-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rl3+BkzqddHlBZ1wAPFTnkiaqa4gbAfisN6Q/6wasxfx/Bdg9Z5UY5ssb9fWQ2DJ 02kAm3vSSMnfaZ7KDOfRIg== 0001193125-07-152710.txt : 20070710 0001193125-07-152710.hdr.sgml : 20070710 20070710165711 ACCESSION NUMBER: 0001193125-07-152710 CONFORMED SUBMISSION TYPE: F-3ASR PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20070710 DATE AS OF CHANGE: 20070710 EFFECTIVENESS DATE: 20070710 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HDFC BANK LTD CENTRAL INDEX KEY: 0001144967 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL BANKS, NEC [6029] IRS NUMBER: 000000000 STATE OF INCORPORATION: K7 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: F-3ASR SEC ACT: 1933 Act SEC FILE NUMBER: 333-144461 FILM NUMBER: 07972566 BUSINESS ADDRESS: STREET 1: 'HDFC BANK HOUSE', SENAPATI BAPAT ROAD STREET 2: LOWER PAREL (WEST), MUMBAI INDIA CITY: INDIA STATE: K7 ZIP: 400013 BUSINESS PHONE: 91224957676 MAIL ADDRESS: STREET 1: KAMAIA MILLS COMPOUND STREET 2: SENAPAIT BAPAT MARG, LOWER PAREL CITY: MUMBAI INDIA STATE: K7 ZIP: 00000 F-3ASR 1 df3asr.htm REGISTRATION STATEMENT Registration Statement
Table of Contents

As filed with the Securities and Exchange Commission on July 10, 2007

Registration No. 333-            

 


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


Form F-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


HDFC Bank Limited

(Exact name of Registrant as specified in its charter)

 


Not Applicable

(Translation of Registrant’s name into English)

 

Republic of India   None

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification Number)

HDFC Bank House

Senapati Bapat Marg

Lower Parel, Mumbai 400 013 India

91-22- 6652-1000

(Address and telephone number of Registrant’s principal executive offices)

Depositary Management Corporation, 570 Lexington Avenue, 44th Floor, New York, NY 10022, 212-319-7600

(Name, address, and telephone number of agent for service)

 


Copies to:

 

Timothy G. Massad, Esq.

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

212-474-1000

 

Anthony Root, Esq.

Milbank, Tweed, Hadley & McCloy LLP

3007 Alexandra House

16 Chater Road Central

Hong Kong

852-2971-4888

Approximate date of commencement of proposed sale to the public.  From time to time after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  ¨

If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  þ

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  ¨

CALCULATION OF REGISTRATION FEE

 


Title of Each Class of

Securities to be Registered(1)

   Amount to be
Registered(2)
  

Proposed Maximum

Offering

Price per Unit(2)

  

Proposed Maximum

Aggregate

Offering Price(2)

  

Amount of

Registration

Fee(2)

Equity shares, par value Rs. 10 per share

      $                 $                 $ 0

(1) American Depositary Shares evidenced by American Depositary Receipts issuable on deposit of the equity shares registered hereby have been registered under a separate registration statement on Form F-6, File No. 333-13730. Each American Depositary Share represents three equity shares.
(2) An indeterminate number of equity shares is being registered as may from time to time be sold at indeterminate prices. In accordance with Rules 456(b) and 457(r) under the Securities Act, the Registrant is deferring payment of all of the registration fee.

 



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PROSPECTUS

LOGO

AMERICAN DEPOSITARY SHARES

REPRESENTING

EQUITY SHARES

From time to time, we may sell American Depositary Shares, or ADSs, representing our equity shares in amounts, at prices and on terms described in one or more supplements to this prospectus. Each ADS offered represents three equity shares.

This prospectus provides a general description of our ADSs. The specific terms of any offering of ADSs will be set forth in a supplement to this prospectus. The prospectus supplement may also add to, update or change the information contained in this prospectus. You should read this prospectus and any supplement carefully before you invest.

We may offer and sell ADSs representing our equity shares to or through one or more underwriters, dealers and agents, or directly to purchasers, on a continuous or delayed basis. The prospectus supplement for an offering will provide the specific terms of the plan of distribution.

Our ADSs are listed on the New York Stock Exchange under the symbol “HDB.” The last reported sale price of our ADSs on July 6, 2007 was $87.77 per ADS.

 


Investing in our ADSs involves risks. See the “ Risk Factors” section contained in the applicable prospectus supplement and in the documents we incorporate by reference in this prospectus.

 


Neither the Securities and Exchange Commission nor any other state or foreign securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Prospectus dated July 10, 2007


Table of Contents

TABLE OF CONTENTS

 

     Page

ABOUT THIS PROSPECTUS

   ii

AVAILABLE INFORMATION

   1

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

   1

FORWARD-LOOKING STATEMENTS

   2

THE BANK

   3

RISK FACTORS

   6

USE OF PROCEEDS

   6

DESCRIPTION OF EQUITY SHARES

   7

DESCRIPTION OF AMERICAN DEPOSITARY SHARES

   12

RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

   19

PLAN OF DISTRIBUTION

   21

ENFORCEMENT OF CIVIL LIABILITIES

   21

LEGAL MATTERS

   22

EXPERTS

   22

INDEX TO FINANCIAL STATEMENTS

   F-1

 

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ABOUT THIS PROSPECTUS

This document is called a prospectus and is part of a registration statement that we have filed with the U.S. Securities and Exchange Commission, or SEC, using a “shelf” registration process. This prospectus provides you with a general description of the ADSs representing our equity shares that we may offer. Each time we offer ADSs representing our equity shares, we will provide a supplement to this prospectus. The accompanying prospectus supplement will describe the specific terms of that offering, and may also include a discussion of any special considerations applicable to our ADSs. The accompanying prospectus supplement may also add, update or change the information contained in this prospectus. If there is any inconsistency between the information in this prospectus and the accompanying prospectus supplement, you should rely on the information in the accompanying prospectus supplement. Please read carefully this prospectus and the accompanying prospectus supplement. In addition to the information contained in the documents, we refer you to the information contained under the headings “Available Information” and “Incorporation of Documents by Reference.” The registration statement containing this prospectus, including the exhibits to the registration statement, provides additional information about us and the ADSs offered under this prospectus. The registration statement, including the exhibits, can be read on the SEC website or at the SEC’s offices, each of which is listed under the heading “Available Information.”

All references in this prospectus and the accompanying prospectus supplement to “we,” “us,” “our,” “HDFC Bank” or “the Bank” shall mean HDFC Bank Limited.

 

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AVAILABLE INFORMATION

We will furnish to holders of our ADSs, through the Depositary, English language versions of any reports, notices and other communications that we generally transmit to holders of our equity shares.

We have filed with the SEC a registration statement on Form F-3 and a registration statement on Form F-6 under the U.S. Securities Act with respect to the offered ADSs. This prospectus, which is a part of the registration statement on Form F-3, does not contain all of the information set forth in these registration statements. Statements made in this prospectus as to the contents of any contract, agreement or other document, are not necessarily complete. Where we have filed a contract, agreement or other document as an exhibit to these registration statements, we refer to the exhibit for a more complete description of the matter involved, and each of our statements in this prospectus with respect to that contract, agreement or document is qualified in its entirety by such reference.

We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20459. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public over the Internet at the SEC’s website at www.sec.gov. You can also obtain information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The SEC allows us to incorporate by reference the information we furnish to or file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and some later information that we file with the SEC will automatically be deemed to update and supersede this information. We incorporate by reference the following documents that have been furnished or filed with the SEC:

 

   

the Registration Statement on Form 8-A we filed with the SEC on July 16, 2001;

 

   

the Annual Report on Form 20-F we filed with the SEC on July 10, 2007 for the fiscal year ended March 31, 2007, which we refer to as our Form 20-F; and

 

   

the report on Form 6-K that we furnished to the SEC on July 10, 2007.

We also incorporate by reference into this prospectus any future filings on Form 20-F made with the SEC pursuant to the Exchange Act of 1934, as amended (the “Exchange Act”), after the date of this prospectus and prior to the consummation of the offering of the ADSs, and to the extent designated therein, future reports on Form 6-K furnished to the SEC.

Any statement contained in a document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed or furnished document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this prospectus.

We will provide without charge to each person, including any beneficial owner of our common shares or of ADSs, to whom a copy of this prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents referred to above which have been or may be incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Requests should be directed to Sanjay Dongre, 2nd floor, Process House, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, India (Telephone: 91-22-2490-2934 or 91-22-2496-1616, Ext. 3473).

 

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FORWARD-LOOKING STATEMENTS

We have included statements in this prospectus which contain words or phrases such as “will,” “aim,” “will likely result,” “believe,” “expect,” “will continue,” “anticipate,” “estimate,” “intend,” “plan,” “contemplate,” “seek to,” “future,” “objective,” “goal,” “project,” “should,” “will pursue” and similar expressions or variations of these expressions, that are “forward-looking statements.” Actual results may differ materially from those suggested by the forward-looking statements due to certain risks or uncertainties associated with our expectations with respect to, but not limited to, our ability to implement our strategy successfully, the market acceptance of and demand for various banking services, future levels of our non-performing loans, our growth and expansion, the adequacy of our allowance for credit and investment losses, technological changes, volatility in investment income, our ability to market new products, cash flow projections, the outcome of any legal, tax or regulatory proceedings in India and in other jurisdictions we are or become a party to, the future impact of new accounting standards, our ability to pay dividends, the impact of changes in banking regulations and other regulatory changes in India and other jurisdictions on us, our ability to roll over our short-term funding sources and our exposure to market and operational risks. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what may actually occur in the future. As a result, actual future gains, losses or impact on net income could materially differ from those that have been estimated.

In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: general economic and political conditions, instability or uncertainty in India and the other countries which have an impact on our business activities or investments, caused by any factor including terrorist attacks in India, the United States or elsewhere, anti-terrorist or other attacks by the United States, a United States-led coalition or any other country, tensions between India and Pakistan related to the Kashmir region, military armament or social unrest in any part of India; the monetary and interest rate policies of the government of India; natural calamities, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices; the performance of the financial markets in India and globally; changes in Indian and foreign laws and regulations, including tax, accounting and banking regulations; changes in competition and the pricing environment in India; and regional or general changes in asset valuations. For further discussion on the factors that could cause actual results to differ, see “Risk Factors.”

 

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THE BANK

Overview of Business

We are a leading private sector bank and financial services company in India. Our goal is to be the preferred provider of financial services to upper and middle income individuals and leading corporations in India. We have experienced significant growth while maintaining strong asset quality and a low-cost funding structure.

Our strategy is to provide a wide range of financial products and services to our customers through multiple distribution channels with high quality service and superior execution. For fiscal 2007, we had net income of Rs. 11.0 billion. As of March 31, 2007, we had total assets of Rs. 1,013.2 billion.

We have three principal business activities:

Retail banking. We strive to be a one-stop shop that meets the financial needs of our retail customers by offering a variety of deposit products as well as loans, credit cards, debit cards, third party mutual funds and insurance products investment advisory services, bill payment services and other services. We aim to provide our customers with high quality service on an “anytime, anywhere, anyhow” basis through our multiple distribution channels, which included a network of 684 branches (including 22 extension counters) and 1,605 ATMs as of March 31, 2007. As of June 30, 2007, our network of branches and ATMs increased to 753 and 1,716, respectively in 320 cities. As of March 31, 2007, we had approximately 10.0 million customers and approximately 4.1 million debit card holders. We are also a leading provider of retail depositary services for holding securities.

Wholesale banking. We provide loans, bill discounting, credit substitutes, deposit products, documentary credits (primarily letters of credit), guarantees and foreign exchange and derivative products primarily to the top end of the Indian corporate sector and small and medium sized enterprises meeting our credit requirements. We also provide a broad range of transactional banking services to a wide variety of corporations and financial institutions. Through our cash management services, we provide our clients with physical and electronic payment and collection mechanisms that are faster and more cost effective than traditional Indian payment and clearing systems. We also provide clearing and cash settlement services to the major stock exchanges in India. In addition, we provide custody services to Indian mutual funds and correspondent banking services to foreign banks and cooperative banks. We were also the first private sector bank to be appointed by the government of India to collect direct taxes on its behalf.

Treasury operations. Our treasury group manages our balance sheet and provides foreign exchange and derivatives products to our clients. Our proprietary securities trading is limited principally to Indian government securities and our proprietary derivatives trading is limited primarily to rupee-based interest rate swaps.

Since we commenced operations, we have made substantial investments in our technology platform and distribution capabilities. In addition to our growing branch and ATM network, we offer telephone banking in 217 cities, as well as internet banking and banking services by mobile telephone. These and other resources give us the capability to deliver a broad selection of banking products through multiple delivery channels that are convenient for our customers. We believe this positions us well to grow as the Indian financial services industry evolves.

 

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Our business has expanded rapidly over the past several years. Net income has grown at a compound annual rate of 32.4% since fiscal 2004 and we have extended our market and geographical penetration from 4.6 million customers in 163 cities as of March 31, 2004 to 10.0 million customers in 316 cities as of March 31, 2007. Our total assets have grown from Rs. 426.8 billion as of March 31, 2004, to Rs. 1,013.2 billion as of March 31, 2007. While our business has grown quickly, we have maintained a disciplined growth strategy and a strong balance sheet. As of March 31, 2007, customer deposits represented 67.3% of our total liabilities and shareholders’ equity and we had an average cost of funds including equity (calculated under Indian generally accepted accounting principles, or Indian GAAP) for the fiscal 2007 of 3.7%. Our cost of funds of 3.1% for fiscal 2006 was one of the lowest for all domestic banks in India (such comparative data is not yet available for 2007). As of March 31, 2007, our net non-performing assets constituted 0.4% of our net customer assets as per Indian GAAP.

Our Competitive Strengths

We attribute our growth and success to the following competitive strengths:

We are a leader among Indian banks in our use of technology. Since our inception, we have made substantial investments in our technology platform and systems. We have built multiple distribution channels, including an electronically linked branch network, automated telephone banking, internet banking and banking by mobile phone, to offer customers convenient access to our products. Our technology platform has also driven the development of innovative new products and reduced our operating costs.

We deliver high quality service with superior execution. Through intensive training of our staff and the use of our technology platform, we deliver efficient service with rapid response times. Our focus on knowledgeable and personalized service draws customers to our products and increases existing customer loyalty.

We offer a wide range of products to our clients to service their banking needs. Whether in retail or wholesale banking, we consider ourselves a “one-stop shop” for our customers’ banking needs. Our broad array of products creates multiple cross-selling opportunities for us and improves our customer retention rates.

We have an experienced management team. Many members of our senior management team have been with us since our inception, have substantial experience in multinational banking and share our common vision of excellence in execution. We believe this team is well suited to leverage the competitive strengths we have already developed as well as create new opportunities for our business.

Market Opportunity

India has had average real GDP growth of 6.8% per annum over the last decade and has liberalized many sectors of its economy. India is also witnessing a favorable shift in its demographic profile, with the upper and middle class constituting an expanding share of the population. We believe that banking in India remains an under-penetrated market with substantial growth opportunities, particularly for a private sector bank in a market traditionally dominated by large public sector banks.

Our Business Strategies

Our business strategy emphasizes the following elements:

Increase our market share in India’s expanding banking and financial services industry. In addition to benefiting from the overall growth in India’s economy and financial services industry, we believe we can increase our market share by continuing our focus on our competitive strengths. We also aim to increase geographical and market penetration by expanding our branch and ATM network and increasing our efforts to cross-sell our products.

 

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Maintain strong asset quality through disciplined credit risk management. We have maintained high quality loan and investment portfolios through careful targeting of our customer base, a comprehensive risk assessment process and diligent risk monitoring and remediation procedures. We believe we can maintain strong asset quality appropriate to the loan portfolio composition, while achieving growth.

Maintain a low cost of funds. We believe we can maintain a relatively low-cost funding base as compared to our competitors, by expanding our base of retail deposits and increasing the free float generated by transaction services such as cash management and stock exchange clearing.

Focus on high earnings growth with low volatility. We intend to maintain our focus on steady earnings growth through conservative risk management techniques and low cost funding. In addition, we intend not to rely heavily on revenue derived from trading so as to limit volatility.

 

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RISK FACTORS

Please carefully consider the risk factors described in our filings on Form 20-F made with the SEC which are incorporated by reference in this prospectus, as well as other information we include or incorporate by reference in this prospectus or include in any applicable prospectus supplement. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

USE OF PROCEEDS

We will use the new proceeds from the sales of the ADSs as set forth in the applicable prospectus supplement.

 

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DESCRIPTION OF EQUITY SHARES

The Company

We are registered under number 11-80618 of 1994 with the Registrar of Companies, Maharashtra State, India. Our Articles permit us to engage in a wide variety of activities, including all of the activities in which we currently engage or intend to engage, as well as other activities in which we currently have no intention of engaging.

Dividends

Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval by a majority of the shareholders at the annual general meeting of shareholders held within six months of the end of each fiscal year. The shareholders have the right to decrease but not increase the dividend amount recommended by the board of directors. Dividends are generally declared as a percentage of par value and distributed and paid to shareholders in proportion to the paid- up value of their equity shares. The Companies Act provides that shares of a company of the same class must receive equal dividend treatment.

These distributions and payments are required to be deposited into a separate bank account and paid to shareholders within 30 days of the annual general meeting where the resolution for declaration of dividends is approved.

The Companies Act states that any dividends that remain unpaid or unclaimed after that period are to be transferred to a special bank account. Any money that remains unclaimed for seven years from the date of the transfer is to be transferred by us to a fund created by the government of India. No claims for the payment of dividends unpaid or unclaimed for a period of seven years shall lie against the fund of the government of India or against us.

Our Articles authorize our board of directors to declare interim dividends, the amount of which must be deposited in a separate bank account within five days and paid to the shareholders within 30 days of the declaration.

Under the Companies Act, final dividends payable can be paid only in cash to the registered shareholder at a record date fixed prior to the relevant annual general meeting, to his order or to the order of his banker.

Before paying any dividend on our shares, we are required under the Indian Banking Regulation Act to write off all capitalized expenses (including preliminary expenses, organization expenses, share-selling commission, brokerage, amounts of losses incurred or any other item of expenditure not represented by tangible assets). We are permitted to declare dividends of up to 33.33% of net profit calculated under Indian GAAP without prior RBI approval subject to compliance with certain prescribed requirements. Further, upon compliance with the prescribed requirements, we are also permitted to declare interim dividends subject to the above- mentioned cap computed for the relevant accounting period.

Dividends may only be paid out of our profits for the relevant year and in certain contingencies out of the reserves of the company. Before declaring dividends, we are required, under the Indian Banking Regulation Act, to transfer 25% of the balance of profits of each year to a reserve fund.

Bonus Shares

In addition to permitting dividends to be paid out of current or retained earnings calculated under Indian GAAP, the Companies Act permits our board of directors, subject to the approval of our shareholders, to distribute to the shareholders, in the form of fully paid-up bonus equity shares, an amount transferred from the capital surplus reserve or legal reserve to stated capital. Bonus equity shares can be distributed only with the prior approval of the RBI. These bonus equity shares must be distributed to shareholders in proportion to the number of equity shares owned by them.

 

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Preemptive Rights and Issue of Additional Shares

The Companies Act gives shareholders the right to subscribe for new shares in proportion to their existing shareholdings unless otherwise determined by a resolution passed by three-fourths of the shareholders present and voting at a general meeting. Under the Companies Act and our Articles, in the event of an issuance of securities, subject to the limitations set forth above, we must first offer the new shares to the holders of equity shares on a fixed record date. The offer, required to be made by notice, must include:

 

   

the right, exercisable by the shareholders of record, to renounce the shares offered in favor of any other person;

 

   

the number of shares offered; and

 

   

the period of the offer, which may not be less than 15 days from the date of the offer. If the offer is not accepted, it is deemed to have been declined.

Our board of directors is permitted to distribute equity shares not accepted by existing shareholders in the manner it deems beneficial for us in accordance with our Articles. Holders of ADSs may not be able to participate in any such offer. See “Description of American Depositary Shares—Share Dividends and Other Distributions.”

General Meetings of Shareholders

There are two types of general meetings of shareholders: annual general meetings and extraordinary general meetings. We are required to convene our annual general meeting within six months after the end of each fiscal year. We may convene an extraordinary general meeting when necessary or at the request of a shareholder or shareholders holding on the date of the request at least 10% of our paid- up capital. A general meeting is generally convened by our secretary in accordance with a resolution of the board of directors. Written notice stating the agenda of the meeting must be given at least 21 days prior to the date set for the general meeting to the shareholders whose names are in the register at the record date. Those shareholders who are not registered at the record date do not receive notice of this meeting and are not entitled to attend or vote at this meeting.

The annual general meeting is held in Mumbai, the city in which our registered office is located. General meetings other than the annual general meeting may be held at any location if so determined by a resolution of our board of directors.

Voting Rights

A shareholder has one vote for each equity share and voting may be by a show of hands or on a poll. However, under the Indian Banking Regulation Act, on poll, a shareholder cannot exercise voting rights in excess of 10% of the total voting rights of all shareholders. Unless a poll is demanded by a shareholder, resolutions are adopted at a general meeting by a majority of the shareholders having voting rights present or represented. The quorum for a general meeting is five members personally present. Generally, resolutions may be passed by simple majority of the shareholders present and voting at any general meeting. However, resolutions such as an amendment to the organizational documents, commencement of a new line of business, an issue of additional equity shares without preemptive rights and reductions of share capital, require that the votes cast in favor of the resolution (whether by show of hands or on a poll) are not less than three times the number of votes, if any, cast against the resolution. As provided in our Articles, a shareholder may exercise his voting rights by proxy to be given in the form prescribed by us. This proxy, however, is required to be lodged with us at least 48 hours before the time of the relevant meeting. A shareholder may, by a single power of attorney, grant general power of representation covering several general meetings. A corporate shareholder is also entitled to nominate a representative to attend and vote on its behalf at all general meetings.

The Companies Act has recently been amended to provide for the passing of resolutions in relation to certain matters specified by the government of India, by means of a postal ballot.

 

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ADS holders have no voting rights with respect to the deposited shares. See “Description of American Depositary Shares—Voting Rights.”

Annual Report

At least 21 days before an annual general meeting, we must circulate either a detailed or abridged version of our Indian GAAP audited financial accounts, together with the Directors’ Report and the Auditor’s Report, to the shareholders along with a notice convening the annual general meeting. We are also required under the Companies Act to make available upon the request of any shareholder our complete balance sheet and profit and loss account.

Under the Companies Act, we must file with the Registrar of Companies our Indian GAAP balance sheet and profit and loss account within 30 days of the conclusion of the annual general meeting and our annual return within 60 days of the conclusion of that meeting.

Register of Shareholders, Record Dates and Transfer of Shares

The equity shares are in registered form. We maintain a register of our shareholders in Mumbai. We register transfers of equity shares on the register of shareholders upon presentation of certificates in respect of the transfer of equity shares held in physical form together with a transfer deed duly executed by the transferor and transferee. These transfer deeds attract stamp duty, which has been fixed at 0.5% of the transfer price.

For the purpose of determining equity shares entitled to annual dividends, the register of shareholders is closed for a period prior to the annual general meeting. The Companies Act and our listing agreements with the stock exchanges permit us, pursuant to a resolution of our board of directors and upon at least 30 days’ advance notice to the stock exchanges, to set the record date and close the register of shareholders after seven days’ public notice for not more than 30 days at a time, and for not more than 45 days in a year, in order for us to determine which shareholders are entitled to certain rights pertaining to the equity shares. Trading of equity shares and delivery of certificates in respect of the equity shares may, however, continue after the register of shareholders is closed.

Transfer of Shares

Shares held through depositories are transferred in the form of book entries or in electronic form in accordance with the regulations laid down by SEBI. These regulations provide the regime for the functioning of the depositories and the participants and set out the manner in which the records are to be kept and maintained and the safeguards to be followed in this system. Transfers of beneficial ownership of shares held through a depositary are exempt from stamp duty.

SEBI requires that our equity shares for trading and settlement purposes be in book-entry form for all investors, except for transactions that are not made on a stock exchange and transactions that are not required to be reported to the stock exchange. Transfers of equity shares in book-entry form require both the seller and the purchaser of the equity shares to establish accounts with depositary participants appointed by depositories established under the Depositaries Act, 1996. Charges for opening an account with a depositary participant, transaction charges for each trade and custodian charges for securities held in each account vary depending upon the practice of each depositary participant. Upon delivery, the equity shares shall be registered in the name of the relevant depositary on our books and this depositary shall enter the name of the investor in its records as the beneficial owner. The transfer of beneficial ownership shall be effected through the records of the depositary. The beneficial owner shall be entitled to all rights and benefits and subject to all liabilities in respect of his securities held by a depositary.

The requirement to hold the equity shares in book-entry form will apply to the ADS holders when the equity shares are withdrawn from the depositary facility upon surrender of the ADSs. In order to trade the equity shares in the Indian market, the withdrawing ADS holder will be required to comply with the procedures described above.

 

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Our equity shares are freely transferable, subject only to the provisions of the Companies Act under which, if a transfer of equity shares contravenes the Securities and Exchange Board of India Act, 1992 or the regulations issued under it or the Sick Industrial Companies (Special Provisions) Act, 1985, or any other similar law, the Indian Company Law Board may, on application made by us, a depositary incorporated in India, an investor, SEBI or certain other parties, direct a rectification of the register of records. It is a condition of our listing that we transfer equity shares and deliver share certificates duly endorsed for the transfer within one month of the date of lodgment of transfer. If a company without sufficient cause refuses to register a transfer of equity shares within two months from the date on which the instrument of transfer is delivered to the company, the transferee may appeal to the Indian Company Law Board seeking to register the transfer of equity shares. The Indian Company Law Board may, in its discretion, issue an interim order suspending the voting rights attached to the relevant equity shares before completing its investigation of the alleged contravention. Our Articles provide for certain restrictions on the transfer of equity shares, including granting power to the board of directors in certain circumstances, to refuse to register or acknowledge transfer of equity shares or other securities issued by us. Furthermore, the RBI requires us to obtain its approval before registering a transfer of equity shares in favor of a person which together with equity shares already held by him represent more than 5.0% of our share capital.

Our transfer agent is Datamatics Financial Services Limited, located in Mumbai. Certain foreign exchange control and security regulations apply to the transfer of equity shares by a non-resident or a foreigner. See “Restrictions on Foreign Ownership of Indian Securities.”

Disclosure of Ownership Interest

The provisions of the Companies Act generally require beneficial owners of equity shares of Indian companies that are not holders of record to declare to the company details of the holder of record and holders of record to declare details of the beneficial owner. While it is unclear whether these provisions apply to holders of an Indian company’s ADSs, investors who exchange ADSs for equity shares are subject to this provision. Failure to comply with these provisions would not affect the obligation of a company to register a transfer of equity shares or to pay any dividends to the registered holder of any equity shares in respect of which this declaration has not been made, but any person who fails to make the required declaration may be liable for a fine of up to Rs. 1,000 for each day this failure continues. However, under the Indian Banking Regulation Act, a registered holder of any equity shares, except in certain conditions, shall not be liable to any suit or proceeding on the ground that the title to those equity shares vests in another person.

Acquisition by the Issuer of Its Own Shares

Until recently, the Companies Act did not permit a company to acquire its own equity shares because of the resulting reduction in the company’s capital. However, the government of India amended the Companies Act and consequently this reduction in capital is permitted in certain circumstances. The reduction of capital requires compliance with buy-back provisions specified in the Companies Act and by SEBI.

ADS holders will be eligible to participate in a buy-back in certain cases. An ADS holder may acquire equity shares by withdrawing them from the depositary facility and then selling those equity shares back to us. ADS holders should note that equity shares withdrawn from the depositary facility may only be redeposited into the depositary facility under certain circumstances. See “Description of American Depositary Shares—Deposit, Withdrawal and Cancellation.”

There can be no assurance that the equity shares offered by an ADS investor in any buy-back of shares by us will be accepted by us. The position regarding regulatory approvals required for ADS holders to participate in a buy-back is not clear. ADS investors are advised to consult their Indian legal advisers prior to participating in any buy-back by us, including in relation to any regulatory approvals and tax issues relating to the buy-back.

 

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Liquidation Rights

Subject to the rights of depositors, creditors and employees, in the event of our winding up, the holders of the equity shares are entitled to be repaid the amounts of capital paid up or credited as paid up on these equity shares. All surplus assets remaining belong to the holders of the equity shares in proportion to the amount paid up or credited as paid up on these equity shares, respectively, at the commencement of the winding-up.

Acquisition of the Undertaking by the Government

Under the Indian Banking Regulation Act, the government may, after consultation with the RBI, in the interest of our depositors or banking policy or better provision of credit generally or to a particular community or area, acquire our banking business. The RBI may acquire our business if it is satisfied that we have failed to comply with the directions given to us by the RBI or that our business is being managed in a manner detrimental to the interest of our depositors. Similarly, the government of India may also acquire our business based on a report by the RBI.

Takeover Code and Listing Agreements

Under the Securities and Exchange Board of India (Substantial Acquisitions of Shares & Takeovers) Regulations, 1997 (the “Takeover Code”), upon the acquisition of more than 5% of the outstanding shares or voting rights of a publicly listed Indian company, a purchaser is required to notify the company and the company and the purchaser are required to notify all the stock exchanges on which the shares of such company are listed. Such notification is also required upon acquisition of 10% and 14% of the outstanding shares or voting rights of a publicly listed Indian company. An ADS holder would be subject to these notification requirements.

Upon the acquisition of 15% or more of such shares or voting rights, or a change in control of the company, the purchaser is required to make an open offer to the other shareholders, offering to purchase at least 20% of all the outstanding shares of the company at a minimum offer price as determined pursuant to the Takeover Code. Since we are a listed company in India, the provisions of the Takeover Code will apply to us. However, the Takeover Code provides for a specific exemption from this provision to an ADS holder and states that this provision will apply to an ADS holder only once he or she converts the ADSs into the underlying equity shares.

We have entered into listing agreements with each of the Indian stock exchanges on which our equity shares are listed. Each of the listing agreements provides that if a purchase of a listed company’s shares results in the purchaser and its affiliates holding more than 5% of the company’s outstanding equity shares or voting rights, the purchaser and the company must report its holding to the company and the relevant stock exchanges. The agreements also provide that if an acquisition results in the purchaser and its affiliates holding equity shares representing more than 15% of the voting rights in the company, then the purchaser must, before acquiring such equity shares, make an offer on a uniform basis to all remaining shareholders of the company to acquire equity shares that have at least an additional 20% of the voting rights of the total equity shares of the company at a prescribed price.

 

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DESCRIPTION OF AMERICAN DEPOSITARY SHARES

American Depositary Shares

JPMorgan Chase Bank, N.A., as depositary, will issue the American Depositary Shares, or ADSs, related to any offering. Each ADS will represent an ownership interest in three equity shares which we will deposit with the custodian, as agent of the depositary, under the deposit agreement among ourselves, the depositary and yourself as an ADR holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but which it has not distributed directly to you. Your ADSs will be evidenced by what are known as American Depositary Receipts or ADRs.

The depositary’s office is located at 4 New York Plaza, 13th Floor, New York, NY 10004.

You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having an ADS registered in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of an ADR holder described in this section. You should consult with your broker or financial institution to find out what those procedures are.

Because the depositary’s nominee will actually be the registered owner of the shares, you must rely on it to exercise the rights of a shareholder on your behalf. The obligations of the depositary and its agents are set out in the deposit agreement. The deposit agreement and the ADSs are governed by New York law.

The following is a summary of the material terms of the deposit agreement. Because it is a summary, it does not contain all the information that may be important to you. For more complete information, you should read the entire deposit agreement and the form of ADR which contains the terms of your ADSs. You can read a copy of the deposit agreement which was filed as an exhibit to the registration statement on Form F-1 we filed on July 12, 2001. You may also obtain a copy of the deposit agreement at the SEC’s Public Reference Room which is located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Share Dividends and Other Distributions

We may make various types of distributions with respect to our securities. The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after deducting its expenses. You will receive these distributions in proportion to the number of underlying shares that your ADSs represent.

Except as stated below, to the extent the depositary is legally permitted it will deliver such distributions to ADR holders in proportion to their interests in the following manner:

Cash

The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution if this is practicable and can be done in a reasonable manner. The depositary will attempt to distribute this cash in a practicable manner, and may deduct any taxes required to be withheld, any expenses of converting foreign currency and transferring funds to the United States and other expenses and adjustments. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution.

Shares

In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such shares. Only whole ADSs will be issued. The depositary will sell any shares which would result in fractional ADSs and distribute the net proceeds to the ADR holders entitled to them.

 

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Rights to Receive Additional Shares

In the case of a distribution of rights to subscribe for additional shares or other rights, if we provide satisfactory evidence that the depositary may lawfully distribute the rights, the depositary may arrange for ADR holders to instruct the depositary as to the exercise of the rights. However, if we do not furnish that evidence or if the depositary determines it is not practical to distribute the rights, the depositary may:

 

   

sell the rights, if practicable, and distribute the net proceeds as cash, or

 

   

allow the rights to lapse, in which case ADR holders will receive nothing.

We have no obligation to file a registration statement under the Securities Act in order to make any rights available to ADR holders.

Other Distributions

In the case of a distribution of securities or property other than those described above, the depositary may either:

 

   

distribute such securities or property in any manner it deems equitable and practicable,

 

   

to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell such securities or property and distribute any net proceeds in the same way it distributes cash, or

 

   

hold the distributed property, in which case the ADSs will also represent the distributed property.

Any U.S. dollars will be distributed by checks drawn on a bank in the United States for whole dollars and cents (fractional cents will be withheld without liability for interest and added to future cash distributions).

The depositary may choose any practical method of distribution for any specific ADR holder, including the distribution of foreign currency, securities or property, or it may retain those items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities.

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holders.

We cannot assure you that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other securities at a specified price, or that any of such transactions can be completed within a specified time period.

Deposit, Withdrawal and Cancellation

The depositary will issue ADSs upon the deposit of shares or evidence of rights to receive shares with the custodian. In the case of the ADSs to be issued under the accompanying prospectus supplement, we will arrange with the underwriters named therein to deposit such shares.

Except for shares that we deposit, no shares may be deposited by persons located in India, residents of India or for, or on the account of, such persons. Under current Indian laws and regulations, the depositary cannot accept deposits of outstanding shares and issue ADRs evidencing ADSs representing such shares without prior approval of the government of India. However, an investor who surrenders an ADS and withdraws shares may be permitted to redeposit those shares in the depositary facility in exchange for ADSs and the depositary may accept deposits of outstanding shares purchased by a non-resident of India on the local stock exchange and issue ADSs representing those shares. However, in each case, the number of shares redeposited or deposited cannot exceed the number represented by ADSs converted into underlying shares.

 

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Shares deposited in the future with the custodian must be accompanied by certain documents, including instruments showing that such shares have been properly transferred or endorsed to the person on whose behalf the deposit is being made. After the closing of the offering to which the accompanying prospectus supplement relates, unless otherwise agreed by the depositary and ourselves and permitted by applicable law, only the following may be deposited with the depositary or custodian:

 

   

shares issued as a free distribution in respect of deposited securities;

 

   

shares subscribed for or acquired by holders from us through the exercise of rights distributed by us to such persons in respect of shares; and

 

   

securities issued by us as a result of any change in par value, subdivision, consolidation and other reclassification of deposited securities or otherwise.

We will inform the depositary if any of the shares permitted to be deposited do not rank pari passu with the shares issued in the offering to which the accompanying prospectus supplement relates and the depositary will arrange for the ADSs issuable with respect to such shares to be differentiated from those issued in such offering until such time as they rank pari passu with the shares issued in such offering.

The custodian will hold all deposited shares (including those being deposited by or on our behalf in connection with the offering to which the accompanying prospectus supplement relates) for the account of the depositary. ADR holders thus have no direct ownership interest in the shares and only have such rights as are contained in the deposit agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for the deposited shares. The deposited shares and any such additional items are referred to as “deposited securities.”

Upon each deposit of shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement, including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the name of the person entitled thereto evidencing the number of ADSs to which such person is entitled. Certificated ADRs will be delivered at the depositary’s principal New York office or any other location that it may designate as its transfer office.

When you turn in your ADRs at the depositary’s office, the depositary will, upon payment of certain applicable fees, charges and taxes, and upon receipt of proper instructions, deliver the underlying shares in dematerialized form, for which the ADS holder will be required to open an account with a depositary participant of the National Securities Depositary Limited or Central Depositary Services (India) Limited to hold and sell the shares in dematerialized form upon payment of customary fees and expenses. See “Description of Equity Shares—Transfer of Shares.”

The depositary may only restrict the withdrawal of deposited securities in connection with:

 

   

temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends;

 

   

the payment of fees, taxes and similar charges; or

 

   

compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.

This right of withdrawal may not be limited by any other provision of the deposit agreement.

Voting Rights

You will have no voting rights with respect to the deposited equity shares. The depositary will abstain from exercising the voting rights of the deposited equity shares. Recently, the RBI examined the matter relating to the exercise of voting rights by the depositary and issued a circular dated February 5, 2007 pursuant to which we

 

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furnished to the RBI a copy of our agreement with the depository. We have also given an undertaking to the RBI stating that we will not give cognizance to voting by the depositary if the vote given by the depositary is in contravention of its agreement with us and that we or the depositary will not bring about any change in our depository agreement without the prior approval of the RBI.

Equity shares which have been withdrawn from the depositary facility and transferred on our register of shareholders to a person other than the depositary or its nominee may be voted by that person. However, you may not receive sufficient advance notice of shareholder meetings to enable you to withdraw the underlying shares and vote at such meetings.

Record Dates

The depositary may fix record dates for the determination of the ADR holders who will be entitled to receive a dividend, distribution or rights, subject to the provisions of the deposit agreement.

Reports and Other Communications

The depositary will make available for inspection by ADR holders any written communications from us which are both received by the custodian or its nominee as a holder of deposited securities and made generally available to the holders of deposited securities. We will furnish these communications in English.

Additionally, if we make any written communications generally available to holders of our shares, including the depositary or the custodian, and the depositary or the custodian actually receives those written communications, the depositary will mail copies of them, or, at its option, summaries of them to ADR holders.

Fees and Expenses

The depositary will charge ADR holders a fee for each issuance of ADSs, including issuances resulting from distributions of shares, rights and other property, and for each surrender of ADSs in exchange for deposited securities. The fee in each case is U.S.$5.00 for each 100 ADSs (or any portion thereof) issued or surrendered. The depositary may also charge ADR holders or persons depositing shares:

 

   

stock transfer or other taxes and other governmental charges;

 

   

cable, telex and facsimile transmission and delivery charges incurred at your request;

 

   

transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and

 

   

expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars. The fees described above may be amended from time to time.

Payment of Taxes

ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution. If an ADR holder owes any tax or other governmental charge, the depositary may

 

   

deduct the amount thereof from any cash distributions, or

 

   

sell deposited securities and deduct the amount owing from the net proceeds of such sale.

In either case the ADR holder remains liable for any shortfall. Additionally, if any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up or combination of deposited securities or withdrawal of deposited securities (except under limited circumstances mandated by securities regulations). If any tax or governmental charge is required to be withheld on any non-cash distribution, the depositary may sell the distributed property or securities to pay such taxes and distribute any remaining net proceeds to the ADR holders entitled to them.

 

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Reclassifications, Recapitalizations and Mergers

If we take certain actions that affect the deposited securities, including (1) any change in par value, split-up, consolidation, cancellation or other reclassification of deposited securities or (2) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the depositary may choose to:

 

   

amend the form of ADR;

 

   

distribute additional or amended ADRs;

 

   

distribute cash, securities or other property it has received in connection with such actions;

 

   

sell any securities or property received and distribute the proceeds as cash; or

 

   

take no action.

If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited securities and each ADS will then represent a proportionate interest in such property.

Amendment and Termination

We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at least 30 days’ notice of any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or affects any substantial existing right of ADR holders. If an ADR holder continues to hold an ADR or ADRs after being notified of these changes, the ADR holder is deemed to agree to such amendment. Notwithstanding the foregoing, an amendment can become effective before notice is given if this is necessary to ensure compliance with a new law, rule or regulation.

No amendment will impair your right to surrender your ADSs and receive the underlying securities. If a governmental body adopts new laws or rules which require the deposit agreement or the ADS to be amended, we and the depositary may make the necessary amendments, which could take effect before you receive notice thereof.

The depositary may terminate the deposit agreement by giving the ADR holders at least 30 days’ prior notice, and it must do so at our request. After termination, the depositary’s only responsibility will be (i) to deliver deposited securities to ADR holders who surrender their ADRs, and (ii) to hold or sell distributions received on deposited securities. As soon as practicable after the expiration of six months from the termination date, the depositary will sell the deposited securities which remain and hold the net proceeds of such sales, without liability for interest, in trust for the ADR holders who have not yet surrendered their ADRs. After making those sales, the depositary shall have no obligations except to account for such proceeds and other cash. The depositary will not be required to invest such proceeds or pay interest on them.

Limitations on Obligations and Liability to ADR Holders

The deposit agreement expressly limits the obligations and liability of the depositary, ourselves and our respective agents. Neither we nor the depositary nor any such agent will be liable if:

 

   

a change in law or regulation governing any deposited securities, act of God, war or other circumstance beyond its control shall prevent, delay or subject to any civil or criminal penalty any act which the deposit agreement or the ADRs provide shall be done or performed by it;

 

   

it exercises or fails to exercise discretion under the deposit agreement or the ADR;

 

   

it performs its obligations without gross negligence or bad faith;

 

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it takes any action or inaction in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information; or

 

   

it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.

Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs. We and our agents shall only be obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs, which in our opinion may involve us in expense or liability, if indemnity satisfactory to us against all expense (including fees and disbursements of counsel) and liability is furnished as often as we require.

The depositary will not be responsible for failing to carry out instructions to vote the deposited securities or for the manner in which the deposited securities are voted or the effect of the vote.

The depositary may own and deal in deposited securities and in ADSs.

Disclosure of Interest in ADSs

From time to time we may request you and other holders and beneficial owners of ADSs to provide information as to:

 

   

the capacity in which you and other holders and beneficial owners own or owned ADSs;

 

   

the identity of any other persons then or previously interested in such ADSs; and

 

   

the nature of such interest and various other matters.

You agree to provide any information requested by us or the depositary pursuant to the deposit agreement. The depositary has agreed to use reasonable efforts to comply with written instructions received from us requesting that it forward any such requests to you and other holders and beneficial owners and to forward to us any responses to such requests to the extent permitted by applicable law.

We may restrict transfers of the shares where any such transfer might result in ownership of shares in contravention of, or exceeding the limits under, the governmental approval which we received from the Indian government in connection with any offering, applicable law or our organizational documents. We also may instruct you that we are restricting the transfers of ADSs where such transfer may result in the total number of shares represented by the ADSs beneficially owned by you contravening or exceeding the limits under the applicable law or our organizational documents. We reserve the right to instruct you to deliver your ADSs for cancellation and withdrawal of the shares underlying such ADSs.

Requirements for Depositary Actions

We, the depositary or the custodian may refuse to:

 

   

issue, register or transfer an ADR or ADRs;

 

   

effect a split-up or combination of ADRs;

 

   

deliver distributions on any such ADRs; or

 

   

permit the withdrawal of deposited securities (unless the deposit agreement provides otherwise), until the following conditions have been met:

 

   

the holder has paid all taxes, governmental charges and fees and expenses as required in the deposit agreement;

 

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the holder has provided the depositary with any information it may deem necessary or proper, including, without limitation, proof of identity and the genuineness of any signature; and

 

   

the holder has complied with such regulations as the depositary may establish under the deposit agreement.

The depositary may also suspend the issuance of ADSs, the deposit of shares, the registration, transfer, split-up or combination of ADRs, or the withdrawal of deposited securities (unless the deposit agreement provides otherwise), if the register for ADRs or any deposited securities is closed or if we or the depositary decide it is advisable to do so.

Books of Depositary

The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs. You may inspect the depositary’s designated records at such office during regular business hours.

The depositary will maintain facilities to record and process the registration, registration of transfer, combination and split of ADRs. These facilities may be closed from time to time, to the extent not prohibited by law.

Pre-release of ADSs

The depositary may issue ADSs prior to the deposit with the custodian of shares (or rights to receive shares). This is called a pre-release of the ADSs. A pre-release is closed out as soon as the underlying shares (or other ADSs) are delivered to the depositary. The depositary may pre-release ADSs only if:

 

   

the depositary has received collateral for the full market value of the pre-released ADSs; and

 

   

each recipient of pre-released ADSs agrees in writing that he or she:

 

   

owns the underlying shares,

 

   

assigns all rights in such shares to the depositary,

 

   

holds such shares for the account of the depositary, and

 

   

will deliver such shares to the custodian as soon as practicable, and promptly if the depositary so demands.

In general, the number of pre-released ADSs will not evidence more than 30% of all ADSs outstanding at any given time (excluding those evidenced by pre-released ADSs). However, the depositary may change or disregard such limit from time to time as it deems appropriate. The depositary may retain for its own account any earnings on collateral for pre-released ADSs and its charges for issuance thereof.

The Depositary

JPMorgan Chase Bank, N.A., a national banking association organized under the laws of the United States, is a commercial bank offering a wide range of banking and trust services to its customers in the New York metropolitan area, throughout the United States and around the world.

 

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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

The government of India regulates ownership of Indian companies by foreigners. Foreign investment in Indian securities is generally regulated by the Foreign Exchange Management Act. The Foreign Exchange Management Act, when read together with a series of regulations issued thereunder by the RBI, permits transactions involving the inflow or outflow of foreign exchange and empowers the RBI to prohibit or regulate such transactions.

The Foreign Exchange Management Act has eased restrictions on current account transactions. However, the RBI continues to exercise control over capital account transactions (i.e., those that alter the assets or liabilities, including contingent liabilities, of persons). The RBI has issued regulations under the Foreign Exchange Management Act to regulate the various kinds of capital account transactions, including certain aspects of the purchase and issuance of shares of Indian companies.

The RBI has issued a notification under the provisions of the Foreign Exchange Management Act relaxing the requirement of prior approval for an Indian company making an ADS issue provided that the issuer is eligible to issue ADSs pursuant to the relevant scheme or notification issued by the Ministry of Finance or has the necessary approval from the Foreign Investment Promotion Board.

Under the foreign investment rules, the following restrictions are applicable to foreign ownership:

Foreign Direct Investment

The government of India, pursuant to its liberalization policy, set up the Foreign Investment Promotion Board, or the FIPB, to regulate all foreign direct investment into India. Foreign Direct Investment means investment by way of subscription and/or purchase of securities of an Indian company by a non- resident investor. FIPB approval is required for investment in some sectors, including housing, petroleum (other than refining), defense and strategic industries. Also, the following investments would require the prior permission of the FIPB:

 

   

investments, including a transfer of shares, in excess of specified sectoral caps;

 

   

investments by a foreign investor who has an existing joint venture or technology transfer/trade mark agreement in the same field. However, prior FIPB approval will not be required in case of investment made by a venture capital fund registered with SEBI or where the investment in the existing joint venture is less than 3.0% or where the existing joint venture is defunct or sick;

 

   

investment of more than 24.0% in the equity capital of units manufacturing items reserved for small scale industries;

 

   

investments by an unincorporated entity;

 

   

investment in industries for which industrial licensing is compulsory; and

 

   

all proposals relating to acquisition of shares of an Indian company by a foreign investor (including individuals of Indian nationality or origin residing outside India (a “Non-Resident Indian”), the activities of which company are not under the “automatic” route under existing Indian foreign investment policy or where the Indian company is engaged in the financial services sector or where the acquisition of shares attracts the provisions of the Takeover Code. However, as per a Press Note dated February 10, 2006 issued by the government of India, the prior permission of the FIPB would not be required for transfer of shares from residents to non-residents in the financial services sector or where the provisions of the Takeover Code are attracted, in cases where approvals are required from the RBI, under the Takeover Code or the Insurance Regulatory and Development Authority.

Subject to certain exceptions, Foreign Direct Investment and investment by Non-Resident Indians, in Indian companies does not require the prior approval of the FIPB or the RBI. The government has indicated that in all cases where Foreign Direct Investment is allowed on an automatic basis without FIPB approval the RBI would

 

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continue to be the primary agency for the purposes of monitoring and regulating foreign investment. In cases where FIPB approval is obtained, no approval of the RBI is required, although a declaration in the prescribed form, detailing the foreign investment, must be filed with the RBI once the foreign investment is made in the Indian company. The foregoing description applies only to an issuance of shares by, and not to a transfer of shares of, Indian companies.

The government has set up the Foreign Investment Implementation Authority, or the FIIA in the Ministry of Commerce and Industry. The FIIA has been mandated to (i) translate foreign direct investment approvals into implementation, (ii) provide a proactive one-stop after-care service to foreign investors by helping them obtain necessary approvals, (iii) sort out operational problems and (iv) meet with various government agencies to find solutions to foreign investment problems and maximize opportunities through a cooperative approach.

Under the foreign investment rules, the following restrictions are applicable to foreign ownership:

 

   

Foreign investors may own up to 74.0 % of the equity shares subject to compliance with guidelines issued by the RBI from time to time. This limit falls under the automatic route and does not require specific approval of the Foreign Investment Promotion Board. It includes foreign direct investment, ADSs, Global Depositary Receipts and investments under the portfolio investment scheme by foreign institutional investors and also by Non-Resident Indians. In addition, it encompasses shares acquired by subscription in private placements and public offerings and acquisitions of shares from existing shareholders. Aggregate foreign investment in HDFC Bank from all sources is allowed up to a maximum of 74.0 % of the paid- up capital of the Bank. At least 26.0 % of the paid up capital would have to be held by Indian residents.

 

   

Under the Issue of Foreign Currency Convertible Bonds and Equity Shares (through Depositary Receipt Mechanism) Scheme, 1993, foreign investors may purchase ADSs subject to the receipt of all necessary government approvals at the time the depositary receipt program is set up. With a view to liberalizing the operational procedures, the government of India’s Ministry of Finance and the RBI have granted a general approval to ADS issues, subject to certain restrictions. However, pricing of ADS offerings is subject to new regulations announced by the Ministry of Finance on August 31, 2005 amending the depository receipt scheme. Pursuant to this amendment, issuers of ADSs are required to ensure that the pricing of ADSs is made at a price that is the higher of (i) the average of the weekly high and low of the closing prices of an issuer’s shares quoted on the stock exchanges during the six months preceding the relevant date; and (ii) the average of the weekly high and low of the closing prices of an issuer’s shares quoted on the stock exchanges during the two weeks preceding the relevant date. The relevant date is the date 30 days prior to the date on which the meeting of the general body of shareholders is held to consider the proposed issue of such ADSs. This pricing requirement will be dispensed with if the ADSs are offered simultaneously with or within 30 days of a domestic offering of equity shares and if the ADSs are priced at or above the price of the domestic offering; and

 

   

Under the portfolio investment scheme, foreign institutional investors, subject to registration with SEBI and the RBI, may hold in aggregate up to 24.0% of the paid- up equity capital of a company, subject to a resolution of the board of directors and a special resolution of the shareholders. This limit may be raised to 49.0% of the total issued capital of the company that are not represented by ADSs; no single foreign institutional investor may own more than 10.0% of the total issued capital of the company; a corporate/individual sub-account of the foreign institutional investor may not hold more than 5.0% of the total issued capital of a company; a broad based sub-account may not hold more than 10.0% of the total issued capital of a company and no single Non-Resident Indian may own more than 5.0% of the total issued capital of the company. In addition, pursuant to an RBI circular dated November 29, 2001 overseas corporate bodies are not permitted to invest under the portfolio investment scheme though they may continue to hold investments that have already been made under the portfolio investment scheme until such time as these investments are sold on the stock exchange.

Investors in ADSs do not need to seek the specific approval from the government of India to purchase, hold or dispose of their ADSs. In our ADS offering, we obtained the in-principle approval of the relevant stock

 

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exchanges for listing of the equity shares underlying the ADSs. We were not required to obtain the prior approval of the Foreign Investment Promotion Board or the RBI. Notwithstanding the foregoing, if a foreign institutional investor, non-resident Indian or overseas corporate body were to withdraw its equity shares from the ADS program, its investment in the equity shares would be subject to the general restrictions on foreign ownership noted above and may be subject to the portfolio investment restrictions, including the portfolio investment limitations mentioned above. The implications of these limitations, however are not clear. Secondary purchases of securities of Indian companies in India by foreign direct investors or investments by non-resident Indians, persons of Indian origin, overseas corporate bodies and foreign institutional investors above the ownership levels set forth above require the government of India’s approval on a case-by-case basis. Furthermore, if an investor withdraws equity shares from the ADS program and its direct or indirect holding in us is equal to or exceeds 15.0% of our total equity, such investor may be required to make a public offer to the remaining shareholders under the Takeover Code.

PLAN OF DISTRIBUTION

We may offer and sell ADSs in one or more transactions from time to time to or through underwriters, who may act as principals or agents, directly to other purchasers or through agents to other purchasers or through any combination of these methods.

A prospectus supplement relating to a particular offering of ADSs may include the following information:

 

   

the terms of the offering;

 

   

the names of any underwriters or agents;

 

   

the purchase price of the ADSs;

 

   

the net proceeds to us from the sale of the ADSs;

 

   

any delayed delivery arrangements; and

 

   

any underwriting discounts and commissions, and other items constituting underwriters’ compensation; any initial public offering price; and any discounts or concessions allowed or reallowed or paid to dealers.

The distribution of the ADSs may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices as set forth in a prospectus supplement with respect to such transaction.

ENFORCEMENT OF CIVIL LIABILITIES

We are incorporated under the laws of India. Our directors and members of our senior management, and substantially all experts named in this prospectus and any prospectus supplement, reside outside of the United States. All of our assets are located outside of the United States. In addition, a substantial portion of the assets of our directors and members of our senior management and of the non-resident experts are located outside the United States. As a result, it may be difficult to effect service of process within the United States upon these persons or to enforce in U.S. courts judgments obtained in U.S. courts against these persons, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States.

Section 44A of the Indian Code of Civil Procedure provides that where a foreign judgment has been rendered by a court in any country or territory outside India which the government of India has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. The United States has not been declared by the government of India to be a reciprocating territory for the purposes of Section 44A.

 

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Talwar Thakore and Associates, our Indian counsel, has advised us that, accordingly, a judgment of a court in the United States may be enforced in India only by a suit upon the judgment in terms of Section 13 of the Indian Code of Civil Procedure, and not by proceedings in execution. This section, which is the statutory basis for the recognition of foreign judgments, states that a foreign judgment is conclusive as to any matter directly adjudicated upon except:

 

   

where the judgment has not been pronounced by a court of competent jurisdiction;

 

   

where the judgment has not been given on the merits of the case;

 

   

where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which Indian law is applicable;

 

   

where the proceedings in which the judgment was obtained were opposed to natural justice;

 

   

where the judgment has been obtained by fraud; or

 

   

where the judgment sustains a claim founded on a breach of any law in force in India.

The suit must be brought in India within three years from the date of the judgment by a court in the United States in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action were brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice. A party seeking to enforce a foreign judgment in India is required to obtain prior approval from the RBI under the Foreign Exchange Management Act to execute such a judgment or to repatriate any amount recovered. Any judgment in a foreign currency would be converted into rupees on the date of judgment and not on the date of payment.

LEGAL MATTERS

The validity of the ADSs offered pursuant to this prospectus and the validity of the equity shares represented by the ADSs offered hereby will be passed upon by Talwar Thakore and Associates, Mumbai, India, our Indian counsel. U.S. securities matters in connection with any offering made pursuant to this prospectus will be passed upon by Cravath, Swaine & Moore LLP, our U.S. counsel.

EXPERTS

The consolidated financial statements and management’s report on the effectiveness of internal control over financial reporting included in this prospectus and incorporated by reference in this prospectus from our Annual Report on Form 20-F have been audited by Deloitte Haskins & Sells, an independent registered public accounting firm, as stated in their reports, which are included and incorporated by reference herein (which reports (1) express an unqualified opinion on the financial statements and include explanatory paragraphs related to the adoption of new accounting standards and convenience translation from Indian rupee amounts to U.S. Dollar amounts, (2) express an unqualified opinion on management’s assessment regarding the effectiveness of internal control over financial reporting, and (3) express an unqualified opinion on the effectiveness of internal control over financial reporting), and have been so included and incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

 

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INDEX TO FINANCIAL STATEMENTS

 

     Page

Consolidated Financial Statements of HDFC Bank Limited And Subsidiaries:

  

Report of independent registered public accounting firm

   F-2

Consolidated balance sheets as of March 31, 2006 and 2007

   F-3

Consolidated statements of income for the years ended March 31, 2005, 2006 and 2007

   F-4

Consolidated statements of cash flows for the years ended March 31, 2005, 2006 and 2007

   F-5

Consolidated statements of shareholders’ equity for the years ended March 31, 2005, 2006 and 2007

   F-6

Notes to consolidated financial statements

   F-7

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

HDFC Bank Limited:

We have audited the accompanying consolidated balance sheets of HDFC Bank Limited (the “Bank”) as of March 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2007. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Bank as of March 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Bank’s internal control over financial reporting as of March 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 10, 2007, expressed an unqualified opinion on management’s assessment of the effectiveness of the Bank’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Bank’s internal control over financial reporting.

As described in Note 2 (b) to the consolidated financial statements, these consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which differ in certain material respects from accounting principles generally accepted for banks in India, which form the basis of the Bank’s general purpose financial statements.

Our audits also comprehended the translation of India rupee amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2 (w). Such U.S. dollar amounts are presented solely for the convenience of readers in the United States of America.

As discussed in Note 2 (q) to the consolidated financial statements, effective April 1, 2006, the Bank adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment.” Also, as discussed in Note 21 to the consolidated financial statements, effective March 31, 2007, the Bank adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.”

/s/ DELOITTE HASKINS & SELLS.

Chartered Accountants

Mumbai, India

July 10, 2007

 

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HDFC BANK LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of March 31, 2006 and 2007

 

     As of March 31,  
     2006     2007     2007  
     (In millions except number of shares)  

ASSETS:

      

Cash and cash equivalents

   Rs. 61,194.3     Rs. 80,546.4     US$ 1,868.8  

Term placements

     10,243.7       12,815.8       297.4  

Investments held for trading, at fair value

     2,945.6       4,284.1       99.4  

Investments available for sale, at fair value (includes restricted investments of Rs. 90,102.5 and Rs. 119,824.7 (US$ 2,780.2) respectively)

     273,457.0       304,241.1       7,059.0  

Securities purchased under agreements to resell

     4,200.0       —         —    

Loans (net of allowance of Rs. 5,653.3 and Rs. 8,014.5 (US$ 185.9) respectively)

     395,274.3       536,730.9       12,453.2  

Accrued interest receivable

     8,662.7       15,742.9       365.3  

Property and equipment, net

     8,714.6       10,397.6       241.2  

Other assets

     26,277.2       48,427.1       1,123.4  
                        

Total assets

   Rs. 790,969.4     Rs. 1,013,185.9     US$ 23,507.7  
                        

LIABILITIES AND SHAREHOLDERS’ EQUITY:

      

Liabilities:

      

Interest-bearing deposits

   Rs. 410,181.2     Rs. 484,542.9     US$ 11,242.3  

Non-interest-bearing deposits

     147,124.2       197,805.1       4,589.4  
                        

Total deposits

     557,305.4       682,348.0       15,831.7  

Securities sold under repurchase agreements

     —         10,500.0       243.6  

Short-term borrowings

     74,805.4       95,472.4       2,215.1  

Accrued interest payable

     8,264.1       17,035.7       395.3  

Long-term debt

     17,899.9       33,601.5       779.6  

Accrued expenses and other liabilities

     77,201.8       108,398.6       2,515.0  
                        

Total liabilities

     735,476.6       947,356.2       21,980.3  
                        

Commitments and contingencies (See Note 25)

      
                        

Minority interest

     225.3       321.6       7.5  
                        

Shareholders’ equity:

      

Equity shares: par value—Rs.10 each; authorized 450,000,000 shares; issued and outstanding 313,142,408 shares and 319,389,608 shares, respectively

     3,131.4       3,193.9       74.1  

Additional paid in capital

     26,805.7       30,226.6       701.3  

Retained earnings

     18,284.6       24,503.3       568.5  

Statutory reserve

     8,364.6       11,218.2       260.3  

Deferred stock-based compensation

     (19.5 )     —         —    

Accumulated other comprehensive income (loss)

     (1,299.3 )     (3,633.9 )     (84.3 )
                        

Total shareholders’ equity

     55,267.5       65,508.1       1,519.9  
                        

Total liabilities and shareholders’ equity

   Rs. 790,969.4     Rs. 1,013,185.9     US$ 23,507.7  
                        

See accompanying notes to consolidated financial statements

 

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HDFC BANK LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For each of the years ended March 31, 2005, 2006 and 2007

 

    Years ended March 31,  
    2005     2006     2007     2007  
    (In millions, except share and per share amounts)  

Interest and dividend revenue:

       

Loans

  Rs. 16,431.4     Rs. 28,853.8     Rs. 46,823.5     US$ 1,086.2  

Trading securities

    144.4       195.6       1,148.2       26.6  

Available for sale securities, including dividend

    11,399.1       12,969.6       19,408.0       450.3  

Other

    1,234.5       1,509.0       2,681.9       62.2  
                               

Total interest and dividend revenue

    29,209.4       43,528.0       70,061.6       1,625.3  
                               

Interest expense:

       

Deposits

    11,074.1       15,590.1       26,175.9       607.4  

Short-term borrowings

    1,759.4       3,469.7       4,800.4       111.4  

Long term debt

    390.2       562.0       2,164.8       50.2  

Other

    —         —         4.0       0.1  
                               

Total interest expense

    13,223.7       19,621.8       33,145.1       769.1  
                               

Net interest revenue

    15,985.7       23,906.2       36,916.5       856.2  

Provision for credit losses

    3,048.2       5,032.0       8,250.3       191.4  
                               

Net interest revenue after provision for credit losses

    12,937.5       18,874.2       28,666.2       664.8  
                               

Non-interest revenue, net:

       

Fees and commissions

    6,124.4       10,949.6       13,371.9       310.3  

Trading securities gains (losses), net

    (39.3 )     (44.8 )     (134.7 )     (3.1 )

Realized gain (losses) on sales of available for sale securities, net

    194.3       420.3       (456.9 )     (10.6 )

Foreign exchange transaction gains

    911.7       994.0       1,903.5       44.2  

Derivative transaction gains (losses), net

    204.0       (402.9 )     165.1       3.8  

Other, net

    816.4       231.7       150.8       3.5  
                               

Total non-interest revenue, net

    8,211.5       12,147.9       14,999.7       348.1  
                               

Total revenue, net

    21,149.0       31,022.1       43,665.9       1,012.9  
                               

Non-interest expense:

       

Salaries and staff benefits

    3,249.9       5,420.9       11,430.6       265.2  

Premises and equipment

    2,260.8       3,125.9       4,130.5       95.8  

Depreciation and amortization

    1,440.7       1,812.1       2,273.3       52.7  

Administrative and other

    4,462.5       7,487.9       9,591.7       222.5  
                               

Total non-interest expense

    11,413.9       17,846.8       27,426.1       636.2  
                               

Income before income tax expense

    9,735.1       13,175.3       16,239.8       376.7  

Income tax expense

    3,125.4       3,965.7       5,142.9       119.3  
                               

Net income before minority interest

  Rs. 6,609.7     Rs. 9,209.6     Rs. 11,096.9     US$ 257.4  

Minority interest

    —         22.5       57.2       1.3  
                               

Net income

  Rs. 6,609.7     Rs. 9,187.1     Rs. 11,039.7     US$ 256.1  
                               

Per share information: (See Note: 28)

       

Earnings per equity share—basic

  Rs. 22.78     Rs. 29.45     Rs. 35.10     US$ 0.81  

Earnings per equity share—diluted

  Rs. 22.60     Rs. 29.08     Rs. 34.60     US$ 0.80  

Per ADS information (where 1 ADS represents 3 shares): (See Note 28)

       

Earnings per ADS—basic

  Rs. 68.34     Rs. 88.36     Rs. 105.30     US$ 2.44  

Earnings per ADS—diluted

  Rs. 67.80     Rs. 87.24     Rs. 103.80     US$ 2.41  

See accompanying notes to consolidated financial statements

 

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HDFC BANK LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For each of the years ended March 31, 2005, 2006 and 2007

 

    Years ended March 31,  
    2005     2006     2007     2007  
    (In millions)  

Cash flows from operating activities:

       

Net income

  Rs. 6,609.7     Rs. 9,187.1     Rs. 11,039.7     US$ 256.1  

Adjustment to reconcile net income to net cash provided by operating activities

       

Provision for credit losses (net)

    3,048.2       5,032.0       8,250.3       191.4  

Depreciation and amortization

    1,440.7       1,812.1       2,273.3       52.7  

Amortization of deferred stock based compensation

    308.5       46.6       —         —    

Amortization of deferred acquisition costs

    3,008.8       1,523.2       3,597.1       83.5  

Amortization of premium (discount) on investments

    1,516.1       2,462.5       2,051.4       47.6  

Other than temporary impairment of Investment

    —         714.3       105.9       2.5  

Provision for deferred income taxes

    (213.5 )     455.2       (675.9 )     (15.7 )

Share based compensation expense

    —         —         976.3       22.7  

(Gain) loss on securitization of loans

    (622.5 )     31.3       (52.5 )     (1.2 )

Net realized (gain) loss on sale of available for sale securities

    (194.3 )     (420.3 )     456.9       10.6  

Gain (loss) on disposal of property and equipment, net

    (2.1 )     (2.7 )     10.5       0.2  

Net change in:

       

Investments held for trading

    4,955.3       (1,667.1 )     (1,338.5 )     (31.1 )

Accrued interest receivable

    (733.4 )     (3,750.6 )     (7,080.2 )     (164.3 )

Other assets

    527.9       (12,162.5 )     (25,813.5 )     (598.8 )

Accrued interest payable

    1,677.6       2,421.1       8,771.6       203.5  

Accrued expense and other liabilities

    (19,582.3 )     26,933.9       31,256.7       725.3  
                               

Net cash provided by operating activities

    1,744.7       32,616.1       33,829.1       785.0  
                               

Cash flows from investing activities:

       

Net change in term placements

    (5,134.3 )     (1,544.2 )     (2,572.1 )     (59.7 )

Purchase of subsidiary

    —         155.8       —         —    

Activity in available for sale securities:

       

Purchases

    (153,898.8 )     (170,373.4 )     (214,645.5 )     (4,980.2 )

Proceeds from sales

    96,986.1       62,820.2       156,310.3       3,626.7  

Maturities, prepayments and calls

    20,543.1       33,299.5       22,625.1       524.9  

Activity in held to maturity securities:

       

Purchases

    (11,888.8 )     —         —         —    

Maturities, prepayments and calls

    10,792.0       —         —         —    

Net change in repurchase options and reverse repurchase options

    19,950.0       (4,200.0 )     14,700.0       341.1  

Proceeds from loans securitized

    48,234.6       19,733.3       6,535.8       151.6  

Loans purchased

    (18,309.8 )     (8,952.3 )     (16,382.1 )     (380.1 )

Repayments on loans purchased

    16,621.2       5,216.0       7,482.8       173.6  

Increase in loans originated, net of principal collections

    (127,777.5 )     (159,840.8 )     (147,290.9 )     (3,417.4 )

Additions to property and equipment

    (2,442.8 )     (3,752.9 )     (3,245.1 )     (75.3 )

Proceeds from sale or disposal of property and equipment

    9.5       51.5       20.7       0.5  
                               

Net cash used in investing activities

    (106,315.5 )     (227,387.3 )     (176,461.0 )     (4,094.3 )
                               

Cash flows from financing activities:

       

Net increase in deposits

    59,480.5       193,762.9       125,042.6       2,901.2  

Net increase (decrease) in short-term borrowings

    38,014.9       13,597.6       20,667.0       479.5  

Proceeds from issuance of debt

    —         12,020.0       16,806.0       389.9  

Repayments of debt

    (1,057.9 )     (19.5 )     (1,104.4 )     (25.6 )

Proceeds from issuance of equity shares for options exercised

    659.1       625.8       2,540.2       58.9  

Proceeds from issuance of shares

    12,747.6       —         —         —    

Proceeds from applications received for shares pending allotment

    423.3       —         —         —    

Payment of dividends and dividend tax

    (1,131.3 )     (1,597.1 )     (1,967.4 )     (45.6 )
                               

Net cash provided by financing activities

    109,136.2       218,389.7       161,984.0       3,758.3  
                               

Net change in cash and cash equivalents

    4,565.4       23,618.5       19,352.1       449.0  

Cash and cash equivalents, beginning of year

    33,010.4       37,575.8       61,194.3       1,419.8  
                               

Cash and cash equivalents, end of year

  Rs. 37,575.8     Rs. 61,194.3     Rs. 80,546.4     US$ 1,868.8  
                               

Supplementary cash flow information:

       

Interest paid

  Rs. 11,543.9     Rs. 17,200.7     Rs. 24,373.5     US$ 565.5  

Income taxes paid

  Rs. 3,719.5     Rs. 5,421.6     Rs. 4,150.0     US$ 96.3  

Supplementary information on non cash transactions:

       

Investments transferred from held to maturity to available for sale category

  Rs. 37,005.6     Rs. —       Rs. —       US$ —    

See accompanying notes to consolidated financial statements

 

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HDFC BANK LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For each of the years ended March 31, 2005, 2006 and 2007

 

    Number of
Equity
Shares
  Equity
Share
Capital
  Additional
Paid In
Capital
    Advance
Received
Pending
Allotment
Of Shares
    Retained
Earnings
    Statutory
Reserve
  Deferred
Stock-Based
Compensation
    Accumulated
Other
Comprehensive
Income (loss)
    Comprehensive
Income
    Total
Shareholders’
Equity
 
    (In millions, except for equity shares)        

Balance at March 31, 2004

  282,844,438   Rs. 2,828.4     Rs. 12,527.3     Rs. 125.5     Rs. 9,057.1     Rs. 4,523.7   Rs. (374.6 )   Rs. 2,528.4         Rs. 31,215.8  

Shares issued upon exercise of options

  4,106,775     41.1     743.5       (125.5 )               659.1  

Shares issued in public offering

  22,924,095     229.2     12,518.4                   12,747.6  

Dividends, including dividend tax

            (1,131.3 )             (1,131.3 )

Advance received pending allotment of shares

          423.3                 423.3  

Amortization of deferred stock-based compensation

                308.5           308.5  

Transfer to statutory reserve

            (1,663.9 )     1,663.9            

Net income

            6,609.7           Rs. 6,609.7       6,609.7  

Unrealized gains on securities transferred from held to maturity to available for sale

                  558.9       558.9       558.9  

Unrealized loss reclassified to earnings

                  (773.4 )     (773.4 )     (773.4 )

Change in the unrealized net gain on available for sale securities, net of tax

                  (1,280.2 )     (1,280.2 )     (1,280.2 )

Comprehensive income

                  Rs. 5,115.0    
                                                                 

Balance at March 31, 2005

  309,875,308   Rs. 3,098.7     Rs. 25,789.2     Rs. 423.3     Rs. 12,871.6     Rs. 6,187.6   Rs. (66.1 )   Rs. 1,033.7         Rs. 49,338.0  
                                                                 

Shares issued upon exercise of options

  3,267,100     32.7     1,016.5       (423.3 )               625.9  

Dividends, including dividend tax

            (1,597.1 )             (1,597.1 )

Amortization of deferred stock-based compensation

                46.6           46.6  

Transfer to statutory reserve

            (2,177.0 )     2,177.0           —    

Net income

            9,187.1           Rs. 9,187.1       9,187.1  

Unrealized gain reclassified to earnings

                  (80.6 )     (80.6 )     (80.6 )

Change in the unrealized net gain on available for sale securities, net of tax

                  (2,252.4 )     (2,252.4 )     (2,252.4 )

Comprehensive income

                  Rs. 6,854.1    
                                                                 

Balance at March 31, 2006

  313,142,408     Rs. 3,131.4     Rs. 26,805.7     Rs. —       Rs. 18,284.6     Rs. 8,364.6   Rs. (19.5 )   Rs. (1,299.3 )       Rs. 55,267.5  
                                                                 

Shares issued upon exercise of options

  6,247,200     62.5     2,477.7                   2,540.2  

Dividends, including dividend tax

            (1,967.4 )             (1,967.4 )

Adjustment on initial application

                   

of FAS 123 (R)

        (33.1 )           19.5           (13.6 )

Transfer to statutory reserve

            (2,853.6 )     2,853.6           —    

Net income

            11,039.7           Rs. 11,039.7       11,039.7  

Unrealized loss reclassified to earnings

                  378.9       378.9       378.9  

Change in the unrealized net gain on available for sale securities, net of tax

                  (2,690.6 )     (2,690.6 )     (2,690.6 )

Share based compensation

        976.3                   976.3  

Application of FAS 158, net of tax

                  (22.9 )       (22.9 )

Comprehensive income

                  Rs. 8,728.0    
                                                                 

Balance at March 31, 2007

  319,389,608     Rs. 3,193.9   Rs. 30,226.6     Rs. —       Rs. 24,503.3       Rs. 11,218.2   Rs. —       Rs. (3,633.9 )     Rs. 65,508.1  
                                                                 

Balance at March 31, 2007

  319,389,608   US$ 74.1   US$ 701.3     US$ —       US$ 568.5     US$ 260.3   US$ —       US$ (84.3 )     US$ 1,519.9  
                                                                 

See accompanying notes to consolidated financial statements

 

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1. The Bank

HDFC Bank Limited (the “Bank”) was incorporated in August 1994 with its registered office in Mumbai, India. The Bank is a banking company governed by India’s Banking Regulations Act, 1949. The Bank’s shares are listed on the Bombay Stock Exchange Ltd., The National Stock Exchange of India Limited and its ADSs are listed on the New York Stock Exchange.

The Bank’s largest shareholder is Housing Development Finance Corporation Limited (“HDFC Limited”), which, along with its subsidiaries, owns 21.6 % of the Bank’s equity as of March 31, 2007. The remainder of the Bank’s equity is widely held by the public and by foreign and Indian institutional investors.

After March 31, 2007, the Bank allotted to HDFC Limited a further 13.582 million shares on a preferential basis at a price of Rs. 1,023.49 per share. After March 31, 2007 the total number of shares issued pursuant to exercise of stock options till June 30, 2007 is 215,400 shares.

The Bank’s principal business activities are retail banking, wholesale banking and treasury operations. The Bank’s retail banking division provides a variety of deposit products as well as loans, credit cards, debit cards, third party mutual funds and insurance, investment advisory services, depositary services, trade finance, foreign exchange and derivative services and sale of gold bars. Through its wholesale banking operations, the Bank provides loans, deposit products, documentary credits, guarantees, bullion trading, foreign exchange, and derivative products. It also provides cash management services, clearing and settlement services for stock exchanges, tax and other collections for the government, custody services for mutual funds and correspondent banking services. The Bank’s treasury group manages its debt securities and money market operations and its foreign exchange and derivative products.

2. Summary of Significant Accounting Policies

a. Principles of Consolidation

The consolidated financial statements include the accounts of HDFC Bank Limited and its subsidiaries. The Bank consolidates subsidiaries in which, directly or indirectly, it holds more than 50% of the voting rights or exercises control. Entities where the Bank holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence are accounted for under the equity method, and the pro rata share of their income (loss) is included in income. Income from investments in other companies is recognized when dividends are received. The Bank consolidates Variable Interest Entities (VIEs) where the Bank is determined to be the primary beneficiary under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46 (R)). All significant inter-company accounts and transactions are eliminated on consolidation.

b. Basis of presentation

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). US GAAP differs in certain material respects from accounting principles generally accepted in India, the requirements of India’s Banking Regulations Act and related regulations issued by the Reserve Bank of India (“RBI”) (collectively “Indian GAAP”), which form the basis of the statutory general purpose financial statements of the Bank in India. Principal differences insofar as they relate to the Bank include: determination of the allowance for credit losses; classification and valuation of investments; accounting for deferred income taxes, stock-based compensation, employee benefits, loan origination fees and derivative financial instruments, and the presentation format and disclosures of the financial statements and related notes.

c. Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent

 

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assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses for the years presented. Actual results could differ from these estimates. Material estimates included in these financial statements that are susceptible to change include the allowance for credit losses and the valuation of unquoted investments and derivatives.

d. Cash and cash equivalents

The Bank considers all highly liquid financial instruments, which are readily convertible into cash and have original maturities of three months or less on the date of purchase, to be cash equivalents.

e. Customer acquisition costs

Customer acquisition costs principally consist of commissions paid to third party referral agents who obtain retail loans and such costs are deferred and amortized as a yield adjustment over the life of the loans. Advertising and marketing expenses incurred to solicit new business are expensed as incurred.

f. Investments in securities

Investments consist of securities purchased as part of the Bank’s treasury operations, such as government securities and other debt and equity securities, and investments purchased as part of the Bank’s wholesale banking operations, such as credit substitute securities issued by the Bank’s wholesale banking customers.

Credit substitute securities typically consist of commercial paper, short-term debentures and preference shares issued by the same customers with whom the Bank has a lending relationship in its wholesale banking business. Investment decisions for credit substitute securities are subject to the same credit approval processes as for loans, and the Bank bears the same customer credit risk as it does for loans extended to those customers. Additionally, the yield and maturity terms are generally directly negotiated by the Bank with the issuer. As the Bank’s exposures to such securities are similar to its exposures on its loan portfolio, additional disclosures have been provided on impairment status in Note 8 and on concentrations of credit risk in Note 12.

All other securities including mortgage and asset-backed securities are actively managed as part of the Bank’s treasury operations. The issuers of such securities are either the government, public financial institutions or private issuers. These investments are typically purchased from the market, and debt securities are generally publicly rated.

Securities that are held principally for resale in the near term are classified as held for trading (“HFT”) and are carried at fair value, with changes in fair value recorded in earnings.

Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity (“HTM”) and are carried at amortized cost.

Equity securities with readily determinable fair values and all debt securities that are not classified as HTM or HFT are classified as available for sale (“AFS”) and are carried at fair value. Unrealized gains and losses on such securities, net of applicable taxes, are reported in accumulated other comprehensive income (loss), a separate component of shareholders’ equity.

Fair values are based on market quotations where a market quotation is available or otherwise based on present values at current interest rates for such investments.

Where management determines that an HTM security’s credit rating has been irrevocably downgraded, and continued holding to maturity is likely to result in increased losses, it transfers the security to AFS or sells the security at the best available price.

Transfers between categories are recorded at fair value on the date of the transfer.

 

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g. Impairment of securities

Declines in the fair values of held to maturity and available for sale securities below their carrying values that are other than temporary are reflected in earnings as realized losses, based on management’s best estimate of the fair value of the investment. The Bank identifies other than temporary declines based on an evaluation of all significant factors, including the length of time and extent to which fair value is less than carrying values and the financial condition and economic prospects of the issuer. Estimates of any declines in the fair values of credit substitute securities that are other than temporary are measured on a case-by-case basis together with loans to those customers. The Bank does not recognize an impairment for debt securities if the cause of the decline is related solely to interest rate increases and where the Bank has the ability and intent to hold the security until the forecasted recovery.

h. Loans

The Bank grants retail and wholesale loans to customers.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances adjusted for an allowance for credit losses.

Interest is accrued on the unpaid principal balance and is included in interest income. Loans are placed on “non-accrual” status when interest or principal payments are past due for a specified period, at which time no further interest is accrued and overdue interest is written off against interest income. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans are placed on “non-accrual” status when interest or principal payments are one quarter past due in line with international practices.

i. Allowance for credit losses

The Bank provides an allowance for credit losses based on management’s best estimate of losses inherent in the loan portfolio. The allowance for credit losses consists of allowances for retail loans and wholesale loans.

Retail

The Bank’s retail loan loss allowance consists of specific and unallocated allowances.

The Bank establishes a specific allowance on the retail loan portfolio based on factors such as the nature of the product, delinquency levels or the number of days the loan is past due, the nature of the security available and loan to value ratios. The loans are charged off against allowances at defined delinquency levels.

The Bank also records unallocated allowance for its retail loans by product type. The Bank’s retail loan portfolio comprises groups of large numbers of small value homogeneous loans. The Bank establishes an unallocated allowance for loans in each product group based on its estimate of the expected amount of losses inherent in such product. In making such estimates, among other factors considered, the Bank stratifies such loans based on the number of days past due and takes into account historical losses for such product, the nature of security available and loan to value ratios.

Wholesale

The allowance for wholesale loans consists of specific and unallocated components. The allowance for such credit losses is evaluated on a regular basis by management and is based upon management’s view of the probability of recovery of loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, factors affecting the industry which the loan exposure relates to and prevailing economic conditions.

 

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This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Loans are charged off against the allowance when management believes that the loan balance cannot be recovered. Subsequent recoveries, if any, are credited to the provision.

The Bank grades its wholesale loan accounts considering both qualitative and quantitative criteria. Wholesale loans are considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, the financial condition of the borrower, the value of collateral held, and the probability of collecting scheduled principal and interest payments when due.

The Bank establishes specific allowances for each impaired wholesale loan customer in the aggregate for all facilities, including term loans, cash credits, bills discounted and lease finance, based on either the present value of expected future cash flows discounted at the loan’s effective interest rate or the net realizable value of the collateral if the loan is collateral dependent.

Wholesale loans that experience insignificant payment delays and payment shortfalls are generally not classified as impaired but are placed on a surveillance watch list and closely monitored for deterioration. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, market information, and the amount of the shortfall in relation to the principal and interest owed.

In light of the significant growth in the size and diversity of its wholesale loan portfolio, the Bank has also established an unallocated allowance for wholesale standard loans based on the overall portfolio quality, asset growth, economic conditions and other risk factors. The Bank estimate its wholesale unallocated allowance based on an internal credit slippage matrix, which measures the Bank’s historic losses for its standard loan portfolio.

j. Sales/Transfer of Receivables

The Bank sells finance receivables to special purpose entities (“SPEs”) in securitization transactions. Recourse is in the form of the Bank’s investment in subordinated securities issued by these SPEs, cash collateral and other credit and liquidity enhancements. Securitized receivables are derecognized in the balance sheet when they are sold and consideration has been received by the Bank. Sales and transfers that do not meet the criteria for surrender of control are accounted for as secured borrowings. The Bank also enters into securitisation transactions, which are similar to asset-backed securitization transactions through the SPE route, except that such portfolios of receivables are assigned directly to the purchaser and are not represented by pass-through certificates.

Gains or losses from the sale of receivables are recognized in the income statement in the period the sale occurs based on the relative fair value of the portion sold and the portion allocated to retained interests, and are reported net of the estimated cost of servicing by the Bank.

Fair values are determined based on the present value of expected future cash flows, using best estimates for key assumptions, such as prepayment and discount rates, commensurate with the risk involved.

For further information, see note 11.

 

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k. Property and equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided over the estimated useful lives of fixed assets on a straight-line basis at the following rates:

 

Type of Asset

  

Rate of depreciation

Buildings

   1.61%

Leasehold improvements

   Lower of asset life or period of lease

ATMs

   12.50%

Very small aperture terminals (“VSATs”)

   10.00%

Office equipment

   16.21%

Computer equipment

   33.33%

Automobiles

   25.00%

Software and system development expenditure

   25.00%

Assets at the residence of executives of the Bank

   25.00%

l. Impairment or disposal of tangible long lived assets

Whenever events or circumstances indicate that the carrying amount of tangible long lived assets may not be recoverable, the Bank subjects such long lived assets to a test of recoverability based on the undiscounted cash flows from use or disposition of the asset. Such events or circumstances would include changes in the market, technology obsolescence, adverse changes in profitability or regulation. If the asset is impaired, the Bank recognizes an impairment loss estimated as the difference between carrying value and the net realizable value.

m. Foreclosed or repossessed assets

Assets acquired through or in lieu of foreclosure or through repossession are generally held for sale and initially recorded at fair value on the date of foreclosure or repossession. On subsequent dates, such assets are periodically evaluated by management for changes in fair value, and are carried at the lower of the fair value on the date of foreclosure or repossession and the net realizable value on the balance sheet date. Net realizable value represents the anticipated sale price less the estimated costs of disposal. Revenues and expenses from the operation of such assets and changes in the fair value are recognised in earnings.

n. Income tax

Income tax expense/benefit consists of the current tax provision and the net change in the deferred tax asset or liability in the year.

Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and operating loss carry forwards. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

Some of the provisions of tax laws that have been recently promulgated remain open to interpretations. The Bank uses a conservative estimate to make provisions for these taxes since no precedents exist or decided cases which could be used as points in reference.

o. Revenue recognition

Interest income from loans and from investments is recognized on an accrual basis when earned except in respect of loans or investments placed on non-accrual status, where it is recognized when received. The Bank generally does not charge upfront loan origination fees. Nominal application fees are charged which offset the related costs incurred.

 

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Fees and commissions from guarantees issued are amortized over the contractual period of the commitment, provided the amounts are collectible.

Dividends are recognized when declared.

Realized gains and losses on sale of securities are recorded on the trade date and are determined using the weighted average cost method.

Other fees and income are recognized when earned, which is when the service that results in the income has been provided. The Bank amortizes annual fees on credit cards over the contractual period of the fees.

p. Foreign currency transactions

The Bank’s functional currency is the Indian rupee. Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction. Foreign currency denominated monetary assets and liabilities are converted into Indian rupees using exchange rates prevailing on the balance sheet dates. Gains and losses arising on conversion of foreign currency denominated monetary assets and liabilities and on foreign currency transactions are included in the determination of net income.

q. Stock-Based Compensation

The Bank has implemented the provisions of SFAS No. 123(R) “Accounting for Stock-Based Compensation” with effect from April 1, 2006. Accordingly the fair value method is used to account for the compensation cost of stock options and awards granted to employees of the Bank with effect from April 1, 2006. The Bank elected the ‘modified prospective method’ as prescribed in SFAS 123 (R) and therefore the prior periods were not restated. Accordingly ‘modified prospective method’ was applied to new awards granted after April 1, 2006 and to unvested portion of previously granted stock options and awards.

Until March 31, 2006 had compensation cost for the Bank’s stock option plans been determined based on the fair value approach, the Bank’s net income and earnings per share would have been as per the proforma amounts indicated below:

 

          Years ended March 31,  
          2005     2006  
         

(In millions, except

per share amounts)

 

Net Income:

   As reported    Rs. 6,609.7     Rs. 9,187.1  

Add: Stock-based employee compensation expense included in net income

   As reported      308.5       46.6  

Less: Stock-based compensation expense determined under fair value based method:

   Pro forma      (1,209.4 )     (1,276.5 )
                   

Net Income:

   Pro forma    Rs. 5,708.8       Rs. 7,957.2  
                   

Basic earnings per share

   As reported    Rs. 22.78     Rs. 29.45  
   Pro forma      19.68       25.51  

Diluted earnings per share

   As reported    Rs. 22.60     Rs. 29.08  
   Pro forma      19.52       25.19  

Basic earnings per ADS

   As reported    Rs. 68.34     Rs. 88.36  
   Pro forma      59.04       76.53  

Diluted earnings per ADS

   As reported    Rs. 67.80     Rs. 87.24  
   Pro forma      58.56       75.56  

 

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The adoption of SFAS 123(R) has resulted in the recognition of stock compensation expense of Rs. 976.3 million for fiscal 2007. The impact on the consolidated financial statements of the Bank for fiscal 2007 due to the adoption of SFAS 123(R) using the modified prospective approach is given below:

 

     Years ended March 31,  
         2007             2007      
     (In millions, except per share
amounts)
 

Income before income tax

     Rs. (976.3 )   US$ (22.7 )

Net income

     (976.3 )     (22.7 )

Cash flows from operating activities

     (976.3 )     (22.7 )
                

Earnings per equity share—basic

   Rs. (3.10 )   US$ (0.07 )

Earnings per equity share—diluted

     (3.06 )       (0.07 )

Earnings per ADS—basic

     (9.30 )     (0.22 )

Earnings per ADS—diluted

     (9.18 )     (0.21 )

The fair value of options have been estimated on the dates of each grant using a binomial option pricing model with the following assumptions:

 

     Years ended March 31,
     2005*    2006   2007

Dividend yield

   —      0.7%   0.55%

Expected volatility

   —      21.25%   31.75%

Risk—free interest rate

       

ESOS Plan

   —      6.1%-6.6%   7.8%-7.9%

Expected lives:

       

ESOS Plan

   —      1-7 yrs   1-5 yrs

 

* No options were granted in the year 2005.

r. Debt issuance costs

Issuance costs of long-term debt are amortized over the tenure of the debt.

s. Earnings per share

Basic earnings per equity share have been computed by dividing net income by the weighted average number of equity shares outstanding for the period. For the purpose of determining the weighted average number of equity shares outstanding, the Bank treats advances received from optionees who exercise their options as issued shares even if the administrative formalities of allocating equity shares have not been completed. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period, using the treasury stock method, except where the result would be anti-dilutive. The Bank also reports basic and diluted earnings per ADS, where each ADS represents three equity shares. Earnings per ADS have been computed as earnings per equity share multiplied by the number of equity shares per ADS. A reconciliation of the number of shares used in computing earnings per share has been provided in Note 28.

t. Segment information

The Bank operates in three reportable segments, namely retail banking, wholesale banking and treasury services. Segment-wise information has been provided in Note 24.

 

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u. Derivative Financial Instruments

The Bank recognizes all derivative instruments, including certain derivative instruments embedded in other contracts, as assets or liabilities in the balance sheet and measures them at fair value, unless those instruments qualify to be accounted for as hedge contracts. The Bank has not designated any derivatives as hedges. As such, all changes in fair value of derivative instruments are recognised in net income in the period of change.

The Bank enters into forward exchange contracts, currency swaps and currency options with its customers and typically transfers such customer exposures in the inter-bank foreign exchange markets. The Bank also enters into such instruments to cover its own foreign exchange exposures. All such instruments are carried at fair value, determined based on market quotations.

The Bank enters into rupee interest rate swaps for its own account. The Bank also enters into interest rate currency swaps and cross currency interest rate swaps with its customers and typically lays these off in the inter-bank market. Such contracts are carried on the balance sheet at fair value, based on market quotations where available or priced using market determined yield curves.

v. Recently issued accounting pronouncements not yet effective

In February 2006, the FASB issued SFAS No. 155 “Accounting for Certain Hybrid Instruments” which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded derivative and would otherwise require bifurcation in accordance with SFAS 133. The statement is effective as of April 1, 2007. The adoption of SFAS no. 155 is not expected to have a material impact on the bank’s future financial position or results of operation.

In March 2006, the FASB issued SFAS No.156, “Accounting for Servicing of Financial Assets, an amendment to FASB Statement No. 140”, which permits but does not require an entity to account for one or more classes of servicing rights at fair value, with changes in fair value recorded in Consolidated Statement of Income. The statement is effective April 1, 2007. The Bank does not expect that the adoption of the above mentioned new accounting pronouncement will have a material impact on the bank’s future financial position or results of operation.

In September 2006, the FASB issued SFAS No.157, “Fair Value Measurements”. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. The statement is effective November 2007. The bank is currently evaluating this standard to determine whether it will have a material effect on the bank’s future financial position or results of operation.

In February, 2007, the FASB issued Statement No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (including an amendment of FASB Statement No. 115). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The unrealized gains and losses on items for which the fair value option has been elected is to be reported in earnings. SFAS 159 is effective from an entity’s first year beginning after 15 November 2007. The bank is currently evaluating this standard to determine whether it will have a material effect on the bank’s future financial position or results of operation.

In June 2006, the FASB issued FIN No. 48, “Accounting for uncertainty in Income Taxes- an interpretation of FASB statement No. 109”. This Interpretation clarifies the accounting for uncertainty in income taxes

 

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recognized in accordance with FASB Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return besides it also provides guidance on several other similar issues. This interpretation is effective for fiscal years beginning after December 2006. The Bank does not expect that the adoption of FIN No. 48 will have a material impact on the bank’s future financial position or results of operation.

w. Convenience Translation

The accompanying financial statements have been expressed in Indian rupees (“Rs.”), the Bank’s functional currency. For the convenience of the reader, the financial statements as of and for the year ended March 31, 2007 have been translated into U.S. dollars at U.S.$1.00 = Rs. 43.10 based on the noon buying rate for cable transfers on March 30, 2007 as certified for customs purposes by the Federal Reserve Bank of New York. Such translation should not be construed as a representation that the rupee amounts have been or could be converted into United States dollars at that or any other rate, or at all.

3. Cash and cash equivalents

Cash and cash equivalents as of March 31, 2006 and 2007 include balances of Rs. 27,989.0 million, Rs. 44,359.7 million respectively, maintained with the RBI to meet the Bank’s cash reserve ratio requirement. The Bank is required to maintain a specific percentage of its demand and time liabilities by way of a balance in current account with the RBI. This is to maintain the solvency of the banking system. The cash reserve ratio has to be maintained on an average basis for a two-week period and should not fall below 70% of the required cash reserve ratio on any particular day.

4. Term placements

Term placements consist of placements with banks and financial institutions in the ordinary course of business. These placements have original maturities for periods between 3 months and 7 years.

5. Investments, held for trading

The portfolio of trading securities at March 31, 2006 and 2007 is as follows:

 

     As of March 31, 2006
     Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
  

Fair

Value

     (In millions)

Government of India securities

   Rs. 2,948.1    Rs. 6.1    Rs. 8.6    Rs. 2,945.6
                           

Total

   Rs. 2,948.1    Rs. 6.1    Rs. 8.6    Rs. 2,945.6
                           

 

     As of March 31, 2007
     Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
  

Fair

Value

     (In millions)

Government of India securities

   Rs. 1,639.3    Rs. 3.5    Rs. 5.0    Rs. 1,637.8
                           

Total Debt Securities

     1,639.3      3.5      5.0      1,637.8

Mutual fund units

     2,644.2      2.5      0.4      2,646.3
                           

Total

   Rs. 4,283.5    Rs. 6.0    Rs. 5.4    Rs. 4,284.1
                           

Total

   US$ 99.4    US$ 0.1    US$ 0.1    US$ 99.4
                           

 

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6. Investments, available for sale

The portfolio of available for sale securities at March 31, 2006 and 2007 is as follows:

 

     As of March 31, 2006
     Amortized Cost    Gross
Unrealized
Gains
   Gross
Unrealized
Losses
  

Fair

Value

     (In millions)

Government of India securities

   Rs. 189,200.9    Rs. 405.1    Rs. 1,945.0    Rs. 187,661.0

Securities issued by Government of India sponsored institutions

     27,772.2      105.1      450.8      27,426.5

State government securities

     459.4      0.1      12.1      447.4

Securities issued by state government sponsored institutions

     315.0      6.7      0.3      321.4

Credit substitutes (See Note 8)

     9,625.6      170.6      44.9      9,751.3

Corporate bonds

     150.0      —        0.9      149.1
                           

Debt securities

     227,523.1      687.6      2,454.0      225,756.7

Mortgage-backed securities

     17,158.8      90.7      194.7      17,054.8

Asset-backed securities

     27,338.6      34.5      247.0      27,126.1

Equity securities

     275.3      54.1      3.9      325.5

Mutual fund units

     3,187.1      6.8      —        3,193.9
                           

Total

   Rs. 275,482.9    Rs. 873.7    Rs. 2,899.6    Rs. 273,457.0
                           

Securities with gross unrealized losses

            Rs. 197,275.2

Securities with gross unrealized gains

              76,181.8
               
            Rs. 273,457.0
               

 

     As of March 31, 2007
    

Amortized

Cost

   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
  

Fair

Value

     (In millions)

Government of India securities

     Rs. 234,077.0      Rs. 319.8      Rs. 5,182.8      Rs. 229,214.0

Securities issued by Government of India sponsored institutions

     29,517.3      104.5      462.4      29,159.4

State government securities

     447.4      —        19.5      427.9

Securities issued by state government sponsored institutions

     716.8      —        7.9      708.9

Credit substitutes (See Note 8)

     6,893.0      21.0      155.0      6,759.0

Other corporate/financial institution bonds

     749.0      —        12.2      736.8
                           

Debt securities

     272,400.5      445.3      5,839.8      267,006.0

Mortgage-backed securities

     14,801.3      88.7      175.6      14,714.4

Asset-backed securities

     22,365.7      24.8      164.5      22,226.0

Equity securities

     173.3      126.6      15.2      284.7

Mutual fund units

     10.0      —        —        10.0
                           

Total

     Rs. 309,750.8      Rs. 685.4      Rs. 6,195.1      Rs. 304,241.1
                           

Total

   US$ 7,186.8    US$ 15.9    US$ 143.7    US$ 7,059.0
                           

Securities with gross unrealized losses

              Rs. 240,292.1

Securities with gross unrealized gains

              63,949.0
               
              Rs. 304,241.1
               
            US$ 7,059.0
               

 

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Investments include Rs. 90,102.5 million as of March 31, 2006 and Rs. 119,824.7 million as of March 31, 2007 respectively, which have been kept as margins for clearing, collateral borrowing and lending obligation (CBLO) and real time gross settlement (RTGS). These have been kept with the Clearing Corporation of India Limited and RBI.

The Bank conducts a review each year to identify and evaluate investments that have indications of possible impairment. An investment in an equity or debt security is impaired if its fair value falls below its cost and the decline is considered other than temporary. Factors considered in determining whether a loss is temporary include length of time and extent to which fair value has been below cost, the financial condition and near term prospects of the issuer, and the Bank’s ability and intent to hold the investment for a period sufficient to allow for any anticipated recovery. The Bank evaluated the impaired investments and has fully recognized an expense of Rs. 105.9 million (US$ 2.5 million) (previous year Rs. 714.3 million) as other than temporary impairment in fiscal 2007. The Bank believes that the other unrealized losses on its investments in equity and debt securities as of March 31, 2007 are temporary in nature. The Bank’s review of impairment generally entails:

 

   

identification and evaluation of investments that have indications of possible impairment;

 

   

analysis of individual investments that have fair values of less than 95% of amortized cost, including consideration of the length of time the investment has been in an unrealized loss position;

 

   

analysis of evidential matter, including an evaluation of factors or triggers that would or could cause individual investments to have other-than temporary impairment; and

 

   

documentation of the results of these analyses, as required under business policies.

The gross unrealized losses and fair value of available for sale securities at March 31, 2007 is as follows:

 

     As of March 31, 2007
     Less Than 12 Months    12 Months or Greater
     Fair Value    Unrealized
Losses
   Fair Value    Unrealized
Losses
     (In millions)

Government of India securities

     Rs. 10,925.9      Rs. 177.4    Rs. 169,976.0    Rs. 5,005.4

Securities issued by Government of India sponsored institutions

     6,052.8      54.4      18,713.2      408.0

State government securities

     0.1      —        427.1      19.5

Securities issued by state government sponsored institutions

     704.3      7.9      —        —  

Credit substitutes (See Note 8)

     4,525.1      125.4      1,118.4      29.6

Other corporate/financial institution bonds

     736.8      12.2      —        —  
                           

Debt securities

     22,945.0      377.3      190,234.7      5,462.5

Mortgage-backed securities

     2,997.5      39.6      4,908.3      136.0

Asset-backed securities

     7,822.3      26.4      11,376.8      138.1

Equity securities

     7.5      15.2      —        —  
                           

Total

     Rs. 33,772.3      Rs. 458.5    Rs. 206,519.8      Rs. 5,736.6
                           

Total

   US$ 783.6    US$ 10.6    US$ 4,791.6    US$ 133.1
                           

 

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The contractual residual maturity of available for sale debt securities as of March 31, 2007 is set out below:

 

     As of March 31, 2007
     Amortized
Cost
   Fair Value    Fair Value
     (In millions)

Within one year

   Rs. 19,807.2    Rs. 19,758.6    US$ 458.4

Over one year through five years

     162,252.0      158,927.4      3,687.4

Over five years through ten years

     70,309.7      69,109.5      1,603.5

Over ten years

     20,031.6      19,210.5      445.7
                    

Total

   Rs. 272,400.5    Rs. 267,006.0    US$ 6,195.0
                    

AFS investments of Rs. 188,108.4 million and Rs. 229,641.9 million as of March 31, 2006 and March 31, 2007, respectively, are held to meet the Bank’s statutory liquidity ratio requirements. These balances are subject to withdrawal and usage restrictions, but may be freely traded by the Bank within those restrictions.

Gross realized gains and gross realized losses from sales of such securities and dividends and Interest on available for sale securities are set out below:

 

     Year ended March 31,  
     2005     2006     2007     2007  
     (In millions)  

Gross realized gains on sale

   Rs. 1,349.9     Rs. 694.3     Rs. 297.6     US$ 6.9  

Gross realized losses on sale

     (1,155.6 )     (274.0 )     (754.5 )     (17.5 )
                                

Realized gains (losses), net

     194.3       420.3       (456.9 )     (10.6 )

Dividends and interest

     10,605.7       12,969.6       19,408.0       450.3  
                                

Total

   Rs. 10,800.0     Rs. 13,389.9     Rs. 18,951.1     US$ 439.7  
                                

7. Investments, held to maturity

There were no HTM securities as of March 31, 2006 and March 31, 2007.

Interest on held to maturity securities was Rs. 793.4 million for the year ended March 31, 2005.

In the year ended March 31, 2005, because interest rates were rising in the Indian market, the Bank elected to transfer investments with a fair value of Rs. 11.2 billion from its HTM portfolio to its AFS portfolio because these investments were yielding higher than prevailing market yields. This transfer was permitted by RBI regulations. However, under U.S. GAAP, the Bank’s HTM portfolio was deemed “tainted” and the Bank was required to re-classify the remaining HTM portfolio as AFS securities. The Bank is not permitted to establish a new HTM portfolio under U.S. GAAP until after March 31, 2007 and, accordingly, the Bank’s investment classification under U.S. GAAP and Indian GAAP could vary materially in the future.

This reclassification resulted in an increase to shareholders’ equity of Rs. 1,222.2 million and had no impact on net income during the year ended March 31, 2005.

 

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8. Credit Substitutes

Credit substitutes consist of securities that the Bank invests in as part of an overall extension of credit to certain customers. Such securities share many of the risk and reward characteristics of loans and are managed by the Bank together with other credit facilities extended to the same customers. The fair values of credit substitutes by type of instrument as of March 31, 2006, March 31, 2007 are as follows:

 

     As of March 31,
     2006    2007
     Amortized
Cost
   Fair Value    Amortized
Cost
  

Fair

Value

     (In millions)

Available for sale credit substitute securities:

           

Debentures

   Rs. 9,183.0    Rs. 9,308.1    Rs. 6,415.5    Rs. 6,382.4

Preferred shares

     442.6      443.2      378.1      277.2

Commercial paper

     —        —        99.4      99.4
                           

Total

   Rs. 9,625.6    Rs. 9,751.3    Rs. 6,893.0    Rs. 6,759.0
                           
         US$ 159.9    US$ 156.8
                   

The bank has no credit substitutes in the held to maturity category.

The fair values of credit substitutes have been analyzed as follows:

 

     As of March 31,  
     2006     2007     2007  
     (In millions)  

Performing

   Rs. 9,751.3     Rs. 6,759.0     US$ 156.8  

Impaired—gross balance

     95.4       95.4       2.2  

Less amounts provided for other than temporary impairments

     (95.4 )     (95.4 )     (2.2 )
                        

Impaired credit substitutes, net

     —         —         —    
                        

Total credit substitutes, net

   Rs. 9,751.3     Rs. 6,759.0     US$ 156.8  
                        

Impaired credit substitutes as of March 31, 2006 and March 31, 2007:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Gross impaired credit substitutes:

        

—on accrual status

   Rs. —      Rs. —      US$ —  

—on non-accrual status

     95.4      95.4      2.2
                    

Total

   Rs. 95.4    Rs. 95.4    US$ 2.2
                    

Gross impaired credit substitutes by industry:

        

—Electronics

   Rs. 95.4    Rs. 95.4    US$ 2.2
                    

Total

   Rs. 95.4    Rs. 95.4    US$ 2.2
                    

Average impaired credit substitutes

   Rs. 92.4    Rs. 95.4    US$ 2.2
                    

Interest foregone on impaired credit substitutes

   Rs. —      Rs. —      US$ —  
                    

Interest income recognized on impaired credit substitutes

   Rs. —      Rs. —      US$ —  
                    

Interest income recognized on impaired credit substitutes on a cash basis

   Rs. —      Rs. —      US$ —  
                    

As of March 31, 2007, the Bank has no additional funds committed to borrowers whose credit substitutes were impaired.

 

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9. a. Securities purchased under resell agreements

Securities purchased under agreements to resell are classified separately from investments and generally mature within 14 days of the transaction date. Such resell transactions are recorded at the amount of cash advanced on the transaction. Resell transactions outstanding as of March 31, 2006 and March 31, 2007 are Rs. 4,200.0 million, and Rs. nil respectively.

b. Securities sold under repurchase agreements

Securities sold under agreements to repurchase are classified separately from investments and generally mature within 14 days of the transaction date. Such repurchase transactions are recorded at the amount of cash received on the transaction. Repurchase transactions outstanding as of March 31, 2006 and March 31, 2007 are Rs. nil and Rs. 10,500.0 million respectively.

10. Loans

Loan balances include Rs. 47,100.0 million and Rs. 68,094.0 million as of March 31, 2006 and March 31, 2007 for assets which have been pledged as collateral for borrowings and are therefore restricted.

Loans by facility as of March 31, 2006 and March 31, 2007 are as follows:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Retail Loans:

        

Auto loans

   Rs. 51,184.4    Rs. 87,701.2    US$ 2,034.8

Commercial vehicle and construction equipment finance

     43,613.2      52,070.6      1,208.1

Personal loans

     47,775.6      57,370.6      1,331.1

Loans against securities

     17,669.8      12,720.3      295.1

Two-wheeler loans

     19,661.2      22,340.1      518.3

Retail business banking

     29,291.6      54,374.4      1,261.6

Credit cards

     13,758.0      20,104.9      466.5

Other retail loans

     6,347.6      11,924.0      276.8
                    

Subtotal

   Rs. 229,301.4    Rs. 318,606.1    US$ 7,392.3

Wholesale loans:

        

Working capital finance

   Rs. 78,693.4    Rs. 76,421.6    US$ 1,773.1

Term loans

     92,932.8      149,717.7      3,473.7
                    

Sub total

   Rs. 171,626.2    Rs. 226,139.3    US$ 5,246.8
                    

Gross loans

     400,927.6      544,745.4      12,639.1

Less: Allowance for credit losses

     5,653.3      8,014.5      185.9
                    

Total

   Rs. 395,274.3    Rs. 536,730.9    US$ 12,453.2
                    

The contractual residual maturity of gross loans as of March 31, 2007 is set out below:

 

     As of March 31, 2007
     Working
Capital
Finance
  

Term

Loans

  

Retail

Loans

   Total
     (In millions)

Maturity profile of loans:

           

Within one year

   Rs. 41,995.1    Rs. 83,051.3    Rs. 127,572.3    Rs. 252,618.7

Over one year through five years

     34,426.5      41,835.9      181,021.0      257,283.4

After five years through ten years

     —        24,830.5      10,012.8      34,843.3
                           

Total gross loans

   Rs. 76,421.6    Rs. 149,717.7    Rs. 318,606.1    Rs. 544,745.4
                           
   US$ 1,773.1    US$ 3,473.7    US$ 7,392.3    US$ 12,639.1
                           

 

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Gross loans analyzed by performance are as follows:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Performing

   Rs. 396,144.1    Rs. 538,489.8    US$ 12,494.0

Impaired

     4,783.5      6,255.6      145.1
                    

Total gross loans

   Rs. 400,927.6    Rs. 544,745.4    US$ 12,639.1
                    

Impaired loans as of March 31, 2006 and 2007 by facility are as follows:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Retail loans

   Rs. 3,193.5    Rs. 4,785.7    US$ 111.0

Wholesale loans

     1,590.0      1,469.9      34.1
                    

Gross impaired loans

     4,783.5      6,255.6      145.1

Less: Specific allowance for credit losses

     3,204.6      4,224.2      98.0
                    

Impaired loans, net of specific allowance

   Rs. 1,578.9    Rs. 2,031.4    US$ 47.1
                    

Gross impaired loans:

        

—without valuation allowance

   Rs. 1,578.9    Rs. 2,031.4    US$ 47.1

—with valuation allowance

     3,204.6      4,224.2      98.0
                    

Total

   Rs. 4,783.5    Rs. 6,255.6    US$ 145.1
                    

Gross impaired loans:

        

—on accrual status

   Rs. —      Rs. —      US$ —  

—on non-accrual status

     4,783.5      6,255.6      145.1
                    

Total

   Rs. 4,783.5    Rs. 6,255.6    US$ 145.1
                    

Gross impaired loans by industry:

        

—Automotive

   Rs. 954.4    Rs. 642.9    US$ 14.9

—Land Transport

     347.9      266.7      6.2

— Textiles

     313.7      219.8      5.1

—Others (none > than 5% of impaired loans)

     3,167.5      5,126.2      118.9
                    

Total

   Rs. 4,783.5    Rs. 6,255.6    US$ 145.1
                    

Summary information relating to impaired loans as of March 31, 2005, 2006 and 2007 is as follows:

 

     As of March 31,
     2005    2006    2007    2007
     (In millions)

Average impaired loans, net of allowance

   Rs. 430.7    Rs. 1,085.1    Rs. 1,805.1    US$ 41.9

Interest foregone on impaired loans

   Rs. 216.7    Rs. 208.5    Rs. 198.3    US$ 4.6

Interest income recognized on impaired loans

   Rs. 0.6    Rs. 5.3    Rs. 15.9    US$ 0.4

Interest income recognized on impaired loans on a cash basis

   Rs. 0.6    Rs. 5.3    Rs. 15.9    US$ 0.4

As of March 31, 2007, the Bank had no additional funds committed to borrowers whose loans were impaired.

 

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Changes in the allowance for credit losses are as follows:

 

     As of March 31,  
     2006     2007     2007  
     (In millions)  

Specific allowance for credit losses, beginning of period

   Rs. 3,492.8     Rs. 3,204.6     US$ 74.3  

Gross provision for credit losses

     4,804.1       6,980.8       162.0  

Allowance no longer required due to:

      

Cash recoveries

     (275.1 )     (72.1 )     (1.7 )

Write-offs

     (4,817.2 )     (5,889.1 )     (136.6 )
                        

Specific allowance for credit losses, end of period

   Rs. 3,204.6     Rs. 4,224.2     US$ 98.0  
                        

Unallocated allowance for credit losses, beginning of period

     1,945.7       2,448.7       56.8  

Additions during the period

     503.0       1,341.6       31.1  
                        

Unallocated allowance for credit losses, end of period

     2,448.7       3,790.3       87.9  
                        

Total allowance for credit losses, end of period

   Rs. 5,653.3     Rs. 8,014.5     US$ 185.9  
                        

Interest and fees on loans by facility are as follows:

 

     Years ended March 31,
     2005    2006    2007    2007
     (In millions)

Wholesale

   Rs. 8,126.6    Rs. 13,989.4    Rs. 17,161.5    US$ 398.1

Retail loans

     8,304.8      14,864.4      29,662.0      688.1
                           

Total

   Rs. 16,431.4    Rs. 28,853.8    Rs. 46,823.5    US$ 1,086.2
                           

11. Sales/Transfer of Loans

The following table summarizes pre-tax gains on securitizations and certain cash flows received from customers and paid to SPEs for sales that were completed during the years ended March 31, 2005, March 31, 2006 and March 31, 2007:

 

     Years ended March 31,
     2005    2006     2007    2007
     (In millions)

Sale consideration from new securitizations/transfer

   Rs. 48,660.0    Rs. 19,733.3     Rs. 6,535.8    US$ 151.6

Less: Book value of finance receivables derecognized

     48,022.2      19,752.9       6,467.1      150.0

Less: Estimated costs of servicing

     15.3      11.7       16.2      0.4
                            

Pre-tax gains(loss) on securitizations

   Rs. 622.5    Rs. (31.3 )   Rs. 52.5    US$ 1.2
                            

Cash flow information

          

Collections against securitized receivables

   Rs. 12,635.7    Rs. 28,902.8     Rs. 26,030.2    US$ 603.9

Payments made to SPEs

   Rs. 10,666.2    Rs. 28,861.6     Rs. 26,213.5    US$ 608.2

Cash flows on retained interests

   Rs. 328.8    Rs. 304.7     Rs. 231.6    US$ 5.4

The Bank has relied upon market information and its past experience for the purpose of determining the assumptions below. Key assumptions used in measuring the retained interests in finance receivables of sales completed during the years ended March 31, 2006 and March 31, 2007 as of the dates of such sales were as follows:

 

     For the year ended
March 31, 2006
    For the year ended
March 31, 2007
 

Key assumptions: (rates per annum)

    

Annual prepayment rate

   6.0 %   5.0 %

Expected credit losses

   0.5 %   0.8 %

 

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Credit losses and prepayment losses as a percentage to the gross loans disbursed are estimated on the basis of historical losses on a similar portfolio.

Other key disclosures are as follows:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Finance receivables held by SPEs

   Rs. 40,593.4    Rs. 20,262.4    US$ 470.1

Delinquencies

     408.2      522.9      12.1

Credit losses

     183.5      317.2      7.4

Retained interest in sold receivables, consisting of subordinated securities

     669.8      362.3      8.4

The table below outlines the economic assumptions and the sensitivity of the estimated fair value of retained interests in finance receivables as of March 31, 2006 and March 31, 2007, to immediate 10% and 20% changes in those assumptions:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Carrying value/fair value of retained interests

  

Annual prepayment rate:

        

Impact of 10% adverse change

   Rs. 0.6    Rs. 0.5    US$ 0.0

Impact of 20% adverse change

     1.2      1.0      0.0

Expected credit losses:

        

Impact of 10% adverse change

     18.4      17.2      0.4

Impact of 20% adverse change

     36.7      34.3      0.8

The discount rate used for the valuation of retained interests is the rate of return to the transferees of the various pools of securitized receivables and, therefore, is not subject to change. Weighted average life in years of the securitized receivables is also not subject to change except in case of a change in the prepayment rate assumption. Consequently, the above sensitivity analysis does not include the impact on the estimated fair values of the retained interests due to adverse change in the weighted average life in years and the discount rate.

These sensitivities are hypothetical and should be used with appropriate caution. A 10% change in the assumptions may not result in lineally proportionate changes in the fair values of retained interests. Adverse changes assumed in the above analysis and the resultant change in the fair values of retained interests are calculated independent of each other. In reality, any change in one factor may cause change in the other factors.

12. Concentrations of credit risk

Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to the Bank’s total credit exposure. The Bank manages its credit risk collectively for its loan portfolio and credit substitute securities as these instruments are invested in as part of an overall lending program for corporate customers; accordingly, information on concentrations of credit risk has been provided for these exposures together.

 

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The Bank’s portfolio of loans and credit substitute securities is broadly diversified along industry and product lines, and as of March 31, 2006 and 2007 the exposures are as set forth below. The Bank does not consider retail loans a specific industry for this purpose. However, retail business banking loans are classified in the appropriate categories below and loans to commercial vehicle operators are included in land transport below.

 

     As of March 31, 2006  

Category

  

Gross

Loans

  

Fair Values
Of Credit

Substitutes

   Total    %  
     (In millions, except percentages)  

Automotive manufacturers

   Rs. 40,970.3    Rs. 38.0    Rs. 41,008.3    10.0 %

Land transport

     36,841.6      —        36,841.6    9.0  

Trade

     14,357.2      39.6      14,396.8    3.5  

Activities allied to Agriculture

     11,559.7      —        11,559.7    2.8  

Engineering

     10,659.7      303.7      10,963.5    2.7  

NBFC/Other Financial Intermediaries

     10,430.3      346.8      10,777.1    2.6  

Telecommunications

     5,217.1      3,671.3      8,888.4    2.2  

Others (none > than 2%)

     270,891.7      5,351.9      276,243.5    67.2  
                           

Total

   Rs. 400,927.6    Rs. 9,751.3    Rs. 410,678.9    100 %
                           

 

     As of March 31, 2007  

Category

   Gross loans    Fair Values
Of Credit
Substitutes
   Total    Total    %  
     (In millions, except percentages)  

Land Transport

   Rs. 61,407.3    Rs. —      Rs. 61,407.3    US$ 1,424.7    11.1 %

Activities allied to Agriculture

     27,237.3      —        27,237.3      632.0    4.9  

Trade

     26,364.3      40.6      26,404.9      612.6    4.8  

Automotive manufacturers

     26,165.0      —        26,165.0      607.1    4.7  

Food Processing

     13,586.0      —        13,586.0      315.2    2.5  

Engineering

     12,912.7      98.1      13,010.8      301.9    2.4  

Fertilisers

     12,081.9      202.9      12,284.8      285.0    2.2  

Others (none > than 2%)

     364,990.9      6,417.4      371,408.3      8,617.4    67.4  
                                  

Total

   Rs. 544,745.4    Rs. 6,759.0    Rs. 551,504.4    US$ 12,795.9    100.0 %
                                  

The Bank has a geographic concentration of credit risk, with exposure to borrowers based in Western India (including Mumbai), comprising 39.0% and 42.4 % of the total loan and credit substitute security portfolio as of March 31, 2006 and March 31,2007 respectively. While such borrowers are based in Western India they may use the funds provided by the Bank for a variety of uses that may or may not be related to the economy in Western India.

 

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Loan and credit substitute exposures as of March 31, 2006 and 2007 based on the region in which the instruments are originated are as follows (which may be or may not be where funds are used):

 

     As of March 31, 2006  

Region of origination

   Gross Loans    Fair Values
Of Credit
Substitutes
   Total Exposure    %  
     (In millions, except percentages)  

Mumbai

   Rs. 80,051.8    Rs. 7,305.6    Rs. 87,357.4    21.3 %

Western region, other than Mumbai

     72,151.2      482.8      72,634.0    17.7  

Northern region

     97,010.2      1,664.4      98,674.6    24.0  

Eastern region

     35,416.8      —        35,416.8    8.6  

Southern region

     116,297.6      298.5      116,596.1    28.4  
                           

Total

   Rs. 400,927.6    Rs. 9,751.3    Rs. 410,678.9    100.0 %
                           

 

     As of March 31, 2007  

Region of origination

   Gross Loans    Fair Values
Of Credit
Substitutes
   Total Exposure    Total Exposure    %  
     (In millions, except percentages)  

Mumbai

   Rs.145,208.5    Rs.5,835.2    Rs.151,043.7    US$ 3,504.4    27.4 %

Western region, other than Mumbai

   82,387.3    262.2    82,649.5      1,917.6    15.0  

Northern region

   130,775.0    502.4    131,277.4      3,045.9    23.8  

Eastern region

   36,258.6    —      36,258.6      841.3    6.6  

Southern region

   150,116.0    159.2    150,275.2      3,486.7    27.2  
                            

Total

   Rs.544,745.4    Rs.6,759.0    Rs.551,504.4    US$ 12,795.9    100.0 %
                            

The Bank’s exposures to its ten largest borrowers as of March 31, 2007, computed as per RBI guidelines, which include the aggregate of the higher of the outstanding balance or the limit on loans, investments (including credit substitutes) and non-funded exposures, are as follows:

 

     March 31, 2006    March 31, 2007
     Funded
Exposure
   Non-
Funded
Exposure
   Total
Exposure
   Funded
Exposure
   Non-
Funded
Exposure
   Total
Exposure
   Total
Exposure
     (In millions)

Borrower 1

   Rs. 11,991.4    Rs. —      Rs. 11,991.4    Rs. 14,819.8    Rs. —      Rs. 14,819.8    US$ 343.8

Borrower 2

     —        —        —        8,106.8      631.6      8,738.4      202.7

Borrower 3

     113.8      4,600.7      4,714.5      871.2      7,000.0      7,871.2      182.6

Borrower 4

     6,000.0      —        6,000.0      5,900.0      —        5,900.0      136.9

Borrower 5

     —        —        —        3,866.2      1,420.0      5,286.2      122.6

Borrower 6

     —        —        —        4,620.2      520.0      5,140.2      119.3

Borrower 7

     3,181.8      1,000.0      4,181.8      3,997.2      1,000.0      4,997.2      115.9

Borrower 8

     —        —        —        1,635.1      3,247.1      4,882.2      113.3

Borrower 9

     4,845.2      —        4,845.2      4,555.0      —        4,555.0      105.7

Borrower 10

   Rs. —      Rs. —      Rs. —      Rs. 3618.6    Rs. —      Rs. 3618.6    US$ 84.0

Information in respect of earlier years is not provided for the above borrowers if they were then not among the top ten exposures.

 

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13. Property and equipment

Property and equipment by asset category is as follows:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Land and premises

   Rs. 3,145.0    Rs. 3,677.1    US$ 85.3

Software and systems

     2155.3      2,636.1      61.2

Equipment and furniture

     10,472.6      13,416.4      311.2
                    

Property and equipment, at cost

     15,772.9      19,729.6      457.7

Less: Accumulated depreciation

     7,058.3      9,332.0      216.5
                    

Property and equipment, net

   Rs. 8,714.6    Rs. 10,397.6    US$ 241.2
                    

Depreciation charged for the years ended March 31, 2005, 2006 and 2007 was Rs. 1,440.7 million, Rs. 1,812.1 million and Rs. 2,273.3 million (US$ 52.7 million), respectively.

14. Other assets

Other assets include the following:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Checks in the course of collection

   Rs. 91.7    Rs. 65.9    US$ 1.5

Security deposits for leased property

     1,089.9      1,292.0      30.0

Sundry accounts receivable

     3,763.1      4,129.4      95.8

Advance tax (net of provision for taxes)

     3,487.8      4,430.2      102.8

Advances

     836.5      560.0      13.0

Prepaid expenses

     3,336.4      543.0      12.6

Restricted cash/ securitization margin for credit enhancement and securitized transactions

     443.9      1465.1      34.0

Fair value of derivatives and foreign exchange

     9,161.0      29,924.0      694.1

Other

     4,066.9      6017.5      139.6
                    

Total

   Rs. 26,277.2    Rs. 48,427.1    US$ 1,123.4
                    

15. Deposits

Deposits include demand deposits, which are non-interest-bearing, and savings and time deposits, which are interest- bearing. Deposits as of March 31, 2006 and 2007 are as follows:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Interest-bearing:

        

Savings deposits

   Rs. 161,857.9    Rs. 195,847.9    US$ 4,544.0

Time deposits

     248,323.3      288,695.0      6,698.3
                    

Total interest-bearing deposits

     410,181.2      484,542.9      11,242.3

Non-interest bearing deposits

     147,124.2      197,805.1      4,589.4
                    

Total

   Rs. 557,305.4    Rs. 682,348.0    US$ 15,831.7
                    

 

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As of March 31, 2006 and March 31, 2007, time deposits of Rs. 154,259.1 million and Rs. 167,856.9 million, respectively, have a residual maturity of less than one year. The balance of the deposits mature between one and five years.

As of March 31, 2006 and March 31, 2007, time deposits in excess of Rs. 0.1 million aggregated Rs. 226,729.8 million and Rs. 255,223.7 million, respectively.

16. Short-term borrowings

Short-term borrowings are mainly comprised of money market borrowings. These borrowings are unsecured and are utilized by the Bank for its treasury operations. Short-term borrowings as of March 31, 2006 and March 31, 2007 are comprised of the following:

 

     As of March 31,  
     2006     2007     2007  
     (In millions)  

Borrowed in the call market

   Rs. 12,725.1     Rs. 7,987.4     US$ 185.3  

Term borrowings from institutions/banks

     503.3       2,050.0       47.6  

Foreign currency borrowings

     14,477.0       17,341.0       402.3  

Bills rediscounted

     30,100.0       23,924.0       555.1  

Interbank risk participation

     17,000.0       44,170.0       1,024.8  
                        

Total

   Rs. 74,805.4     Rs. 95,472.4     US$ 2,215.1  
                        

Total borrowings outstanding:

      

Maximum amount outstanding

   Rs. 100,008.2     Rs. 119,785.7     US$ 2,779.3  
                        

Average amount outstanding

   Rs. 73,569.3     Rs. 75,391.1     US$ 1,749.2  
                        

Weighted average interest rate

     4.8 %     6.4 %     6.4 %
                        

17. Long-term debt

Long-term debt as of March 31, 2006 and March 31, 2007 is comprised of the following:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Subordinated debt

   Rs. 17,020.0    Rs. 32,826.0    US$ 761.6

Others

     879.9      775.5      18.0
                    

Total

   Rs. 17,899.9    Rs. 33,601.5    US$ 779.6
                    

The scheduled maturities of long-term debt are set out below:

 

     As of March 31,
     2007    2007
     (In millions)

Due in the fiscal year ending March 31:

     

2008

   Rs. 289.8    US$ 6.7

2009

     191.2      4.5

2010

     —        —  

2011

     294.5      6.8

2012

     —        —  

Thereafter (1)

     30,826.0      715.2
             

Total

   Rs. 31,601.5    US$ 733.2
             
(1) The scheduled maturities of long-term debt do not include perpetual bonds of Rs. 2.0 billion.

 

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The Bank issued unsecured non-convertible subordinated debt securities, which qualify as Tier 2 risk-based capital under the RBI’s guidelines for assessing capital adequacy. The Bank issued three tranches of subordinated debt securities during calendar years 1998, 1999 and 2001 at coupon rates of 13.0%, 13.75% and 11.00%, respectively. The 1998 tranche was repaid at maturity in fiscal 2004. The 1999 and 2001 tranches were repaid in fiscal 2007.

During fiscal 2007, the Bank raised Rs. 6,359.0 million as Upper Tier II capital at an annualized coupon ranging between 8.80 % to 9.20 %. The Bank also raised foreign currency borrowing of USD 100 million as Upper Tier II capital at an annualized coupon rate of 6-month USD LIBOR plus 120 bps. The bank raised Rs. 4,100.0 million as Lower Tier II capital at an annualized coupon ranging between 8.45% to 9.10%. The Bank raised a further Rs. 2,000.0 million as unsecured non-convertible subordinated perpetual bonds (Innovative perpetual debt instruments) in the nature of debentures for inclusion as Tier I capital at an annualized coupon 9.92 % payable semi annually.

Based on the balance term to maturity as at March 31, 2007, 100% of the book value of subordinated debt (lower tier II capital) and upper tier II capital is considered as Tier 2 capital for the purpose of capital adequacy computation.

Other long-term debt includes foreign currency borrowings from Citibank and a loan from the Indian Renewable Energy Development Authority used to finance solar equipment.

18. Accrued expenses and other liabilities

Accrued expenses and other liabilities include the amounts set forth below.

 

     As of March 31,
     2006    2007    2007
     (In millions)

Bills payable

   Rs. 20,795.8    Rs. 36,580.8    US$ 848.7

Remittances in transit

     28,206.6      25,793.1      598.4

Accrued expenses

     987.2      3,253.0      75.5

New account deposits

     5,982.6      1,707.8      39.6

Accounts payable

     8,640.9      8,224.2      190.8

Fair value on derivatives and foreign exchange

     8,806.6      27,317.3      633.8

Others

     3,782.1      5,522.4      128.2
                    

Total

   Rs. 77,201.8    Rs. 108,398.6    US$ 2,515.0
                    

19. Income taxes

The income tax expense comprises the following:

 

     Years ended March 31,  
     2005     2006    2007     2007  
     (In millions)  

Current income tax expense

   Rs. 3,338.9     Rs. 3,622.2    Rs. 5,818.8     US$ 135.0  

Deferred income tax (benefit) expense

     (213.5 )     343.5      (675.9 )     (15.7 )
                               

Income tax expense

   Rs. 3,125.4     Rs. 3,965.7    Rs. 5,142.9     US$ 119.3  
                               

 

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The following is the reconciliation of estimated income taxes at the Indian statutory income tax rate to income tax expense as reported:

 

     Years ended March 31,  
     2005     2006     2007     2007  
     (In millions)  

Net income before taxes

   Rs. 9,735.1     Rs.13,175.3     Rs.16,239.8     US$ 376.7  

Effective statutory income tax rate

     36.59 %   33.66 %   33.66 %     33.66 %

Expected income tax expense

     3,562.3     4,434.8     5,466.3       126.8  

Adjustments to reconcile expected income tax to actual tax expense:

        

Permanent differences:

        

Stock-based compensation (net of forfeitures)

     113.5     15.7     324.0       7.5  

Income exempt from taxes

     (504.7 )   (531.2 )   (648.8 )     (15.0 )

Other, net

     (66.2 )   39.4     1.4       —    

Effect of change in statutory tax rate

     20.5     7.0     —         —    
                            

Income tax expense

   Rs. 3,125.4     Rs. 3,965.7     Rs. 5,142.9     US$ 119.3  
                            

The tax effects of significant temporary differences are as follows:

 

     As of March 31,  
     2006    2007    2007  
     (In millions)  

Tax effect of:

        

Deductible temporary differences:

        

Allowance for loan losses

   Rs. 1,696.9    Rs. 2,387.7    US$ 55.4  

Unrealized loss on securities available for sale

     681.9      2,085.3      48.4  

Other

     607.8      975.9      22.7  
                      

Deferred tax asset

     2,986.6      5,448.9      126.5  
                      

Taxable temporary differences:

        

Property and equipment

     822.5      854.0      19.8  

Unrealized gain on securities available for sale

     185.9      492.2      11.5  

Loan origination cost

     961.1      1,165.2      27.0  
                      

Deferred tax liability

     1,969.5      2,511.4      58.3  
                      

Net deferred tax (asset) liability

   Rs. (1,017.1)    Rs. (2,937.5)    US$ (68.2 )
                      

Management believes that the realization of the recognized deferred tax assets is more likely than not based on expectations as to future taxable income.

For the years ended March 31, 2006 and 2007 the Bank has recorded income tax expense of Rs. 3,965.7 million and Rs. 5,142.9 million using an annual effective tax rate of 30.1% and 31.6% respectively.

20. Stock-based compensation

The stock-based compensation plans of the Bank are as follows:

Employees Stock Option Scheme:

The shareholders of the Bank approved in January 2000 Plan “A”, in June 2003 Plan “B” and in June 2005 Plan “C” of the Employees’ Stock Option Scheme (the “Plan”). Under the terms of each of these Plans, the Bank

 

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may issue stock options to employees and directors of the Bank, each of which is convertible into one equity share. The Bank reserved 10 million equity shares, with an aggregate nominal value of Rs. 100 million, for issuance under each Plan.

Plan A provides for the issuance of options at the recommendation of the Compensation Committee of the Board (the “Compensation Committee”) at an average of the daily closing prices on the Mumbai Stock Exchange during the 60 days preceding the date of grant of options, which was the minimum prescribed option price under regulations then issued by the Securities and Exchange Board of India (“SEBI”).

Plan B & Plan C provide for the issuance of options at the recommendation of the Compensation Committee at the closing price on the working day immediately preceding the date when options are granted on an Indian stock exchange with the highest trading volume during the preceding two weeks, which was the minimum prescribed option price under SEBI regulations.

Such options vest at the discretion of the Compensation Committee, subject to a maximum vesting not exceeding five years, set forth at the time the grants are made. Such options are exercisable for a period following vesting at the discretion of the Compensation Committee, subject to a maximum of five years, as set forth at the time of the grant. In June 2007 the Bank approved the offer and allotment of 15.0 million equity stock options, convertible into one equity shares of Rs. 10/- each aggregating to nominal face value of Rs. 150.0 million under the new Employee Stock Option Scheme(s) to the existing and new employees and Directors of the Bank. The Compensation Committee has since approved to grant in aggregate a total of 8,305,500 options for the employees of the Bank under schemes X, XI and XII respectively.

Activity in the options available to be granted under the Employee Stock Option Scheme is as follows:

 

     Options available to be granted  
     Years ending March 31,  
     2005    2006     2007  

Options available to be granted, beginning of year

   1,585,800    3,432,200     6,876,900  

Equity shares allocated for grant under the plan

   —      10,000,000     —    

Options granted

   —      (8,097,300 )   (6,633,300 )

Forfeited/lapsed

   1,846,400    1,542,000     2,666,200  
                 

Options available to be granted, end of year

   3,432,200    6,876,900     2,909,800  
                 

Activity in the options outstanding under the Employee Stock Option Scheme is as follows:

 

    Years ended March 31,
    2005   2006   2007
    Options     Weighted
Average
Exercise
Price
  Options     Weighted
Average
Exercise
Price
  Options     Weighted
Average
Exercise
Price

Options outstanding, beginning of year

  14,319,400     Rs. 325.42   10,313,500     Rs. 344.88   13,601,700     Rs. 503.18

Granted

  —         —     8,097,300       630.60   6,633,300       994.85

Exercised

  (2,159,500 )     215.73   (3,267,100 )     321.19   (6,247,200 )     406.61

Forfeited

  (1,846,400 )     345.01   (1,542,000 )     499.10   (2,666,200 )     679.11
                       

Options outstanding, end of year

  10,313,500     Rs. 344.88   13,601,700     Rs. 503.18   11,321,600     Rs. 803.10
                       

Options exercisable, end of year

  2,618,400     Rs. 297.56   1,898,500     Rs. 342.18   1,690,000     Rs. 498.89
                       

Weighted average fair value of options granted during the year

    Rs. —       Rs. 630.60     Rs. 994.85

 

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The following summarizes information about stock options outstanding as of March 31, 2007

 

          As of March 31, 2007

Plan

  

Range of exercise price

   Number Of
Shares Arising
Out Of Options
   Weighted
Average
Remaining Life*
   Weighted
Average
Exercise Price

Plan A

   Rs.225.43 to Rs.226.96 (or US$5.2 to US$ 5.3 )    9,100    —      Rs.226.71

Plan B

   Rs. 358.60 to Rs. 366.30 (or US$ 8.3 to US$ 8.5)    813,600    —      361.53

Plan C

   Rs. 630.60 to Rs. 994.85(US$ 14.6 to US$23.1)    10,498,900    1.40    837.82

 

* Weighted average remaining life is computed for non-vested shares based on the total number of shares arising out of option.

The intrinsic value of options exercised during the year ended March 31, 2005, 2006 and 2007 was Rs. 14.7 million, Rs. 47.1 million and Rs. 77.8 million respectively. Aggregate intrinsic value of options outstanding and options exercisable as at March 31, 2007 was Rs. 58.9 million and Rs. 12.6 million respectively. As at March 31, 2007, the total estimated compensation cost to be recognized in future periods is Rs. 1,513.2 million.

Employees Welfare Trust

The Bank established an Employees Welfare Trust (the “EWT”) in 1994 for the benefit of the Bank’s employees. The EWT borrowed funds from third parties and subscribed to an aggregate of 10,000,000 equity shares of the Bank at the same price as available to other shareholders, and from time to time, also made open market purchases of shares. In pursuance of the Trust’s objectives, grants were allotted to employees, directors and advisors at prices designated by the trustees. The vesting period varied at the discretion of the trustees from grant to grant, but was generally between 12 and 24 months.

The Bank accounted for the equity shares of the Bank held by the EWT as treasury shares until transferred and reported the external borrowings of the EWT as borrowings of the Bank. Consequently, dividends paid to the EWT were eliminated, and the interest cost incurred by the EWT and stock based compensation were charged as an expense by the Bank. The Bank recognized deferred stock-based compensation on each grant as the difference between the closing price on The Bombay Stock Exchange Ltd., and the applicable grant price. The Bank recognized stock-based compensation expense under this scheme of Rs. 113.7 million and, Rs. 213.9 million for the years ended March 31, 2004 and 2005 respectively. In fiscal 2006, there were no grants available to be allotted to the employees.

Since fiscal 2006 no shares of the Bank are held by EWT. The scheme stands suspended and consequently the sale or transfer of shares of the Bank to the trust for the benefit of its employees is stopped and curtailed. In view of the above, the trustees have reconstituted/reorganized the existing Trust under the title “HDB Employees Welfare Trust” (the “HDBT”). A reconstituted trust deed was executed in June, 2006. Under the reconstituted trust deed the same benefits and facilities are offered to the Employees as were available to the beneficiaries under Original Trust Deed, except for the discretionary power to transfer and sell shares etc. of the Bank to the employees of the Bank, which stands withdrawn. The Trust is run for the welfare of the employees. The beneficiaries of the Trust are the employees of the Bank. No profits are distributable by the trust.

Activity in the grants available to be allotted under the EWT Plan is as follows:

 

     Years ending March 31,
     2005     2006    2007

Grants available to be allotted, beginning of year

   276,775     —      —  

Grants allotted

   (4,700 )   —      —  

Grants sold in open market

   (272,075 )   —      —  

Grants cancelled

   —       —      —  
               

Grants available to be allotted, end of year

   —       —      —  
               

 

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Activity in the allotted grants outstanding under the EWT Plan is as follows:

 

     As of March 31,
     2005    2006    2007
     Grants     Weighted
Average
Exercise
price
   Grants    Weighted
Average
Exercise
Price
   Grants    Weighted
Average
Exercise
Price

Grants allotted beginning of year

   1,670,500     Rs. 42.93    —      Rs.—      —      Rs.—  

New grants

   4,700       43.00    —      —      —      —  

Grants exercised

   (1,675,200 )     42.60    —      —      —      —  

Grants cancelled

   —         —      —      —      —      —  
                                

Grants allotted, end of year

   —       Rs. —      —      Rs.—         Rs.—  
                                

Weighted average fair value of grants allotted during the year

     Rs. 402.00       Rs.—         Rs.—  
                        

21. Retirement benefits

Gratuity

In accordance with Indian law, the Bank provides for gratuity, a defined benefit retirement plan, covering eligible employees. The plan provides for lump sum payments to vested employees at retirement, death while in employment or on termination of employment in an amount equivalent to 15 days’ eligible salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Bank makes annual contributions to funds administered by trustees and managed by Insurance companies for amounts notified by said insurance companies. The Bank accounts for the liability for future gratuity benefits using the projected unit cost method based on an annual actuarial valuation.

The Bank has implemented SFAS No. 158 “Employers Accounting for Defined Benefit Pension And Other Post Retirement Plans—And Amendment Of FASB Statements No. 87, 88, 106 and 132 R”. Accordingly changes in the funded status of the plan are recognized in the year in which the changes occur and are reported in comprehensive income as a separate component of stock holders equity. Further, certain gain and losses that were not previously recognized in the financial statements are reported in comprehensive income.

The following table sets out the funded status of the Gratuity Plan and the amounts recognized in the Bank’s financial statements as of March 31, 2006 and March 31, 2007:

 

     As of March 31,  
     2006     2007     2007  
     (In millions)  

Change in benefit obligations:

      

Projected benefit obligation (“PBO”), beginning of the period

   Rs. 142.7     Rs.202.9     US$ 4.7  

Service cost

     21.4     32.4       0.8  

Interest cost

     9.7     15.9       0.4  

Actuarial loss

     35.9     35.5       0.8  

Benefits paid

     (6.8 )   (9.0 )     (0.2 )
                      

Projected benefit obligation, end of the period

     202.9     277.7       6.5  
                      

Change in plan assets:

      

Fair value of plan assets, beginning of the period

     66.1     103.7       2.4  

Actual return on plan assets

     7.7     10.6       0.2  

Employer contributions

     42.0     52.8       1.2  

Benefits paid

     (6.8 )   (9.0 )     (0.2 )

Actuarial (loss) gain

     (5.3 )   (1.0 )     0.0  
                      

Fair value of plan assets, end of the period

     103.7     157.1       3.6  
                      

Accrued benefit

   Rs. (99.2)     Rs.(120.6)     US$ (2.9)  
                      

 

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The Bank’s expected contribution to the gratuity fund for the next fiscal year is estimated at Rs. 62.5 million. The accumulated benefit obligation as of March 31, 2006 and 2007 was Rs. 86.5 million and Rs. 104.6 million, respectively.

Net gratuity cost for the years ended March 31, 2005, 2006 and 2007 comprises the following components:

 

     Years ended March 31,  
     2005     2006     2007     2007  
     (In millions)  

Service cost

   Rs. 14.2     Rs. 21.8     Rs. 32.4     US$ 0.8  

Interest cost

     7.4       9.7       15.9       0.4  

Expected return on plan assets

     (4.2 )     (5.9 )     (10.4 )     (0.2 )

Actuarial (gain) loss

     26.7       31.3       32.4       0.8  
                                

Net gratuity cost

   Rs. 44.1     Rs. 56.9     Rs. 70.3     US$ 1.8  
                                

The assumptions used in accounting for the gratuity plan are set out below:

 

     Years ended March 31,
     2005    2006    2007
     (% per annum)

Discount rate

   7.0    7.0    8.0

Rate of increase in compensation levels of covered employees

   10.0    10.0    10.0

Rate of return on plan assets

   6.5    7.0    8.0

The following benefit payments, which reflect expected future service, as appropriate are expected to be paid.

 

Year ending March 31,

    
     (In millions)

2008

   Rs. 1.2

2009

     9.5

2010

     3.7

2011

     4.8

2012

     4.0

The following table presents the incremental effect of applying SFAS No. 158 on the consolidated financial statements as of March 31, 2007.

 

      Before application
of SFAS 158
    Adjustments     After application
of SFAS 158
 

Deferred income taxes

   Rs. 2,925.9     Rs. 11.6     Rs. 2,937.5  

Total Assets

     1,013,174.3       11.6       1,013,185.9  

Accrued expenses and other current liabilities

     108,364.1       34.5       108,398.6  

Total Liabilities

     947,643.3       34.5       947,677.8  

Accumulated other comprehensive income, net of tax

     (3,611.0 )     (22.9 )     (3,633.9 )
                        

Total Shareholders’ equity

   Rs. 65,531.0       Rs.(22.9)     Rs. 65,508.1  
                        

Superannuation

Eligible employees of the Bank are entitled to receive retirement benefits under the Bank’s superannuation fund. The superannuation fund is a defined contribution plan under which the Bank annually contributes a sum equivalent to 13% of the employee’s eligible annual salary (15% for the Managing Director) to the Life Insurance Corporation of India, which administers the fund. The Bank has no liability for future superannuation

 

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fund benefits other than its annual contribution, and recognizes such contributions as an expense in the year incurred. The bank contributed Rs. 25.0 million, Rs. 38.5 million and Rs. 65.9 million to the superannuation plan for the years ended March 31, 2005, 2006 and 2007, respectively.

Provident fund

In accordance with Indian law, eligible employees of the Bank are entitled to receive benefits under the provident fund, a defined contribution plan in which both the employee and the Bank contribute monthly at a determined rate (currently 12% of an employee’s eligible salary). These contributions are made to a fund set up by the Bank and administered by a board of trustees, except that out of employer’s contribution, an amount, equal to 8.33% of the lower of employee’s monthly eligible salary or Rs. 6,500, is contributed by the Bank to the Pension Scheme administered by the Regional Provident Fund Commissioner. Employees are credited with interest, which is subject to a government specified minimum rate. The Bank has no liability for future provident fund benefits other than its annual contribution and the shortfall, if any, between the government specified minimum rate and the yield on the fund’s assets, and recognizes such contributions as an expense in the year incurred. The bank contributed Rs. 99.5 million, Rs. 162.4 million, Rs. 246.6 million to the provident fund for the years ended March 31, 2005, 2006 and 2007, respectively.

22. Financial instruments

Foreign exchange and derivative contracts

The Bank enters into forward exchange contracts, currency options, forward rate agreements, currency swaps and rupee interest rate swaps with inter-bank participants on its own account and for customers. These transactions enable customers to transfer, modify or reduce their foreign exchange and interest rate risks.

Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest in rupees against another currency and exchange of notional principal amount at maturity based on predetermined rates. Rupee interest rate swaps are commitments to exchange fixed and floating rate cash flows in rupees.

The market and credit risk associated with these products, as well as the operating risks, are similar to those relating to other types of financial instruments. Market risk is the exposure created by movements in interest rates and exchange rates, during the tenure of the transaction. The extent of market risk affecting such transactions depends on the type and nature of the transaction, the value of the transaction and the extent to which the transaction is uncovered. Credit risk is the exposure to loss in the event of default by counter-parties. The extent of loss on account of a counter-party default will depend on the replacement value of the contract at the ongoing market rates.

Fair values for off balance sheet derivative financial instruments are based on quoted market prices, except in the case of certain options and currency swaps where pricing models are used.

The following table presents the aggregate notional principal amounts of the Bank’s outstanding foreign exchange and interest rate derivative contracts as of March 31, 2006 and March 31, 2007, together with the fair values on each reporting date.

 

    As of March 31,  
    2006   2007   2007  
    Notional   Fair Value     Notional   Fair Value     Notional   Fair
Value
 
    (In millions)  

Interest rate swaps and forward rate agreements

  Rs. 1,209,102.8   Rs. (593.1 )   Rs. 1,794,090.4   Rs. (27.9 )   US$ 41,626.2   US$ (0.6 )

Forward exchange contracts, currency swaps, currency options and interest rate caps and floors

  Rs. 845,329.3   Rs. 1,025.8     Rs. 1,377,440.9   Rs. 2,591.4     US$ 31,959.2   US$ 60.1  

 

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The bank has not designated the above derivative contracts as accounting hedges and accordingly the contracts are recorded at fair value on the balance sheet with changes in fair value recorded in earnings.

Guarantees

As a part of its commercial banking activities, the Bank has issued guarantees and documentary credits, such as letters of credit, to enhance the credit standing of its customers. These generally represent irrevocable assurances that the Bank will make payments in the event that the customer fails to fulfill his financial or performance obligations. Financial guarantees are obligations to pay a third party beneficiary where a customer fails to make payment towards a specified financial obligation. Performance guarantees are obligations to pay a third party beneficiary where a customer fails to perform a non-financial contractual obligation.

The credit risk associated with these products, as well as the operating risks, are similar to those relating to other types of financial instruments.

In terms of FIN No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” the bank has recognized a liability of Rs. 248.8 million as of March 31, 2007 in respect of guarantees issued or modified after December 31, 2002. Based on historical trends, in terms of SFAS No. 5 “Accounting For Contingencies” the Bank has recognized a liability of Rs 287.7 million as of March 31, 2007.

Details of guarantees and documentary credits outstanding are set out below:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Nominal values:

        

Bank guarantees:

        

Financial guarantees

   Rs. 21,141.0    Rs. 23,631.4    US$ 548.3

Performance guarantees

     12,940.9      20,330.7      471.7

Documentary credits

     24,103.7      26,050.5      604.4
                    

Total

   Rs. 58,185.6    Rs. 70,012.6    US$ 1,624.4
                    

Estimated fair values:

        

Guarantees

   Rs. (171.1)    Rs. (248.8)    US$ (5.7)

Documentary credits

     (38.6)      (41.7)      (1.0)
                    

Total

   Rs. (209.7)    Rs. (290.5)    US$ (6.7)
                    

As part of its risk management activities, the Bank continuously monitors the credit-worthiness of customers as well as guarantee exposures. If a customer fails to perform a specified obligation, a beneficiary may draw upon the guarantee by presenting documents in compliance with the guarantee. In that event, the Bank makes payment on account of the defaulting customer to the beneficiary up to the full notional amount of the guarantee. The customer is obligated to reimburse the Bank for any such payment. If the customer fails to pay, the Bank liquidates any collateral held and sets off accounts; if insufficient collateral is held, the Bank recognizes a loss.

Loan sanction letters

The Bank issues sanction letters indicating its intent to provide new loans to certain customers. The aggregate of loans contemplated in these letters that had not yet been made was Rs. 165,825.8 million as of March 31, 2007. If the Bank were to make such loans, the interest rates would be dependent on the lending rates in effect when the loans were disbursed. The Bank has no commitment to lend under these letters. Among other things, the making of a loan is subject to a review of the creditworthiness of the customer at the time the customer seeks to borrow, at which time the Bank has the unilateral right to decline to make the loan.

 

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23. Estimated fair value of financial instruments

The Bank’s financial instruments include financial assets and liabilities recorded on the balance sheet, including instruments such as foreign exchange and derivative contracts. Management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of all the amounts the Bank could have realized in a sales transaction as of March 31, 2006 and March 31, 2007. The estimated fair value amounts as of March 31, 2006 and March 31, 2007 have been measured as of the respective year ends, and have been not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year end.

Financial instruments valued at carrying value:

The respective carrying values of certain on-balance-sheet financial instruments approximated their fair value. These financial instruments include cash and amounts due from banks, interest-bearing deposits in banks, securities purchased and sold under resale and repurchase agreements, accrued interest receivable, short-term borrowings, acceptances, accrued interest payable, and certain other assets and liabilities that are considered financial instruments. Carrying values were assumed to approximate fair values for these financial instruments as they are short-term in nature and their recorded amounts approximate fair values or are receivable or payable on demand.

Trading securities:

Trading securities are carried at fair value based on quoted market prices. For more information on the fair value of these securities, refer to Note 5.

Available for sale securities:

Available for sale investments principally comprise debt securities and are carried at fair value. Such fair values were based on quoted market prices, if available. If quoted market prices did not exist, fair values were estimated using market yield on balance period to maturity on similar instruments and similar credit risk. The fair values of asset backed and mortgage backed securities is estimated based on revised estimated cash flows at each balance sheet date, discounted at current market pricing for transactions with similar risk. For more information on the fair value of these securities, refer to Note 6.

Held to maturity securities:

Held to maturity securities are carried at amortized cost less other than temporary impairments, if any. Fair values of these securities were based on quoted market prices, if available. If quoted market prices did not exist, fair values were estimated using market yield on balance period to maturity on similar instruments and similar credit risk. For more information on these securities including “tainting” of the portfolio, refer to Note 7.

Loans:

The fair values of consumer installment loans and other consumer loans that do not reprice frequently were estimated using discounted cash flow models. The discount rates were based on current market pricing for loans with similar characteristics and risk factors. Since substantially all individual lines of credit and other variable rate consumer loans reprice frequently, with interest rates reflecting current market pricing, the carrying values of these loans approximate their fair values.

The fair values of commercial loans that do not reprice or mature within relatively short time frames were estimated using discounted cash flow models. The discount rates were based on current market interest rates for loans with similar remaining maturities and credit ratings. For commercial loans that reprice within relatively short time frames, the carrying values approximate their fair values.

 

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For purposes of these fair value estimates, the fair values of impaired loans were computed by deducting an estimated market discount from their carrying values to reflect the uncertainty of future cash flows.

Deposits:

The fair value of demand deposits, savings deposits, and money market deposits without defined maturities are the amounts payable on demand. For deposits with defined maturities, the fair values were estimated using discounted cash flow models that apply market interest rates corresponding to similar deposits and timing of maturities. For variable-rate deposits with fixed repricing dates, the first repricing date was considered the maturity date for purposes of fair value calculation.

Long-term debt:

The fair values of the Bank’s unquoted long-term debt instruments were calculated based on a discounted cash flow model. The discount rates were based on yield curves appropriate for the remaining maturities of the instruments.

Term Placements:

The fair values of term placements were estimated using discounted cash flow models. The discount rates were based on current market pricing for placements with similar characteristics and risk factors.

A comparison of the fair values and carrying values of financial instruments other than derivatives (see Note 22) is set out below:

 

    As of March 31,
   

2006

  2007
    Carrying
Value
  Estimated Fair
Value
  Carrying
Value
  Carrying
Value
  Estimated Fair
Value
 

Estimated

Fair Value

    (In millions)    

Financial Assets:

           

Cash and cash equivalents

  Rs. 61,194.3   Rs. 61,194.3   Rs. 80,546.4   US$ 1,868.8   Rs. 80,546.4   US$ 1,868.8

Term placements

    10,243.7     9,845.0     12,815.8     297.4     12,225.3     283.6

Investments held for trading

    2,945.6     2,945.6     4,284.1     99.4     4,284.1     99.4

Investments available for sale

    273,457.0     273,457.0     304,241.1     7,059.0     304,241.1     7,059.0

Securities purchased under agreements to resell

    4,200.0     4,200.0     —       —       —       —  

Loans

    395,274.3     397,162.1     536,730.9     12,453.2     539,811.9     12,524.6

Accrued interest receivable

    8,662.7     8,662.7     15,742.9     365.3     15,742.9     365.3

Financial Liabilities:

           

Interest-bearing deposits

    410,181.2     409,655.9     484,542.9     11,242.3     483,026.5     11,207.1

Non-interest-bearing deposits

    147,124.2     147,124.2     197,805.1     4,589.4     197,805.1     4,589.4

Securities sold under repurchase agreements

    —       —       10,500.0     243.6     10,500.0     243.6

Short term borrowings

    74,805.4     74,805.4     95,472.4     2,215.1     95,472.4     2,215.1

Accrued interest payable

    8,264.1     8,264.1     17,035.7     395.3     17,035.7     395.3

Long-term debt

    17,899.9     17,019.5     33,601.5     779.6     31,019.8     719.7

Accrued expenses and other liabilities

    77,201.8     77,201.8     108,398.6     2,515.0     108,398.6     2,515.0

 

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24. Segment Information

The Bank operates in three reportable segments: wholesale banking, retail banking and treasury services. The revenue and related expense recognition policies are set out in Note 2. Substantially all operations and assets are based in India.

The retail banking segment serves retail customers through a branch network and other delivery channels. This segment raises deposits from customers and makes loans, provides credit cards and debit cards, distributes third-party financial products such as mutual funds and insurance, and provides advisory services to such customers. Revenues of the retail banking segment are derived from interest earned on retail loans, fees for banking and advisory services, profit from foreign exchange and derivative transactions and interest earned from other segments for surplus funds placed with those segments. Expenses of this segment primarily comprise interest expense on deposits, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.

The wholesale banking segment provides loans and transaction services to corporate customers. Revenues of the wholesale banking segment consist of interest earned on loans made to corporate customers, investment income from credit substitutes, interest earned on the cash float arising from transaction services, fees from such transaction services and profits from foreign exchange and derivative transactions with wholesale banking customers. The principal expenses of the segment consist of interest expense on funds borrowed from other segments, premises expenses, personnel costs, other direct overheads and allocated expenses.

The treasury services segment undertakes trading operations on the proprietary account, foreign exchange operations and derivatives trading both on the proprietary account and customer flows. Revenues of the treasury services segment primarily consist of fees and gains and losses from trading operations. Revenues from foreign exchange and derivative operations and customer flows is classified under retail or wholesale segment depending on the profile of the customer.

Segment-wise income and expenses include certain allocations. Interest income is charged by a segment that provides funding to another segment, based on yields benchmarked to an internally developed composite yield curve which broadly tracks market-discovered interest rates. Transaction charges are made by the retail banking segment to the wholesale banking segment for the use by corporate customers of the retail banking segment’s branch network or other delivery channels; such transaction costs are determined on a cost plus basis.

Directly identifiable overheads are attributed to a segment at actual amounts incurred. Indirect shared costs, principally corporate office expenses, are generally allocated equally to each segment. Income taxes for each segment have been allocated based on the effective rate applicable to the Bank, adjusted for specifically identifiable permanent differences relating to each segment.

 

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Summarized segment information for the years ended March 31, 2005, 2006 and 2007 is as follows:

 

    Years ended March 31,        
    2005     2006     2007        
    Retail
Banking
    Wholesale
Banking
    Treasury
Services
    Total     Retail
Banking
    Wholesale
Banking
    Treasury
Services
    Total     Retail
banking
    Wholesale
Banking
    Treasury
Services
    Total     Total  
    (In millions)  

Net interest revenue

  Rs. 9,728.3     Rs. 5,658.7     Rs. 598.7     Rs. 15,985.7     Rs. 18,177.4     Rs. 6,239.1     Rs. (510.3 )   Rs. 23,906.2     Rs. 26,226.4     Rs. 8,907.4     Rs. 1,782.7     Rs. 36,916.5     US$ 856.2  

Less: Provision for credit.losses

    2,925.4       122.8       —         3,048.2       4,956.0       76.0       —         5,032.0       8,386.9       (136.6 )     0.0       8,250.3       191.4  
                                                                                                       

Net interest revenue, after provision for credit losses

    6,802.9       5,535.9       598.7       12,937.5       13,221.4       6,163.1       (510.3 )     18,874.2       17,839.5       9,044.0       1,782.7       28,666.2       664.8  

Non-interest revenue

    6,234.1       1,656.5       320.9       8,211.5       10,071.8       2,092.9       (16.8 )     12,147.9       12,702.6       2,764.1       (467.0 )     14,999.7       348.1  

Non-interest expense

    (8,889.3 )     (1,823.7 )     (700.9 )     (11,413.9 )     (14,482.4 )     (2,802.0 )     (562.4 )     (17,846.8 )     (22,494.0 )     (4,065.3 )     (866.8 )     (27,426.1 )     (636.2 )
                                                                                                       

Income before income tax

  Rs. 4,147.7     Rs. 5,368.7     Rs. 218.7     Rs. 9,735.1     Rs. 8,810.8     Rs. 5,454.0     Rs. (1089.5 )   Rs. 13,175.3     Rs. 8,048.1     Rs. 7,742.8     Rs. 448.9     Rs. 16,239.8     US$ 376.7  
                                                                                                       

Segment assets:

                         

Segment average total assets

  Rs. 197,121.9     Rs. 224,054.3     Rs. 26,076.1     Rs. 447,252.3     Rs. 281,583.8     Rs. 313,603.1     Rs. 38,318.8     Rs. 633,505.7     Rs. 390,732.7     Rs. 452,509.8     Rs. 30,371.2     Rs. 873,613.7     US$ 20,269.5  
                                                                                                       

 

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25. Commitments and contingent liabilities

Commitments and contingent liabilities other than for off balance sheet financial instruments (see Note 22) are as follows:

Capital commitments

The Bank has entered into committed capital contracts, principally for branch expansion and technology upgrades. The estimated amounts of contracts remaining to be executed on the capital account as of March 31, 2006 and March 31, 2007 aggregated Rs. 946.8 million and Rs. 670.3 million, respectively.

Contingencies

The Bank is party to various legal and tax-related proceedings in the normal course of business. The Bank does not expect the outcome of these proceedings to have a material adverse effect on the Bank’s results of financial condition, operations or cash flows.

26. Related party transactions

The Bank’s principal related parties consist of HDFC Limited, its principal shareholder, and its associates. The Bank enters into transactions with its related parties, such as providing banking services, sharing costs and service providers, purchasing services, making joint investments, and borrowing from related parties and subletting premises. The Bank is prohibited from making loans to companies with which it has directors in common. The Bank also makes loans at concessional rates to its employees. The Bank’s related party balances and transactions are summarized as follows:

Balances payable to related parties are as follows:

 

     As of March 31,
     2006    2007    2007
     (In millions)

Balances in current account

   Rs. 201.6    Rs. 102.5    US$ 2.4

Balances in fixed deposits

     149.8      217.4      5.0

Accounts payable

     72.5      —        —  
                    

Total

   Rs. 423.9    Rs. 319.9    US$ 7.4
                    

Balances receivable from related parties are as follows:

 

     Years ended March 31,
     2006    2007    2007
     (In millions)

Deposits to secure leased property

   Rs. 36.9    Rs. 36.9    US$ 0.8

Loans and overdrafts

     0.5      3.0      0.1

Loans to officers and employees

     1,409.7      1,805.7      41.9

Capital advances

     2.0      —        —  

Other deposits

     130.2      0.1      0.0

Accounts Receivable

     304.3      126.0      2.9
                    

Total

   Rs. 1,883.6    Rs. 1,971.7    US$ 45.7
                    

The Bank had retained HDFC Asset Management Company Ltd., an entity controlled by HDFC Limited, to invest its funds up to an amount approved by the board of directors, primarily in debt instruments under an arrangement upto June, 2006. The amount of investments outstanding as on March 31, 2006 and March 31, 2007 was Rs. 3.4 billion and Rs. 1.6 billion, respectively. Purchases of fixed assets from related parties for the years ended March 31, 2006 and 2007 were Rs. 87.9 million and Rs. 113.9 million, respectively.

 

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Included in the determination of net income are the following significant transactions with related parties:

 

    Years ended March 31,  
    2005     2006     2007     2007  
    (In millions)  

Service charges income

  Rs. 438.8     Rs. 1,441.8     Rs. 1,606.3     US$ 37.3  

Dividend Income

    5.7       5.8       52.2       1.2  

Service charges expense

    (31.3 )     (45.6 )     (81.2 )     (1.9 )

Interest Income

    0.4       0.1       0.3       —    

Rent and maintenance expense

    (15.8 )     (12.3 )     (13.3 )     (0.3 )
                               

Net expense incurred to related parties for service provided

  Rs. 397.8     Rs. 1,389.8     Rs. 1,564.3     US$ 36.3  
                               

27. Regulatory Capital and capital adequacy

The Bank is a banking company within the meaning of the Indian Banking Regulation Act, 1949, registered with and subject to supervision by the RBI. Failure to meet minimum capital requirements could lead to regulatory actions by the RBI that, if undertaken, could have a material effect on the Bank and its financial position.

The Bank’s regulatory capital and capital adequacy ratios are measured in accordance with Indian GAAP and are as follows:

 

     As of March 31,  
     2006     2007     2007  
     (In millions)  

Tier 1 capital

   Rs. 51,499.1     Rs. 63,527.1     US$ 1,474.0  

Tier 2 capital

     17,207.1       33,399.9       774.9  
                        

Total capital

   Rs. 68,706.2     Rs. 96,927.0     US$ 2,248.9  
                        

Total risk weighted assets and contingents

   Rs. 602,176.2     Rs. 740,819.2     US$ 17,188.4  
                        

Capital ratios of the Bank:

      

Tier 1

     8.55 %     8.57 %     8.57 %

Total capital

     11.41 %     13.08 %     13.08 %

Minimum capital ratios required by the RBI:

      

Tier 1

     4.50 %     4.50 %     4.50 %

Total capital

     9.00 %     9.00 %     9.00 %

Dividends

Any dividends declared by the Bank are based on the profit available for distribution as reported in the statutory financial statements of the Bank prepared in accordance with Indian GAAP. Additionally, the Banking Regulation Act and related regulations require the Bank to transfer 25% of its Indian GAAP profit after tax to a non-distributable statutory reserve and to meet certain other conditions in order to pay dividends without prior RBI approval. As per RBI guidelines dividend payout (excluding dividend tax) for March 31, 2007 cannot exceed 35% of net income of Rs. 11,414.5 million as calculated under Indian GAAP. Accordingly, the net income reported in these financial statements may not be fully distributable in that year. Dividends for the years ended March 31, 2005, 2006 and 2007 were Rs. 4.50, Rs. 5.50 and Rs. 7.00 per equity share, respectively.

 

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28. Earnings per equity share

A reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share has been provided below.

 

     As of March 31,
     2005    2006    2007

Weighted average number of equity shares used in computing basic earnings per equity share

   290,145,339    311,939,366    314,563,347

Effect of potential equity shares for stock options outstanding

   2,317,669    3,984,648    4,504,056
              

Weighted average number of equity shares used in computing diluted earnings per equity share

   292,463,008    315,924,014    319,067,403
              

For the purpose of determining the weighted average number of equity shares outstanding, the Bank treats cash received from optionees who exercise their option as issued equity shares even if the administrative formalities to allocate equity shares have not been completed.

The following are reconciliations of basic and diluted earnings per equity share and earnings per ADS :

 

     Years ended March 31,
     2005    2006    2007    2007

Basic earnings per share

   Rs.22.78    Rs.29.45    Rs. 35.10    US$ 0.81

Effect of potential equity shares for stock options outstanding

   0.18    0.37    0.50      0.01
                     

Diluted earnings per share

   Rs.22.60    Rs.29.08    Rs. 34.60      0.80
                     

Basic earnings per ADS

   Rs.68.34    Rs.88.36    Rs.105.30    US$ 2.44

Effect of potential equity shares for stock options outstanding

   0.54    1.12    1.50      0.03
                     

Diluted earnings per ADS

   Rs.67.80    Rs.87.24    Rs.103.80    US$ 2.41
                     

29. Reconciliation of consolidated net income and consolidated shareholders’ equity between U.S. GAAP and Indian GAAP.

The following table is a reconciliation of consolidated net income in accordance with U.S. GAAP to consolidated net profit determined under Indian GAAP for the year ended March 31, 2007.

 

     Year ended March 31,  
     2007  
     (In millions)  

Consolidated net income in accordance with U.S.GAAP

   Rs. 11,039.7  

Significant differences between U.S. GAAP and Indian GAAP:

  

(a)    Allowance for credit losses

     (359.8 )

(b)    Customer acquisition cost

     (477.1 )

(c)    Investments

     (224.7 )

(d)    Deferred income taxes

     223.3  

(e)    Stock based compensation

     962.7  

(f)    Accounting for subsidiaries and affiliates

     (45.9 )

(g)    Provision for guarantees

     213.4  

(h)    Accrued compensated absences

     356.9  

(i)    Foreign exchange and derivatives

     15.3  

Other, net

     (194.2 )
        

Consolidated net profit determined under Indian GAAP

   Rs. 11,509.6  
        

 

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The following table is a reconciliation of consolidated shareholders’ equity in accordance with U.S. GAAP to consolidated shareholders’ funds determined under Indian GAAP as of March 31, 2007.

 

     As of March 31,  
     2007  
     (In millions)  

Shareholders’ equity in accordance with U.S. GAAP

   Rs. 65,508.1  

Significant differences between U.S. GAAP and Indian GAAP:

  

(a)    Allowance for credit losses

     335.6  

(b)    Customer acquisition costs

     (3,339.2 )

(c)    Investments

     2,878.3  

(d)    Deferred income taxes

     484.4  

(f)    Accounting for subsidiaries and affiliates

     (374.1 )

(g)    Provisions for guarantees

     536.5  

(h)    Accrued compensated absences

     872.6  

(i)    Foreign exchange and derivatives

     617.0  

(j)    Dividends payable

     (2,615.7 )

Other, net

     (199.8 )
        

Shareholders’ funds under Indian GAAP

   Rs. 64,703.7  
        

The following are the principal differences between U.S. GAAP and Indian GAAP that apply to the Bank:

a. Allowance for credit losses

Under U.S. GAAP, the Bank establishes a specific allowance and records an unallocated allowance based on management’s best estimate of losses inherent in the loan portfolio. The allowance for credit losses consists of allowances for retail loans and wholesale loans. The Banks’ retail loan portfolio comprises of large number of homogeneous loans. Specific allowance on the retail loan portfolio is based on factors such as the nature of product, delinquency levels or the number of days the loan is past due, nature of the security available and loan to value ratio. The unallocated allowance for the retail loans portfolio is recorded by product type based on the Bank’s estimate of the expected amount of losses inherent in such product . The Bank establishes specific allowances for each of its impaired wholesale loan customer in the aggregate for all facilities based on either the present value of future cash flows discounted at the loans effective interest rate, or the net realizable value of the collateral. Unallocated allowances for wholesale standard loans is established based on overall portfolio quality, asset growth, economic conditions and other risk factors.

Under Indian GAAP, the Bank makes specific loan loss provision in respect of non-performing advances based on management’s assessment of the degree of impairment of wholesale and retail advances, subject to minimum provisioning level prescribed by the RBI. The Bank maintains general provision for standard assets, only at levels stipulated by the RBI from time to time. Provisions made in excess of these regulatory levels or provisions which are not made with respect to specific non- performing assets are categorized as floating provisions. Creation of floating provisions are considered by the Bank up to a level approved by the board of directors of the Bank. Floating provisions are not reversed by credit to Profit and Loss account and can be used only for contingencies under extraordinary circumstances for making specific provisions in impaired accounts after obtaining Board approval and with prior permission of RBI.

b. Customer acquisition costs

Under U.S. GAAP, customer acquisition costs primarily consisting of commissions paid to agents are deferred and amortized as a yield adjustment over the life of the related loans. Under Indian GAAP such costs are expensed as incurred.

 

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c. Investments

Under both U.S.GAAP and Indian GAAP, Investments are classified as held for trading (“HFT”),held to maturity (“HTM”) or available for sale (“AFS”) ,based on management’s holding intent on the date of purchase.

Under U.S.GAAP, HFT investments are marked to market on each balance sheet date with both unrealized gains and losses included in net income .Under Indian GAAP, HFT investments are also marked to market, and any net unrealized loss arising on a portfolio basis is recognized in the statement of income . Net unrealized gains arising on a portfolio basis are not recognized.

Under U.S.GAAP, AFS investments are carried at their fair values with both unrealized gains and losses recorded in accumulated comprehensive income, a component of share holder’s equity. Under Indian GAAP AFS investments are marked to fair value and any net unrealized loss arising on a portfolio basis is recognized in the statement of income. Net unrealized gains arising on a portfolio basis are not recognized.

Under U.S.GAAP, HTM investments are carried at amortized cost. Under Indian GAAP, HTM securities are carried at acquisition cost or at amortized cost if purchased at premium. Under both U.S.GAAP and Indian GAAP, an impairment loss is recognized for any impairment that is other than temporary.

Under Indian GAAP, transfers from the HTM category to the AFS category are permitted for any reason once a year, or more frequently if the RBI grants general permission to banks to do so .Under U.S. GAAP, such transfers are only permitted for certain specified reasons.

Under U.S.GAAP, purchased premiums and discounts are both amortized as yield adjustments over the life of the related instrument. Under Indian GAAP, purchased discounts are not amortized but are recognized upon sale or maturity of the instrument.

d. Deferred income taxes

Under U.S.GAAP, a deferred tax liability is established for the tax effect of temporary differences between the tax basis and the carrying value of assets and liabilities. The tax rate used to establish deferred tax liabilities is the enacted tax rate expected to apply when the temporary differences reverse. Under Indian GAAP, a deferred tax liability is established for the tax effect of timing differences between book and tax income for the year, at the “substantially enacted” tax rate applicable on the balance sheet date. In addition, in the U.S.GAAP financial statements, the deferred tax effect of all other U.S.GAAP to Indian GAAP differences is also recognized.

e. Stock based compensation

The Bank has adopted the provisions of SFAS No. 123(R) “Accounting for Stock-Based Compensation” with effect from April 1, 2006. The statement requires all share-based payments to employees, including grants of employee stock options to be recognized in the income statement based on their fair value. Accordingly the Bank adopted the ‘modified prospective method’ for new awards granted after April 1, 2006 and to the unvested portion of previously granted stock options and awards. In respect of the earlier periods the Bank had elected to use the intrinsic value method to recognize stock based compensation.

Under Indian GAAP, the Bank uses the intrinsic value method to recognize its stock based compensation.

f. Accounting for subsidiaries and affiliates

Under U.S. GAAP, the Bank consolidates subsidiaries in which, directly or indirectly, it holds more than 50% of the voting rights or exercises control. Entities where the Bank holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence are accounted for under the equity method, and the pro rata

 

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share of their income (loss) is included in income. The Bank consolidates Variable Interest Entities (VIEs) where the Bank is determined to be the primary beneficiary under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46 (R)).

Under Indian GAAP the Bank consolidates subsidiaries where it controls the ownership, directly or indirectly of more than one-half of the voting power or controls the composition of board of directors with the objective of obtaining economic benefits from their activities. The Bank accounts for investments in associates under the equity method of accounting.

g. Provisions for guarantees

Under U.S. GAAP, the Bank makes provisions for probable loss on outstanding guarantees based on estimate of losses using a historical default rate. The Bank establishes a liability for guarantees based on their fair value at inception.

Under Indian GAAP, the Bank recognizes a provision only when it has a present obligation as a result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

h. Accrued compensated absences

Under U.S. GAAP, the Bank provides for estimated accumulated compensated absences. Under Indian GAAP, accrual for compensated absences is not made.

i. Foreign exchange and derivatives

Under U.S. GAAP, the Bank recognizes derivative instruments and forward exchange contracts, as assets or liabilities in the balance sheet and measures them at fair value, unless those instruments qualify to be accounted for as hedge contracts. For derivatives and forward exchange contracts not designated as a hedge, changes in fair value are recognized in net income in the period of change.

Under Indian GAAP the Bank recognizes all derivative instruments and forward exchange contracts as assets or liabilities in the balance sheet and measures them at the market value as per generally accepted practices prevalent in the industry. The interest rate and exchange rate risks on some on-balance sheet assets and liabilities are hedged through swap contracts. The impact of such derivative instruments is correlated with the movement of underlying assets and accounted for at fair value or on accrual basis, in accordance with RBI guidelines. Accordingly certain derivative contracts classified as hedges under Indian GAAP may not qualify as hedges under US GAAP and are accounted for as trading derivatives with changes in fair value being recorded in the income statement.

j. Dividends payable

Under U.S. GAAP, dividends and the related dividend tax are recorded as a liability when declared. Under Indian GAAP, dividends and the related dividend tax are recorded as a liability in the year to which they relate.

 

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PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 8. Indemnification of Directors and Officers

The Indian Companies Act, 1956 (the “Act”), as amended, provides in Section 201 that:

“(1) Save as provided in this section, any provision, whether contained in the articles of a company or in an agreement with a company or in any other instrument, for exempting any officer of the company or any person employed by the company as auditor from, or indemnifying him against, any liability which, by virtue of any rule of law, would otherwise attach to him in respect of any negligence, default, misfeasance, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void:

Provided that a company may, in pursuance of any such provision as aforesaid, indemnify any such officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or discharged or in connection with any application under section 633 in which relief is granted to him by the Court.”

Under Articles 223 and 224 of our Memorandum and Articles of Association:

“Subject to the provisions of the Act, every Director, Manager and every other officer or servant of the Company shall be indemnified by the Company against all costs, losses and expenses which any such Director, Manager, officer or servant may incur or become liable to by any reason of any contract entered into or act or thing done by him as such Director, Manager, officer or servant or in any way in the discharge of his duties including expenses, and it shall be the duty of Directors to pay the same out of the funds of the Company; and in particular, and so as not to limit the generality of the foregoing provisions, every Director, Manager and every other officer or servant of the Company shall be indemnified by the Company against all liabilities incurred by him as such Director, Manager, officer or servant, in defending any proceedings, whether civil or criminal, in connection with any application under Section 633 of the Act in which relief is granted by the Court, and the amount for which such indemnity is provided shall immediately attach as a lien on the property of the Company.”

“Subject to the provisions of Section 201 of the Act no Director, Manager or Wholetime Director or other Officer of the Company shall be liable for the acts, receipts, neglects or defaults of any other director or officer or for joining in any respect of other act for conformity or for any loss or expenses happening to the Company through the insufficiency or deficiency of title to any property acquired by order of the Directors in or upon which any of the moneys of the Company shall be invested or for any loss or damage arising from bankruptcy, insolvency or tortuous act of any person, company or corporation with whom any moneys, securities or effects shall be entrusted or deposited or for any loss occasioned by any error of judgment, omission or default or oversight on his part or for any other loss or damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto unless the same happens through his own dishonesty.”

 

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Item 9. Exhibits

 

Item   

Description

  1.1    Form of Underwriting Agreement.
  4.1    Specimen of certificate representing the equity shares, par value Rs. 10 each.(1)
  4.2    Form of Deposit Agreement, including, as an exhibit, the form of American depositary receipt.(2)
  5.1    Opinion of Talwar Thakore and Associates.
15.1    Letter of Haribhakti & Co., Chartered Accountants.
23.1    Consent of Deloitte Haskins & Sells, Independent Registered Public Accounting Firm.
23.2    Consent of Talwar Thakore and Associates (contained in Exhibit 5.1).
24.1    Power of Attorney (included on page II-5).
99.1    Certified copy of the resolutions passed by the Board of Directors of HDFC Bank Limited on May 17, 2007.

(1) Incorporated by reference to exhibit included with the Registrant’s Form F-1/A filed on July 16, 2001.

 

(2) Incorporated by reference to exhibit included with the Registrant’s Form F-1 filed on July 12, 2001.

Item 10. Undertakings

(a) The undersigned registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereto) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that subparagraphs (1)(i), (1)(ii) and (1)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

2. That, for purposes of determining any liability under the Securities Act of 1933 each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3. To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.

4. To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering.

 

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Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act of 1933 need not be furnished, provided that the registrant include in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Securities Act of 1933 or Rule 3-19 of Regulation S-X if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement.

5. That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i) Each prospectus filed by the registrants pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

6. That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of an undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of either of the undersigned registrants or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b) The undersigned registrants hereby undertake that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report

 

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pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Mumbai, India on July 10, 2007.

 

HDFC BANK LIMITED,
By:  

/s/ Aditya Puri

Name:   Aditya Puri
Title:  

Managing Director

Principal Executive Officer

POWER OF ATTORNEY

KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Aditya Puri and Sashi Jagdishan, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign this Registration Statement and any and all amendments thereto (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933 and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ Jagdish Capoor

Jagdish Capoor

   Chairman   July 10, 2007

/s/ Aditya Puri

Aditya Puri

   Managing Director (Principal Executive Officer)   July 10, 2007

/s/ Sashi Jagdishan

Sashi Jagdishan

  

Head-Finance and Administration

Principal Financial and Accounting Officer

  July 10, 2007

/s/ Gautam Divan

Gautam Divan

   Non-executive Director   July 10, 2007

 

Vineet Jain

   Non-executive Director   July 10, 2007

/s/ Renu Karnad

Renu Karnad

   Non-executive Director   July 10, 2007

/s/ K.M. Mistry

K.M. Mistry

   Non-executive Director   July 10, 2007

 

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Signature

  

Title

 

Date

/s/ Arvind Pande

Arvind Pande

   Non-executive Director   July 10, 2007

/s/ Ashim Samanta

Ashim Samanta

   Non-executive Director   July 10, 2007

/s/ C.M. Vasudev

C.M. Vasudev

   Non-executive Director   July 10, 2007

/s/ Pandit Palande

Pandit Palande

   Non-executive Director   July 10, 2007

 

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SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REGISTRANT

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative of HDFC Bank Limited in the United States, has signed this Registration Statement or amendment thereto in the City of New York, State of New York, on July 10, 2007.

 

DEPOSITARY MANAGEMENT CORPORATION

By:

 

/s/ George Boychuk

Name:

  George Boychuk

Title:

  Managing Director

 

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EXHIBIT INDEX

 

Item   

Description

  1.1    Form of Underwriting Agreement.
  4.1    Specimen of certificate representing the equity shares, par value Rs. 10 each.(1)
  4.2    Form of Deposit Agreement, including, as an exhibit, the form of American depositary receipt.(2)
  5.1    Opinion of Talwar Thakore and Associates.
15.1    Letter of Haribhakti & Co., Chartered Accountants.
23.1    Consent of Deloitte Haskins & Sells, Independent Registered Public Accounting Firm.
23.2    Consent of Talwar, Thakore and Associates (contained in Exhibit 5.1).
24.1    Power of Attorney (included on page II-5).
99.1    Certified copy of the resolutions passed by the Board of Directors of HDFC Bank Limited on May 17, 2007.

(1) Incorporated by reference to exhibit included with the Registrant’s Form F-1/A filed on July 16, 2001.

 

(2) Incorporated by reference to exhibit included with the Registrant’s Form F-1 filed on July 12, 2001.

 

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EX-1.1 2 dex11.htm FORM OF UNDERWRITING AGREEMENT Form of Underwriting Agreement

Exhibit 1.1

HDFC BANK LIMITED

[•] American Depositary Shares

Representing

[•] Equity Shares

par value Rs. 10 per share

UNDERWRITING AGREEMENT

[•], 2007


[•], 2007

MERRILL LYNCH INTERNATIONAL

Merrill Lynch Financial Centre

2 King Edward Street

London EC1A 1HQ

United Kingdom

UBS AG

52/F, Two International Finance Center

8 Finance Street, Central

Hong Kong

as representatives of the several Underwriters

Dear Sirs and Mesdames:

HDFC Bank Limited, a company incorporated under the laws of the Republic of India as a public limited company (the “Company”), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the “Underwriters”) [•] equity shares, par value Rs. 10 per share, of the Company in the form of [•] American Depositary Shares (the “Firm ADSs”). The Company also proposes to issue and sell to the several Underwriters not more than an additional [•] equity shares in the form of [•] ADSs (the “Additional ADSs”) if and to the extent that the Global Coordinators and Joint Bookrunners (as defined below) shall have determined to exercise, on behalf of the Underwriters, the right to purchase such Additional ADSs granted to the Underwriters in Section 2 hereof. The Firm ADSs and the Additional ADSs are hereinafter collectively referred to as the “Offered ADSs”. Each Offered ADS represents three equity shares. The equity shares of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the “Equity Shares”. The Equity Shares represented by the Offered ADSs are hereinafter referred to as the “Shares”.

Merrill Lynch International (“Merrill Lynch”) and UBS AG (“UBS”) will act as global coordinators and joint bookrunners (the “Global Coordinators and Joint Bookrunners”) for the offering.

The Company has prepared and filed with the United States Securities and Exchange Commission (the “Commission”) an “automatic shelf registration statement” as defined under Rule 405 under the United States Securities Act of 1933, as amended (the “Securities Act”), on Form F-3, (Commission file number [•]) relating to the registration of the offering of the Shares, under the Securities Act, including the related prospectus (the “Base Prospectus”). Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus supplement (the “Prospectus Supplement”) in accordance with the provisions of

 

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Rule 430B under the Securities Act and Rule 424(b) under the Securities Act. The registration statement on Form F-3 as amended at the time it becomes effective, or, if a post-effective amendment is filed with respect thereto, as amended by such post-effective amendment at the time of its effectiveness, including in each case the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430B under the Securities Act and including the documents incorporated by reference therein, is hereinafter referred to as the “Registration Statement” and the Base Prospectus and Prospectus Supplement, including the documents incorporated by reference therein, are hereinafter collectively referred to as the “Prospectus”. The term preliminary prospectus means a preliminary prospectus supplement specifically relating to the Offered ADSs, together with the Base Prospectus. If the Company has filed an abbreviated registration statement to register additional Equity Shares pursuant to Rule 462(b) under the Securities Act (the “Rule 462(b) Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462(b) Registration Statement. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”).

All references in this Agreement to financial statements and schedules and other information which are “contained”, “included” or “stated” in the Registration Statement, any preliminary prospectus, the General Disclosure Package (as defined below), the Base Prospectus, the Prospectus Supplement or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are or are deemed to be incorporated by reference in the Registration Statement, any preliminary prospectus, the General Disclosure Package, the Base Prospectus, the Prospectus Supplement or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus, the General Disclosure Package, the Base Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to mean and include the filing or furnishing of any document under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) which is incorporated by reference in the Registration Statement, such preliminary prospectus, the General Disclosure Package, the Base Prospectus, the Prospectus Supplement or the Prospectus, as the case may be.

The Offered ADSs will be evidenced by American Depositary Receipts (“ADRs”) to be issued by JPMorgan Chase Bank, N.A., as depositary (the “Depositary”), pursuant to a Deposit Agreement, dated as of July 19, 2001 (the “Deposit Agreement”), among the Company, the Depositary and the holders and beneficial holders from time to time of ADRs. The Company and the Depositary have prepared and filed with the Commission a registration statement on Form F-6 (No. 333-13730) for the registration under the Securities Act of the ADSs, have filed such amendments thereto and such amended preliminary prospectus as may have been required to the date hereof, and will file such additional amendments thereto and such amended prospectus as may hereafter

 

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be required. The registration statement on Form F-6 for the registration of the ADSs, as amended (including by the filing of any post-effective amendments thereto), is hereinafter called the “ADS Registration Statement”.

1. Representations and Warranties of the Company. The Company represents and warrants to each of the Underwriters as of the date hereof, as of the Closing Date referred to in Section 4 hereof, as of the Applicable Time referred to in Section 1(a) and as of the Option Closing Date (if any) referred to in Section 4 hereof, and agrees with each of the Underwriters, as follows:

(a) Compliance with the Registration Requirements. The Company meets the requirements for the use of Form F-3 under the Securities Act and is a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act. The Registration Statement meets, and the offering and sale of the ADSs as contemplated hereby complies with, the requirements of Rule 415 under the Securities Act, including, without limitation, Rule 415(a)(5) under the Securities Act. Each of the Registration Statement and the ADS Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Each of the Registration Statement, the ADS Registration Statement, the General Disclosure Package and the Prospectus as of the date hereof comply and, as amended or supplemented, if applicable, as of the Closing Date and any Option Closing Date will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. Neither the Prospectus nor any amendments or supplements thereto (including any prospectus wrapper), on the date thereof and on the Closing Date (and, if any Additional ADSs are purchased, the Option Closing Date), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of the Applicable Time (as defined below), neither (x) the Issuer General Use Free Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time and the Statutory Prospectus (as defined below) as of the Applicable Time and the information included on Schedule II hereto, all considered together (collectively, the “General Disclosure Package”), nor (y) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

As used in this subsection and elsewhere in this Agreement:

Applicable Time” means [•]:00 [a/p]m (New York City) on [•], 2007 or such other time as agreed by the Company and the Global Coordinators and Joint Bookrunners.

 

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Statutory Prospectus” as of any time means the prospectus relating to the Offered ADSs that is included in the Registration Statement immediately prior to that time, including any document incorporated by reference therein.

Issuer Free Writing Prospectus” means any “issuer free writing prospectus”, as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), relating to the Offered ADSs that (i) is required to be filed with the Commission by the Company, (ii) is a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) whether or not required to be filed with the Commission or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Offered ADSs or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a Bona Fide Electronic Road Show (as defined below)), as evidenced by its being specified in Schedule III hereto.

Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

The Company has made available a “bona fide electronic road show”, as defined in Rule 433, in compliance with Rule 433(d)(8)(ii) (the “Bona Fide Electronic Road Show”) such that no filing of any “road show” (as defined in Rule 433(h)) is required in connection with the offering of the Offered ADSs.

Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Offered ADSs, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified.

The representations and warranties in this Section 1(a) shall not apply to statements in or omissions from the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.

At the time (x) of filing the Registration Statement, (y) of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), and (z) the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163 under the Securities Act) made any offer relating to the Offered ADSs in reliance on the exemption of Rule 163 under the Securities Act, the Company was a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act.

 

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At the time of filing the Registration Statement, any 462(b) Registration Statement and any post-effective amendments thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Offered ADSs and at the date hereof, the Company was not and is not an “ineligible issuer”, as defined in Rule 405 under the Securities Act.

Any Issuer Free Writing Prospectus that the Company is required to file pursuant to Rules 163, 164 and 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act, and the applicable rules and regulations of the Commission thereunder. Each Issuer Free Writing Prospectus that the Company has filed, or is required to file, pursuant to Rules 163, 164 and 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the Issuer General Use Free Writing Prospectuses, if any, identified in Schedule III hereto, and electronic road shows, if any, furnished to you before first use, the Company has not prepared, used or referred to, and will not, without your prior written consent (such consent not to be unreasonably withheld or delayed), prepare, use or refer to, any “free writing prospectus” as defined in Rule 405 under the Securities Act.

(b) Filings with the Commission.

(i) Each of the Registration Statement and the ADS Registration Statement has been filed with the Commission in the form heretofore delivered to you. Each of the Registration Statement and the ADS Registration Statement has become effective under the Securities Act. The Registration Statement is an “automatic shelf registration statement”, as defined in Rule 405 under the Securities Act, and the Shares, since their registration on the Registration Statement, have been and remain eligible for registration by the Company on a Rule 405 “automatic shelf registration statement”; the Company has not received from the Commission any notice pursuant to Rule 401(g)(2) under the Securities Act and the rules and regulations of the Commission thereunder objecting to the use of the automatic shelf registration statement form. No stop order suspending the effectiveness of the Registration Statement or the ADS Registration Statement has been issued under the Securities Act or the Exchange Act, as applicable, and no proceedings for such purpose have been instituted or are pending before or, to the best knowledge of the Company, are contemplated or threatened by the Commission, and any request on the part of the Commission for additional information has been complied with.

 

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(ii) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission and, when read together with the other information in the Prospectus, at the time the Registration Statement became effective, at the time the Prospectus was issued and on the Closing Date (and, if any Additional ADSs are purchased, at the Option Closing Date), did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

(c) Distribution of Offering Material by the Company. The Company has not distributed and will not distribute, prior to the later of the Closing Date (or the Option Closing Date, if the Company has received notice of the exercise of the Underwriters’ option in accordance with Section 2(b) hereof) and the completion of the Underwriters’ distribution of the ADSs, any offering material in connection with the offering and sale of the ADSs other than the General Disclosure Package, the Prospectus, the preliminary prospectus, the Registration Statement or the ADS Registration Statement.

(d) Compliance with Indian Rules and Regulations. Each of the Registration Statement and the ADS Registration Statement, when it became effective, did not violate and, as amended or supplemented, if applicable, will not violate the rules, regulations and other requirements of the Government of India, Ministry of Finance, the Foreign Investment Promotion Board, the Reserve Bank of India, the Department of Company Affairs of India, the Company Law Board, the Securities Exchange Board of India, the Indian Stock Exchanges (as defined herein) and all other applicable government of India regulatory, administrative or similar authorities having jurisdiction over the Company or its property or assets, as applicable (collectively, the “Indian Authorities”). In addition, compliance by the Company with its obligations in connection with the transactions contemplated hereby under the Securities Act and, the Exchange Act, including the applicable rules and regulations thereunder, and the rules and regulations of the New York Stock Exchange, Inc., will not violate any such rules and regulations of the Indian Authorities. The indemnification and contribution provisions set forth in Section 8 hereof do not contravene Indian law, rules and regulations of the Indian Authorities or public policy.

(e) Due Incorporation and Good Standing of the Company. The Company has been duly organized and incorporated and is validly existing as a public limited company under the laws of the Republic of India, has the power and authority (corporate and other) to own or lease its property and to conduct its business as described in the General Disclosure Package and to enter into and perform its obligations under this Agreement and the Deposit Agreement and the Company is duly qualified to

 

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transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the condition (financial or otherwise) or the earnings, business or operations of the Company.

(f) Subsidiaries. Other than HDFC Securities Limited (the “Subsidiary”), the Company does not, either directly or indirectly, have any subsidiaries.

(g) Capitalization of the Company. The authorized, issued and outstanding capital stock of the Company is as set forth in the General Disclosure Package in the column entitled “Actual” under the caption “Capitalization” (except for the issuance and sale of the Company’s equity shares to HDFC Limited on June 29, 2007 and subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectus); the terms, rights and preferences related to the authorized and issued share capital of the Company conform as to legal matters to the description thereof contained in the General Disclosure Package. The shares of issued and outstanding capital stock of the Company (including the equity shares that the Company issued and sold to HDFC Limited on June 29, 2007) have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company. Other than as may be disclosed in the General Disclosure Package, there are no outstanding securities convertible into or exchangeable for, or warrants or rights to purchase from the Company Equity Shares or any other share capital of the Company nor are there any obligations of the Company to allot, issue or transfer the Offered ADSs.

(h) Authorization of the Shares. The Shares to be issued in connection with the offering and sale of the Offered ADSs have been duly authorized for issuance and sale pursuant to this Agreement and the Deposit Agreement, as the case may be, and, when issued and delivered by the Company pursuant to this Agreement, will be validly issued, fully paid and non-assessable, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, will rank pari passu, except as described in the General Disclosure Package, with the other Equity Shares outstanding and will not be subject to any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. Any Additional ADSs issued by the Company shall rank pari passu, except as described in the General Disclosure Package, with the Firm ADSs, including the entitlement to the same amount of dividends and other distributions declared by the Company and payable on

 

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the Firm ADSs. The form of certificate for the Equity Shares conforms to the requirements of Indian law, the Charter Documents (as defined herein), the Indian Stock Exchanges (as defined herein) and the description thereof, contained in the General Disclosure Package.

(i) Deposit of Shares and Transfer of Rights to Depositary. The Shares may be freely deposited with the Depositary or with ICICI Bank Limited as the custodian of the Depositary (the “Custodian”) against issuance of ADRs evidencing the Offered ADSs, although there are restrictions on the future deposits and redeposit of withdrawals of Shares which are described in the General Disclosure Package. Upon deposit of the underlying Shares with the Custodian pursuant to the Deposit Agreement in accordance with the terms thereof, all right, title and interest in such Shares, free and clear of any security interest, mortgage, pledge, claim, lien or other encumbrance, will be transferred to the Depositary on behalf of the Underwriters, free and clear of any security interest, mortgage, pledge, claim, lien or other encumbrance other than any liens which may result from actions taken by the Underwriters.

(j) Validity of ADRs and Absence of Transfer Restrictions. Upon issuance by the Depositary of the ADRs evidencing the Offered ADSs against deposit of the underlying Shares in accordance with the provisions of the Deposit Agreement, such ADRs will be duly and validly issued and will entitle the holders thereof to the rights specified in the ADRs and the Deposit Agreement. The Equity Shares, ADSs and ADRs conform to all statements relating thereto contained in the General Disclosure Package and such description conforms to the rights set forth in the instruments defining the same. The Shares and Offered ADSs are freely transferable to or for the account of the Underwriters and there are no restrictions on subsequent transfers of the Shares or the Offered ADSs under the laws of India or the United States except as described in the General Disclosure Package. The issuance of the underlying Shares of the Offered ADSs is not subject to the preemptive or other similar rights of any securityholder of the Company; and there are no restrictions on the voting of the Shares under the laws of India or the United States except as described in the General Disclosure Package.

(k) No Restrictions or Withholding Taxes on Dividends. Except as set forth in the General Disclosure Package, there are no restrictions under Indian law or the rules and regulations of the Indian Authorities nor any approvals currently required in India (including any foreign exchange or foreign currency approvals) in order for the Company to pay dividends declared by the Company to the holders of the ADSs for the underlying Shares, including the Depositary, or for the conversion by the Depositary of any dividends paid in Indian rupees to U.S. dollars. Except as disclosed in the General Disclosure Package, under applicable laws and regulations, no taxes, levies, imposts or charges are required to be deducted or withheld from any payment by the Company of a dividend in respect of the Equity Shares (including, without limitation, those represented by Offered ADSs) to persons not resident in India.

 

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(l) Accuracy of Exhibits. There are no contracts or documents that are required to be described in the Registration Statement, the General Disclosure Package or the Prospectus or to be filed as exhibits thereto which have not been so described and filed as required.

(m) Authorization of this Agreement. This Agreement has been duly authorized, executed and delivered by the Company.

(n) Authorization and Enforceability of the Deposit Agreement. The Deposit Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Depositary, constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfer), reorganization, moratorium or similar laws affecting enforcement of creditors’ rights and except as enforcement thereof is subject to general equity principles (regardless of whether enforcement is considered in a proceeding in equity or at law).

(o) No Defaults or Legal Conflicts. The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement and the Deposit Agreement, the consummation of the transactions herein and therein contemplated, and the consummation of the transactions contemplated in the Registration Statement (including the issuance and sale of the Offered ADSs and the use of the proceeds from the sale of the Offered ADSs as described in the General Disclosure Package under the caption “Use of Proceeds”) did not and will not contravene or result in a violation of or a default (or an event that with the giving of notice or lapse of time or both would constitute a default) under (i) any provision of applicable law (including, without limitation, any applicable Indian law limiting foreign ownership of the Company) or any of the Charter Documents of the Company, (ii) any agreement binding upon the Company or to which the Company is a party that is material to the Company or (iii) any judgment, order or decree of any local or other court or public, governmental or regulatory agency or body or stock exchange authority having jurisdiction over the Company or any of its assets except for such violations or defaults under (i), (ii) or (iii) that would not result in a material adverse effect on the condition (financial or otherwise) or the earnings, business or operations of the Company.

(p) Necessary Authorizations for Transactions. No action, consent, authorization, approval, order, certificate, license or permit of or filing, registration or qualification with any local or other court or public, government or regulatory agency or body or stock exchange authority is required for the offering, issuance or sale of the Offered ADSs hereunder or the

 

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performance by the Company of its obligations under this Agreement and the Deposit Agreement, or the transactions contemplated hereby or thereby, other than (x) such as are set forth in Schedule IV hereto and (y) such as may be required by the securities or Blue Sky laws of the various states or any country (other than the U.S. and India) in connection with the offer and sale of the Offered ADSs in the manner contemplated herein and in the General Disclosure Package. All such authorizations necessary for performance by the Company of its obligations under this Agreement and the Deposit Agreement, or the transactions contemplated thereby, have been obtained and are in full force and effect.

(q) No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement and the General Disclosure Package, except as otherwise stated therein, (i) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, operations, business affairs or business prospects of the Company and the Subsidiary taken as a whole, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (ii) there have been no transactions entered into by the Company or the Subsidiary, other than those in the ordinary course of business, which are material with respect to the Company, (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, (iv) there has not been any material adverse change or any development involving a prospective material adverse change in the capital stock or in the long-term debt of the Company or the Subsidiary, and (v) each of the Company and the Subsidiary has not incurred any material liability or obligation, direct or contingent.

(r) No Violation of Existing Agreements or Laws. Except as otherwise disclosed in the General Disclosure Package, neither the Company nor the Subsidiary is in breach or violation of or in default under (nor has any event occurred which, with notice, lapse of time or both, would result in any breach or violation of, constitute a default under or give the holder of any indebtedness (or a person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) (A) its certificate of incorporation, articles of association or memorandum of association (collectively, the “Charter Documents”), or (B) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or affected, or (C) any local or foreign law, regulation or rule, or (D) any rule or regulation of any self-regulatory organization or other non-governmental regulatory authority (including, without limitation, the rules and regulations of the New York Stock Exchange (“NYSE”), the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited (together with the Bombay Stock Exchange Limited, the “Indian Stock Exchanges”)), or (E) any decree, judgment or order applicable to it or any of its properties (except, in the case of clauses B, C, D and E, for such breaches, violations or defaults that would not result in a Material Adverse Effect).

 

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(s) No Pending Legal Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or the Subsidiary, which is required to be disclosed in the Registration Statement, the General Disclosure Package or the Prospectus that is not so disclosed as required.

(t) Necessary Authorizations to Conduct Businesses. Except as described in the General Disclosure Package, each of the Company and the Subsidiary has all necessary certificates, authorizations, licenses, concessions, consents, approvals, orders or permits (“Governmental Licenses”) issued by, all Indian and foreign governmental authorities, necessary to own or lease its properties and assets, and to conduct its businesses as described in the General Disclosure Package except to the extent that the failure to obtain the same would not have a Material Adverse Effect on the Company. Except as described in the General Disclosure Package, each of the Company and the Subsidiary is in compliance with the terms and conditions of all such Governmental Licenses except where the failure to do so would not, singly or in the aggregate, have a Material Adverse Effect.

(u) Taxes. Except as described in the General Disclosure Package, all tax returns required to be filed by the Company or the Subsidiary have been timely filed, and all taxes and other assessments of a similar nature (whether imposed directly or through withholding) including any interest, additions to tax or penalties applicable thereto due or claimed to be due from such entities have been timely paid, other than those being contested in good faith and for which adequate reserves have been provided.

(v) Listings on Stock Exchanges. The Offered ADSs have been duly authorized and approved for listing and trading on the NYSE, subject to official notice of issuance and effectiveness of the Registration Statement. The Equity Shares have been approved in principle for trading on the Indian Stock Exchanges.

(w) Compliance of Preliminary Prospectus with Securities Regulations. Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act complied when so filed in all material respects with the Securities Act and the applicable rules and regulations thereunder.

 

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(x) No Investment Company. The Company is not and, after giving effect to the offering and sale of the Offered ADSs and the application of the proceeds thereof as described in the General Disclosure Package, will not be an “investment company” as such term is defined in the United States Investment Company Act of 1940, as amended.

(y) Passive Foreign Investment Company. The Company is not, and upon the issuance and sale of the Offered ADSs as herein contemplated and the application of the net proceeds therefrom as described in the General Disclosure Package will not be, a “passive foreign investment company” as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended, (the “Code”) or a “foreign personal holding company” within the meaning of Section 552 of the Code.

(z) Intellectual Property Rights. Each of the Company and the Subsidiary owns, or has duly applied for the issuance of, all the patents, trademarks, trade names, if any, and copyrights (or licenses such rights pursuant to valid and subsisting licenses) necessary for the present conduct of its business as described in the General Disclosure Package, except where the failure to own or license the same would not, singly or in the aggregate, have a Material Adverse Effect.

(aa) No Filing or Filing Fees. To ensure the legality, validity, enforcement or admissibility into evidence in a legal or administrative proceeding in India of each of this Agreement and the Deposit Agreement and the ADRs in India, it is not necessary that this Agreement, the Deposit Agreement or the ADRs be filed or recorded with any court or other authority in India or that any registration tax or similar tax (other than stamp duty) be paid in India on or in respect of any of this Agreement and the Deposit Agreement or the ADRs other than court costs, including (without limitation) filing fees and deposits to guarantee judgment required by an Indian court of law.

(ab) No Agreement to File a Registration Statement. There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement.

(ac) Conformity of Financial Statements with U.S. GAAP.

(i) The U.S. GAAP (as defined below) financial statements of the Company included in the Registration Statement, the General Disclosure Package and the Prospectus, together with the related schedules and notes, present fairly in all material respects the consolidated financial position of the Company at the dates and for the periods indicated and

 

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the consolidated results of operations, shareholders’ equity and cash flows of the Company for the periods specified in conformity with U.S. GAAP; such financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) applied on a consistent basis at the dates and for the periods involved (except as otherwise noted therein). The supporting schedules, if any, included in the Registration Statement, General Disclosure Package and the Prospectus present fairly in accordance with U.S. GAAP the information required to be stated therein. The selected financial data and the summary financial data included in the General Disclosure Package and Prospectus under the captions “Selected Financial and Operating Data”, “Selected Statistical Information” and “Summary Financial and Operating Data” present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement.

(ii) Conformity of Financial Statements with Indian GAAP. The Indian GAAP (as defined below) financial statements of the Company, if any, included in the Registration Statement, the General Disclosure Package and the Prospectus, present fairly in all material respects the consolidated financial position of the Company at the dates and for the periods indicated and the consolidated results of operations, shareholders’ equity and cash flows of the Company for the periods specified in conformity with Indian GAAP; such financial statements have been prepared in conformity with Indian generally accepted accounting principles (“Indian GAAP”) applied on a consistent basis at the dates and for the periods involved (except as otherwise noted therein).

(ad) Independent Public Accountants. Deloitte Haskins & Sells, who have delivered their report with respect to the U.S. GAAP financial statements and supporting schedules (which term as used in this Agreement includes the related notes thereto) filed with the Commission as a part of the Registration Statement and included in the General Disclosure Package, are independent public or certified public accountants as required by the Securities Act and the applicable rules and regulations thereunder.

(ae) Independent Indian Chartered Accountants. Haribhakti & Co. are independent chartered accountants within the rules of the code of professional ethics of the Institute of Chartered Accountants of India.

(af) No Stabilization Action. The Company has not taken, nor will the Company take, either directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Offered ADSs or the Shares.

 

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(ag) Valid Choice of Law, Submission to Jurisdiction and Appointment of Process Agent. The choice of the laws of the State of New York as the governing law of this Agreement and the Deposit Agreement is a valid choice of law under the laws of India and courts of India should honor this choice of law. The Company has the power to submit, and pursuant to this Agreement has validly and irrevocably submitted to the personal jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of New York, New York County (including, in each case, any appellate courts therefrom) in any suit, action or proceeding against it arising out of or related to any of this Agreement or with respect to its obligations, liabilities or any other matter arising out of or in connection with the sale of ADSs to the Underwriters, or the transactions contemplated hereby, has validly and irrevocably waived any objection to the venue of any such proceeding in any such court, and the Company has the power to designate, appoint and empower, and pursuant to this Agreement, has validly appointed the Process Agent named in Section 11 hereof for the purposes described herein, and service of process effected in the manner set forth in Section 11 hereof will be effective to confer valid personal jurisdiction over the Company.

(ah) Stamp Duty and Other Transaction Taxes. Stamp duty is payable in India in connection with the issuance of the Shares (or if certificates for the Shares to be represented by the Offered ADSs have not then been prepared, irrevocable letters of allotment (“Letters of Allotment”) for such Shares, written in favor of the Depositary or its nominee, entitling the Depositary or such nominee to receive delivery of certificates for such Shares within 45 days following the delivery of such Letters of Allotment) in the name of the Depositary; however, no stamp or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable in India or any political subdivision or taxing authority thereof or therein in connection with (i) the deposit with the Depositary of the Shares or the Letters of Allotment by the Company against the issuance of the ADRs evidencing Offered ADSs and the issuance and delivery of certificates for the Shares pursuant to any Letters of Allotment, (ii) the sale and delivery of the Offered ADSs to or for the respective accounts of the Underwriters, (iii) the sale and delivery outside of India by the Underwriters of the Offered ADSs representing the Shares to the initial purchasers thereof or (iv) except as set forth in the Prospectus, the consummation of any other transaction contemplated by this Agreement or the Deposit Agreement in connection with the sale and delivery of the Offered ADSs, except that stamp duty may be payable on this Agreement or the Deposit Agreement if presented in India for enforcement.

(ai) Internal Accounting Controls.

(i) The Company has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific

 

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authorizations, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and Indian GAAP and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management’s general or specific authorization, and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(ii) the Company has established and maintains and evaluates “disclosure controls and procedures” (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act) and “internal control over financial reporting” (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s Managing Director and its Head, Finance and Administration by others within those entities, and such disclosure controls and procedures are effective to perform the functions for which they were established; the Company’s independent auditors and the Audit and Compliance Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies, if any, in the design or operation of internal controls which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial data; and (ii) all fraud, if any, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; all material weaknesses, if any, in internal controls have been identified to the Company’s independent auditors; since the date of the most recent evaluation of such disclosure controls and procedures and internal controls, there have been no significant changes in internal controls or in other factors that could materially affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses; the principal executive officers (or their equivalents) and principal financial officers (or their equivalents) of the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any related rules and regulations promulgated by the Commission, and the statements contained in each such certification are complete and correct; the Company, the Subsidiary and the Company’s directors and officers are each in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and regulations of the Commission and the NYSE promulgated thereunder.

(aj) U.S. Foreign Corrupt Practices Act of 1977. To the best knowledge of the Company, neither the Company, the Subsidiary nor any of their respective directors, officers or employees has violated or is in violation of any provision of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

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(ak) Money Laundering Laws and OFAC. Except as described in the General Disclosure Package, the operations of the Company and the Subsidiary are conducted in compliance, in all material respects, with the financial recordkeeping and reporting requirements of the money laundering statutes that are applicable to them as well as the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency having jurisdiction over them (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or the Subsidiary with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

Neither the Company, the Subsidiary, nor any director or officer of the Company or the Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not use the proceeds of the offering for the purpose of financing the activities of any person known to the Company to be currently subject to any U.S. sanctions administered by OFAC.

(al) Transactions with Affiliates. All material transactions between the Company and the Subsidiary, on the one hand, and any of their respective directors, executive officers, shareholders owning more than 10% of the Company’s equity capital or other affiliates including HDFC Limited and its subsidiaries on the other hand, are fully and fairly described in the General Disclosure Package and each such transaction is on terms no less favorable to the Company or the Subsidiary, as the case may be, as could be obtained with an unaffiliated third party.

(am) No Requirement to Be Licensed and No Implication of Residency. It is not necessary in order to enable any owner of ADSs to enforce any of its rights that such owner of ADSs be licensed, qualified or entitled to do business in India. None of the Underwriters will be deemed to be resident, domiciled, carrying on business or subject to taxation in India by reason of its ownership of the Offered ADSs or the entry into, performance and/or enforcement of this Agreement and the transactions contemplated hereby.

(an) No Immunity Under Indian Law. The Company is subject to civil and commercial law and to suit in India with respect to its obligations under this Agreement and the Deposit Agreement and the ADRs; the execution and delivery by the Company and the performance by the Company of its obligations thereunder constitute private and commercial acts rather than governmental or public acts and neither the Company nor any of its properties, assets or revenues has any right of immunity under Indian law from any legal action, suit or proceeding, from the giving of any relief in any such legal action, suit or

 

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proceeding, from setoff or counterclaim, from the jurisdiction of any Indian court, from service of process, attachment upon or prior to judgment, or attachment in aid of execution of judgment or from execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement, and, to the extent that the Company or any of the Company’s properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings may at any time be commenced, the Company has waived or has agreed to waive such right to the extent permitted by law.

(ap) Officer’s Certificate. Any certificate signed by an officer of the Company and delivered to the Global Coordinators and Joint Bookrunners or to international counsel to the Underwriters shall be deemed to be a representation and warranty by the Company to each Underwriter as to the matters set forth therein.

2. Agreements to Sell and Purchase.

(a) Firm ADSs. The Company hereby agrees to sell to the several Underwriters, severally and not jointly, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the terms and conditions herein stated, agrees, severally and not jointly, to purchase from the Company at U.S.$[] per Firm ADS (the “Purchase Price”) the respective number of Firm ADSs (subject to such adjustments to eliminate fractional ADSs as the Global Coordinators and Joint Bookrunners may determine) set forth in Schedule I hereto opposite the name of such Underwriter.

(b) Additional ADSs. On the basis of the representations and warranties contained herein, and subject to the terms and conditions herein stated, the Company agrees to sell to the Underwriters, severally and not jointly, the Additional ADSs and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to [•] Additional ADSs at the Purchase Price. The Global Coordinators and Joint Bookrunners, on behalf of the Underwriters, may exercise such option by giving written notice to the Company not later than 30 days after the date of this Agreement. The notice shall specify the number of Additional ADSs to be purchased by the Underwriters and the date on which such Additional ADSs are to be purchased. Such date may be the same as the Closing Date but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional ADSs may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm ADSs. If any Additional ADSs are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Additional ADSs that bears the same proportion to the total number of Additional ADSs to be

 

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purchased as the number of Firm ADSs set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm ADSs, subject to such adjustments as the Global Coordinators and Bookrunners in their discretion shall make to eliminate any fractional shares.

(c) Restrictions on Sale of Securities. The Company hereby agrees that, without the prior written consent of the Global Coordinators and Bookrunners on behalf of the Underwriters, it will not, during the period ending 180 days after the date of the Prospectus (i) directly or indirectly offer, pledge, issue, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise transfer or dispose of, directly or indirectly, any Equity Shares, ADSs, ADRs or any securities convertible into or exercisable or exchangeable for Equity Shares, ADSs or ADRs or file any registration statement under the Securities Act with respect to the foregoing or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the Equity Shares, ADSs or ADRs or any other securities convertible into or exercisable or exchangeable for Equity Shares, ADSs or ADRs, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Equity Shares, ADSs or ADRs or such other securities, in cash or otherwise or (iii) take any action to materially increase the number of ADRs or ADSs outstanding under the facility by a new offering of Equity Shares (other than the Shares) or by assisting in a transfer of Equity Shares by any existing shareholder. The foregoing sentence shall not apply to (A) the Shares or Offered ADSs to be sold hereunder, (B) the issuance, sale or grant by the Company of Equity Shares or options to purchase its Equity Shares, or Equity Shares upon exercise of options or warrants, pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Prospectus, or the conversion of a security outstanding on the date hereof which is described in the Prospectus, or (C) transactions by any person other than the Company relating to Equity Shares, ADSs or ADRs or other securities acquired in open market transactions after the completion of the offering of the Offered ADSs.

3. Terms of Public Offering. The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Offered ADSs as soon after the Registration Statement and the ADS Registration Statement have become effective as in your judgment is advisable. The Company is further advised by you that the Offered ADSs are to be offered to the public initially at U.S.$[] per Offered ADS (the “Public Offering Price”) and to certain dealers selected by you at a price that represents a concession not in excess of U.S.$[] per ADS under the Public Offering Price.

4. Payment and Delivery. Payment of the subscription moneys for the Firm ADSs shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm ADSs for the respective accounts of the several

 

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Underwriters at a closing to be held at the offices of Cravath, Swaine & Moore LLP, Worldwide Plaza, 825 Eighth Avenue, New York, NY 10019, at 10:00 a.m., New York City time, on [], 2007 or at such other time on the same or such other date, not later than [•], 2007, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the “Closing Date”.

Payment for any Additional ADSs shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional ADSs for the respective accounts of the several Underwriters at the closing to be held at the offices of Cravath, Swaine & Moore LLP, Worldwide Plaza, 825 Eighth Avenue, New York, NY 10019, at 10:00 a.m., New York City time, on the date specified in the notice described in Section 2 hereof or at such other time on the same or on such other date, in any event not later than [•], 2007, as shall be designated in writing by the Underwriters. The time and date of such payment are hereinafter referred to as the “Option Closing Date”.

Immediately after 10:00 a.m. New York City time, on the Closing Date, the Company shall issue the Shares in book entry form and procure (i) that the Shares are registered on the shareholders’ register of the Company in the name of the Custodian and (ii) that the Custodian immediately credits the Shares to the deposit account of the Depositary established with the Custodian.

ADRs evidencing the Offered ADSs shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The ADRs evidencing the Offered ADSs to be purchased hereunder shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any stamp duty or transfer taxes payable in connection with the transfer of the Offered ADSs to the Underwriters duly paid, against payment of the aggregate Purchase Price therefor.

5. Conditions to the Underwriters’ Obligations. The obligations of the Company to sell the Offered ADSs to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Offered ADSs on the Closing Date are subject to the condition that the Registration Statement has become effective and, at the Closing Date, no stop order suspending the effectiveness of the Registration Statement or the ADS Registration Statement shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission, and any request on the part of the Commission for additional information with respect to the Registration Statement or otherwise shall have been complied with to the reasonable satisfaction of international counsel to the Underwriters. A prospectus containing information (if any) deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430B under the Securities Act shall have been filed with the Commission in accordance with Rule 424(b) under the Securities Act (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430B under the Securities Act).

 

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The several obligations of the Underwriters are subject to the accuracy of the representations and warranties of the Company in Section 1 hereof or in any certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:

(a) No Material Adverse Change. Subsequent to the execution and delivery of this Agreement and prior to the Closing Date there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company from that set forth in the General Disclosure Package that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Offered ADSs on the terms and in the manner contemplated in the General Disclosure Package.

(b) Officers’ Certificate. The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive director of the Company acceptable to you and the chief financial officer or chief accounting officer of the Company, to the effect set forth in Section 5(a) hereof and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Applicable Time and the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.

(c) Opinion of Cravath, Swaine & Moore LLP. The Underwriters shall have received on the Closing Date an opinion of Cravath, Swaine & Moore LLP, international counsel to the Company, dated the Closing Date, in form and substance satisfactory to the Underwriters, to the effect set forth in Exhibit A-1 hereto, and a statement with respect to certain matters pertaining to the Registration Statement, the General Disclosure Package and the ADS Registration Statement to the effect set forth in Exhibit A-2 hereto and to such further effect as counsel to the Underwriters may reasonably request. The opinion and statement of Cravath, Swaine & Moore LLP described in this Section 5(c) shall be rendered to the Underwriters at the request of the Company and shall so state therein.

(d) Opinion of Talwar Thakore and Associates. The Underwriters shall have received on the Closing Date an opinion of Talwar Thakore and Associates, Indian counsel to the Company, dated the Closing Date, in form and substance satisfactory to the Underwriters, to the effect set forth in Exhibit B hereto and to such further effect as counsel to the Underwriters may reasonably request.

 

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(e) Opinion of Ziegler, Ziegler & Associates LLP. The Underwriters shall have received on the Closing Date an opinion of Ziegler, Ziegler & Associates LLP, counsel to the Depositary, dated the Closing Date, in form and substance satisfactory to the Underwriters, to the effect set forth in Exhibit C hereto and to such further effect as counsel to the Underwriters may reasonably request.

(f) Opinion of Milbank, Tweed, Hadley & McCloy LLP. The Underwriters shall have received on the Closing Date an opinion of Milbank, Tweed, Hadley & McCloy LLP, international counsel to the Underwriters, dated the Closing Date, in form and substance satisfactory to you.

(g) Opinion of Khaitan and Co. The Underwriters shall have received on the Closing Date an opinion of Khaitan and Co., Indian counsel to the Underwriters, dated the Closing Date, in form and substance satisfactory to you.

(h) Certificate of the Depositary. The Depositary shall have furnished or caused to be furnished to you certificates satisfactory to you evidencing the deposit with the Custodian of the Equity Shares being so deposited against issuance of ADRs evidencing Firm ADSs to be delivered by the Company at the Closing Date; the execution, issuance, signature and delivery of ADRs evidencing the Firm ADSs pursuant to the Deposit Agreement; and such other matters related thereto as you may reasonably request.

(i) Comfort Letter from Deloitte Haskins & Sells. The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the respective dates of delivery thereof, in form and substance satisfactory to the Underwriters, from Deloitte Haskins & Sells, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus; provided that the letter delivered on the Closing Date shall use a “cut-off date” not earlier than the date hereof.

(j) Comfort Letter from Haribhakti & Co. The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the respective dates of delivery thereof, in form and substance satisfactory to the Underwriters, from Haribhakti & Co., containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus; provided that the letter delivered on the Closing Date shall use a “cut-off date” not earlier than the date hereof.

 

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(k) Lock-Up of Shareholders. Each of HDFC Limited, HDFC Investments Limited and HDFC Holdings Limited has executed and delivered to the Global Coordinators and Joint Bookrunners a lock-up agreement, substantially in the form of Exhibit D hereto.

(l) Listing Approval. The Offered ADSs shall have been approved for listing on NYSE, subject only to official notice of issuance.

(m) Effectiveness of Deposit Agreement. The Deposit Agreement shall be in full force and effect.

(n) Listing Applications and Approvals on Indian Stock Exchanges. You shall have received on the Closing Date a draft of each of the final listing applications for, and evidence of approvals in principle from, the Indian Stock Exchanges.

(o) Other Documents. You shall have received such other documents and certificates as are reasonably requested by you or your counsel.

(p) Conditions to Purchase of Additional ADSs. In the event the Underwriters exercise the option to purchase all or a portion of the Additional ADSs, the several obligations of the Underwriters to purchase Additional ADSs hereunder are subject to the delivery to the Underwriters on the Option Closing Date of such documents as they may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional ADSs and other matters related to the issuance of the Additional ADSs, including without limitation the following:

(i) Officers’ Certificate. A certificate, dated the Option Closing Date, of an executive director of the Company and of the chief financial officer or chief accounting officer of the Company confirming that the certificate delivered on the Closing Date pursuant to Section 5(b) hereof remains true and correct as of the Option Closing Date.

(ii) Opinion of Cravath, Swaine & Moore LLP. The Underwriters shall have received on the Option Closing Date an opinion of Cravath, Swaine & Moore LLP, international counsel to the Company, dated the Option Closing Date, in form and substance satisfactory to the Underwriters, relating to the Additional ADSs to be purchased on the Option Closing Date and otherwise to the same effect as the opinions required by Section 5(c) hereof.

(iii) Opinion of Talwar Thakore and Associates. The Underwriters shall have received on the Option Closing Date an opinion of Talwar Thakore and Associates, Indian counsel to the Company, dated the Option Closing Date, in form and substance satisfactory to the Underwriters, relating to the Additional ADSs to be purchased on the Option

 

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Closing Date and otherwise to the same effect as the opinions required by Section 5(d) hereof.

(iv) Opinion of Milbank, Tweed, Hadley & McCloy LLP. The Underwriters shall have received on the Option Closing Date an opinion of Milbank, Tweed, Hadley & McCloy LLP, international counsel to the Underwriters, dated the Option Closing Date, in form and substance satisfactory to the Underwriters and otherwise to the same effect as the opinions required by Section 5(f) hereof.

(v) Opinion of Khaitan & Co. The Underwriters shall have received on the Option Closing Date an opinion of Khaitan & Co., Indian counsel to the Underwriters, dated the Option Closing Date, in form and substance satisfactory to the Underwriters and otherwise to the same effect as the opinions required by Section 5(g) hereof.

(vi) Bring-down Comfort Letter from Deloitte Haskins & Sells. A letter from Deloitte Haskins & Sells, the accountants to the Company, in form and substance satisfactory to the Underwriters and dated the Option Closing Date, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(i) hereof, except that the “cut-off date” in the letter furnished pursuant to this paragraph shall be a date not more than three days prior to the Option Closing Date.

(vii) Bring-down Comfort Letter from Haribhakti & Co. A letter from Haribhakti & Co., the accountants to the Company, in form and substance satisfactory to the Underwriters and dated the Option Closing Date, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(j) hereof, except that the “cut-off date” in the letter furnished pursuant to this paragraph shall be a date not more than three days prior to the Option Closing Date.

(q) Termination of Agreement. If any condition specified in this Section 5 shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Additional ADSs, the obligations of the several Underwriters to purchase the relevant Additional ADSs, may be terminated by the Global Coordinators and Bookrunners by notice to the Company at any time at or prior to the Closing Date or Option Closing Date, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 7 hereof and except that Sections 1 and 8 hereof shall survive any such termination and remain in full force and effect.

 

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6. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows:

(a) Copies of the Registration Statement and Prospectus. To furnish to you, without charge, conformed copies of the Registration Statement as originally filed (including exhibits filed thereto and documents incorporated by reference therein) and conformed copies of all consents and certificates of experts delivered in connection with the offering and sale of the Offered ADSs, and for delivery to each other Underwriter conformed copies of the Registration Statement and the ADS Registration Statement (without exhibits thereto but including documents incorporated by reference therein) and to use its best efforts to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the second business day succeeding the date of this Agreement and during the period mentioned in Section 6(d) hereof, as many copies of the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request.

(b) Notification of Amendments. Before amending or supplementing the Registration Statement, the ADS Registration Statement, the General Disclosure Package or the Prospectus prior to the completion of the offering of the Offered ADSs, to furnish to you a copy of each such proposed amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and not to file any such proposed amendment or supplement to which you or your counsel reasonably object and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. The terms “supplement” and “amendment” or “amend” as used in this Agreement shall include all documents subsequently filed by the Company with the Commission pursuant to the Exchange Act, that are deemed to be incorporated by reference in the Prospectus.

(c) Notification of Stop Orders and Requests by the Commission. To comply with the requirements of Rules 430B or 424 under the Securities Act, as applicable, and to notify you immediately, and confirm the notice in writing at any time: (i) the Company becomes an “illegible issuer”, as defined in Rule 405 under the Securities Act, (ii) the Registration Statement ceases to be an “automatic shelf registration statement” (as defined in Rule 405 under the Securities Act) or the Company shall have received, from the Commission, a notice, pursuant to Rule 401(g)(2), of objection to the use of the form on which the Registration Statement was filed with the Commission, (iii) when any post-effective amendment to the Registration Statement or to the ADS Registration Statement shall become effective, or any supplement to the Prospectus or Permitted Free Writing Prospectus (as defined below) or any amended Prospectus shall have been filed, (iv) of the receipt of any comments from the Commission, (v) of any request by the Commission for any amendment to the Registration Statement or to the ADS Registration

 

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Statement or any amendment or supplement to the Prospectus or for additional information, and (vi) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the ADS Registration Statement or of any order preventing or suspending the use of any prospectus or of the suspension of the qualification of the ADS for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will make reasonable efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment.

(d) Continued Compliance with Applicable Securities Laws. To comply with the Securities Act and the Exchange Act and the rules and regulations thereunder, Indian law, the rules and regulations of the NYSE, the rules and regulations of the Indian Authorities, the rules and regulations of the Indian Stock Exchanges and all other applicable laws, rules and regulations, so as to permit and facilitate the offer, issue and distribution of the Offered ADSs as contemplated in this Agreement, the Deposit Agreement and in the General Disclosure Package and compliance with its other obligations under this Agreement and the Deposit Agreement. If at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the ADSs, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel to the Underwriters or for the Company, to amend the Registration Statement or ADS Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or ADS Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the Securities Act or the rules and regulations thereunder, the Company will promptly prepare and file with the Commission, subject to Section 6(b) hereof, such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, ADS Registration Statement or the Prospectus comply with such requirements, and will use its best efforts to cause such amendment to the Registration Statement or the ADS Registration Statement to become promptly effective. The Company will furnish to the Underwriters and counsel to the Underwriters such number of copies of such amendment or supplement as the Underwriters and such counsel may reasonably request.

(e) Blue Sky Qualifications. To endeavor to qualify the Offered ADSs for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or a dealer in securities in any jurisdiction in which it is not so qualified or to subject it to taxation in respect of doing business in any jurisdiction in which it is not otherwise subject.

 

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(f) Listings. The Company shall use its best efforts to (i) maintain the listing of the ADSs on NYSE, (ii) obtain final approval for the listing of the Shares on the relevant Indian Stock Exchanges within six weeks after the Closing Date and maintain the listing of Equity Shares on the relevant Indian Stock Exchanges thereafter, and (iii) comply in all material respects and on a timely basis with the reporting and filing requirements of NYSE and the relevant Indian Stock Exchanges, as applicable.

(g) Earning Statement. To timely file or furnish such reports pursuant to the Exchange Act as are necessary in order to make generally available to the Company’s security holders and to you as soon as practicable an earning statement covering the twelve-month period ending March 31, 2008 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations thereunder.

(h) No Stabilization Action. Not to take, directly or indirectly, any action which is designed to or which constitutes or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company or facilitate the sale or resale of the Offered ADSs or the Shares.

(i) Stamp Duty and Other Transaction Taxes. To pay any stamp duty or other issue, transaction, value-added or similar tax, fund or duty (including court fees) in the United States or India on the execution or enforcement of this Agreement and the Deposit Agreement or on the offer and issue of the ADRs.

(j) Indian Taxes. To pay such additional amounts as may be necessary in order that, after deduction or withholding for or on account of any present or future tax, assessment, levies, imposts, duties or other governmental charges imposed by India or any department agency or other political sub-division or tax authority thereof or by any taxing authority of any jurisdiction from which such payment is made, and all interest, penalties or similar liabilities with respect thereto, each payment made by the Company to the Underwriters pursuant to this Agreement will not be less than the amount provided for herein.

(k) Approvals by Indian Authorities. To endeavor to obtain, comply with and maintain in force all approvals (including, without limitation, approvals under the Foreign Exchange Management Act), authorizations and consents from the Indian Authorities, and any conditions thereto, which are necessary for the Company to comply with its obligations under this Agreement and the Deposit Agreement, the ADSs and the Shares and to offer and issue the ADSs and the Shares in the manner set forth in this Agreement, the Deposit Agreement and the General Disclosure Package.

 

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(l) Filing of a Return of Allotments. On the Closing Date or immediately thereafter, to file a return of allotments in respect of the Shares in accordance with Section 75 of the Indian Companies Act, 1956.

(m) Engagement of Transfer Agent and Deposit of Shares. To engage and maintain, at its expense, a registrar and transfer agent for the Equity Shares, the Offered ADSs and the ADRs and to deposit the underlying Equity Shares with the Custodian in accordance with the terms of the Deposit Agreement so that ADRs evidencing the Offered ADSs will be executed by the Depositary and delivered to the Underwriters pursuant to this Agreement on the Closing Date and any Option Closing Date.

(n) Reporting Requirements. During the period when the Prospectus is required by the Securities Act to be delivered in connection with sales of the Offered ADSs, to file or furnish, on a timely basis, with the Commission all reports and documents required to be filed under the Exchange Act.

(o) No Fiduciary Relationship. The Company acknowledges and agrees that (i) the purchase and sale of the Offered ADSs pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other, (ii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and (iii) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate.

(p) Issuer Free Writing Prospectuses. The Company represents and agrees that, unless it obtains the prior consent of the Global Coordinators and Joint Bookrunners (which consent will not be unreasonably withheld or delayed), and each Underwriter represents and agrees that, unless it obtains the prior consent of the Company and the Global Coordinators and Joint Bookrunners, it has not made and will not make any offer relating to the Offered ADSs that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a “free writing prospectus”, as defined in Rule 405 under the Securities Act, required to be filed with the Commission.; provided that the prior consent of the parties hereto shall be deemed to have been given in respect of any Issuer General Use Free Writing Prospectus listed on Schedule III hereto. Any such free writing prospectus consented to by the Company and the Global Coordinators and Joint Bookrunners is hereinafter referred to as a “Permitted Free Writing Prospectus”. The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an

 

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Issuer Free Writing Prospectus, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping.

7. Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement including: (i) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration and delivery of the ADSs under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement (including financial statements and exhibits), any preliminary prospectus, any Permitted Free Writing Prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the ADSs to the Underwriters, including any stamp or transfer or other taxes payable thereon, (iii) the preparation, printing, filing and delivery to the Underwriters of this Agreement and the Deposit Agreement, any agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the ADSs; (iv) the cost of printing or producing any Blue Sky or legal investment memorandum in connection with the offer and sale of the ADSs under state securities laws and all expenses in connection with the qualification of the ADSs for offer and sale under state securities laws as provided in Section 6(e) hereof, including filing fees and the reasonable fees and disbursements of counsel to the Underwriters in connection with such qualification and in connection with the Blue Sky or legal investment memorandum, (v) all filing fees incurred in connection with the review and qualification of the offering of the ADSs by the National Association of Securities Dealers, Inc., (vi) all costs and expenses incident to listing the ADSs on NYSE and the Shares on the Indian Stock Exchanges, (vii) the cost of printing, issuing and delivering certificates, if any, representing the Shares and ADR certificates evidencing the ADSs, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the ADSs to the Underwriters, (viii) the costs and charges of the Depositary, the Custodian or any transfer or registrar, (ix) the fees and expenses incurred in connection with admitting the ADSs for clearance and settlement on the facilities of The Depository Trust Company, (x) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the offering of the ADSs or the Shares, including, without limitation, cost of road show venues, within city local conveyance, meals, lodging expenses, and other related expenses, and the cost of any aircraft chartered in connection with the road show, if applicable, and (xi) all other reasonable costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section 7. It is understood, however, that except as provided in this Section 7, Section 8 hereof, and the last paragraph of Section 10 hereof, the Underwriters will pay all of their direct costs and expenses, including fees and disbursements of their counsel and any advertising expenses connected with any offers they may make and other expenses incurred by the Underwriters. Notwithstanding the foregoing, in the event that the transactions contemplated by the Underwriting Agreement shall have been consummated pursuant to Sections 2 and 4 herein, the Underwriters shall reimburse the Company for certain reasonably incurred expenses in an amount equal to [·]% of the gross proceeds from the sale of the Firm ADSs and, to the extent any Additional ADSs are purchased under Section 2(b) hereof, [·]% of the gross proceeds from the sale of such Additional ADSs actually purchased.

 

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8. Indemnity and Contribution.

(a) The Company agrees to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each person, if any, who is an affiliate of any Underwriter within the meaning of Rule 501(b) of Regulation D under the Securities Act and Rule 12b-2 of the General Regulations under the Exchange Act, from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation, any legal or other expenses reasonably incurred by any Underwriter or any such affiliate in connection with defending or investigating any such action or claim) caused by (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any related preliminary prospectus, the General Disclosure Package, any Issuer Free Writing Prospectus, the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or the ADS Registration Statement (or any amendments thereto) or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Company, such signatories or any such controlling person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereof, any related preliminary prospectus, the General Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the General Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus or any amendments or supplements thereto.

 

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(c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) hereof, such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. The indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters and such affiliates of any Underwriters, such firm shall be designated in writing by the Global Coordinators and Joint Bookrunners. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.

 

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(d) To the extent the indemnification provided for in Sections 8(a) or 8(b) hereof is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Offered ADSs or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Offered ADSs shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Offered ADSs (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Offered ADSs. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters’ respective obligations to contribute pursuant to this Section 8 are several in proportion to the respective number of Offered ADSs they have purchased hereunder, and not joint.

(e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(d) hereof. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Offered ADSs underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue

 

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or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

For purposes of this Section 8, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 8 are several in proportion to the number of Firm ADSs set forth opposite their respective names in Schedule I hereto and not joint.

(f) The indemnity and contribution provisions contained in this Section 8 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any affiliate of any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of, payment for and delivery of any of the Offered ADSs.

9. Termination. The Underwriters may terminate this Agreement by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, the Commission or any of the NYSE, the National Association of Securities Dealers, Inc., the Nasdaq National Market or the Indian Stock Exchanges, or (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over the counter market, or (iii) a material disruption has occurred in commercial securities settlement or clearance services in the United States, or (iv) a general moratorium on commercial banking activities in New York or Mumbai shall have been declared by the relevant authorities, or (v) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse, or (vi) there shall have occurred a change or development involving a prospective change in the existing financial, political, economic or regulatory conditions in the Republic of India (including, without limitation, the imposition of or a change in exchange controls, a change in currency exchange rates or taxation), which change or development makes it, in your judgment, impracticable or inadvisable to market the Offered ADSs, or the United States, the United Kingdom, Singapore, or the Republic of India shall have imposed exchange controls, or (vii) there shall have occurred any change in the U.S. currency markets that, in your judgment, is material and adverse and (b) in the case of any of

 

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the events specified in clauses 9(a)(i) through 9(a)(vii) above, such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Offered ADSs on the terms and in the manner contemplated in the Prospectus.

If this Agreement is terminated pursuant to this Section 9, such termination shall be without liability of any party to any other party except as provided in Section 7 hereof, and provided further that Sections 1 and 8 hereof shall survive such termination and remain in full force and effect.

10. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Offered ADSs that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Offered ADSs which such defaulting Underwriter or Underwriters agreed to but failed or refused to purchase is not more than one-tenth of the aggregate number of the Offered ADSs to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm ADSs set forth opposite their respective names in Schedule I bears to the aggregate number of Firm ADSs set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the ADSs which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Offered ADSs that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of one-ninth of such number of Offered ADSs without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Offered ADSs and the aggregate number of Offered ADSs with respect to which such default occurs is more than one-tenth of the aggregate number of Offered ADSs to be purchased, and arrangements satisfactory to you and the Company for the purchase of such Offered ADSs are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional ADSs and the aggregate number of Additional ADSs with respect to which such default occurs is more than one-tenth of the aggregate number of Additional ADSs to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Additional ADSs or (ii) purchase not less than the number of Additional ADSs that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

 

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If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.

11. Jurisdiction; Consent to Service. To the fullest extent permitted by applicable law, the Company irrevocably (i) agrees that any legal suit, action or proceeding brought by any Underwriter or by any affiliate of any Underwriter arising out of or relating to this Agreement or the transactions contemplated hereby may be instituted in any federal or state court in the Borough of Manhattan, The City of New York, and (ii) waives any objection (x) which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any federal or state court in the Borough of Manhattan, The City of New York, or (y) that any such suit, action or proceeding has been brought in an inconvenient forum, and (iii) irrevocably submits to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding.

The Company has appointed Depositary Management Corporation, 570 Lexington Avenue, 44th Floor, New York, NY 10022 (the “Process Agent”), as its agent to receive on its behalf service of copies of the summons and complaints and any other process which may be served in any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby brought in such New York State or federal court sitting in The City of New York. Such service may be made by delivering a copy of such process to the Company in care of the Process Agent at the address specified above for the Process Agent and obtaining a receipt therefor, and the Company hereby irrevocably authorizes and directs such Process Agent to accept such service on its behalf. The Company represents and warrants that the Process Agent has agreed to act as said agent for service of process, and agrees that service of process in such manner upon the Process Agent shall be deemed to the fullest extent permitted by applicable law, in every respect effective service of process upon the Company, as the case may be, in any such suit, action or proceeding.

12. Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder into any currency other than U.S. dollars, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be the rate at which in accordance with normal banking procedures any Underwriter could purchase U.S. dollars with such other currency in New York City on the business day preceding that on which final judgment is given.

The obligation of the Company in respect of any sum due from the Company to any Underwriter, or of any Underwriter in respect of any sum due from such Underwriter to the Company shall, notwithstanding any judgment in a currency other than

 

35


U.S. dollars, not be discharged until the first business day, following receipt by such Underwriter or the Company, respectively, of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such Underwriter or the Company, respectively, may in accordance with normal banking procedures purchase U.S. dollars with such other currency; if the U.S. dollars so purchased are less than the sum originally due to such Underwriter or the Company, respectively, hereunder, the Company or any such Underwriter, respectively, agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter or the Company, respectively, against such loss. If the U.S. dollars so purchased are greater than the sum originally due to such Underwriter or the Company, respectively, hereunder, such Underwriter and the Company, respectively, agree to pay to the Company or such Underwriter, respectively, an amount equal to the excess of the U.S. dollars so purchased over the sum originally due to such Underwriter or the Company, respectively, hereunder.

13. Benefits of Agreement. This Agreement shall inure to the benefit of and be binding upon the Company, the Underwriters, any controlling persons and affiliates referred to herein and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. No purchaser of Offered ADSs from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

14. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be given to Merrill Lynch at Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ, United Kingdom (facsimile: +44-207-995-2516) and to UBS AG at 52/F, Two International Financial Center, 8 Finance Street, Central, Hong Kong (facsimile: +852-2971-8908); with a copy to Milbank, Tweed, Hadley & McCloy LLP at 3007 Alexandra House, 16 Chater Road, Central, Hong Kong, attention of Anthony Root, Esq. (facsimile: +852-2840-0792). Notices to the Company shall be given to it at its principal executive offices, HDFC Bank House, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, India (facsimile: +91-22-2496-0739), attention: Country Head – Finance, Legal, Secretarial, Administration with a copy to Cravath, Swaine & Moore LLP at Worldwide Plaza, 825 Eighth Avenue, New York, NY 10019-7475, U.S.A., attention of Timothy G. Massad, Esq. (facsimile: +1-212-474-3700).

In all dealings hereunder, you will act for the several Underwriters, and the Company shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by the Global Coordinators and Joint Bookrunners.

15. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

36


16. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

17. Headings. The headings of the sections of this Agreement are for convenience of reference only and shall not affect the construction of this Agreement.

 

37


Very truly yours,
HDFC BANK LIMITED
By:  

 

Name:  
Title:  

Accepted as of the date hereof

MERRILL LYNCH INTERNATIONAL

UBS AG

Acting severally on behalf of themselves and the

several Underwriters named in Schedule I hereto.

 

By: MERRILL LYNCH INTERNATIONAL

By:

 

 

Name:

 

Title:

 

By: UBS AG

By:

 

 

Name:

 

Title:

 

By:

 

 

Name:

 

Title:

 

 

38

EX-5.1 3 dex51.htm OPINION OF TALWAR THAKORE AND ASSOCIATES Opinion of Talwar Thakore and Associates

Exhibit 5.1

July 10, 2007

HDFC Bank Limited

HDFC Bank House

Senapati Bapat Marg

Lower Parel, Mumbai 400 013

Ladies and Gentlemen,

We have acted as counsel for HDFC Bank Limited, a public limited company incorporated under the laws of India (the “Company”), in connection with the registration statement on Form F-3, (the “Registration Statement”), to be filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the registration of equity shares, par value Rs. 10 per share (the “Equity Shares”), of the Company, to be represented by American depositary shares (“ADSs”), each ADS representing the right to receive three Equity Shares in connection with the offering and sale by the Company of ADSs pursuant to the terms of the underwriting agreement (the “Underwriting Agreement”) to be executed by the Company and Merrill Lynch International and UBS AG as representatives (the “Representatives”) of the Underwriters named therein.

In that connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Registration Statement and the exhibits thereto and such documents, corporate records and other instruments as we have deemed necessary or appropriate for the purposes of this opinion, including, without limitation, resolutions adopted by the board of directors of the Company on May 17, 2007 and shareholders of the Company on June 16, 2007.

Based on the foregoing, we are of opinion that the Equity Shares have been duly and validly authorized and, when issued and delivered by the Company, and paid for by the Underwriters in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid and non-assessable.

We are admitted to practice in India, and we express no opinion as to any matters governed by any laws other than the laws of India.

We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the captions “Enforcement of Civil Liabilities” and “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission.

 

Yours truly,

/s/ Shobhan Thakore                

Shobhan Thakore

Partner

EX-15.1 4 dex151.htm LETTER OF HARIBHAKTI & CO., CHARTERED ACCOUNTANTS Letter of Haribhakti & Co., Chartered Accountants

Exhibit 15.1

Consent of Haribhakti & Co.

The Board of Directors

HDFC Bank Limited

HDFC Bank House

Senapati Bapat Marg, Lower Parel

Mumbai 400013

India

Dear Sirs,

Registration Statement filed on July 10, 2007

With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated July 10, 2007 related to our review of unaudited financial results for the quarter ended June 30, 2007 approved by the registrant’s board of directors in the meeting held on July 10, 2007.

Pursuant to rule 436(c) under the Securities Act, 1933 (the “Act”) of the United States, such report is not considered part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act.

 

 

 

 

/s/ Haribhakti & Co.

 

Haribhakti & Co.

Chartered Accountants

Mumbai

July 10, 2007

EX-23.1 5 dex231.htm CONSENT OF DELOITTE HASKINS & SELLS Consent of Deloitte Haskins & Sells

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Registration Statement on Form F-3 of our report dated July 10, 2007 (which report includes explanatory paragraphs related to the adoption of new accounting standards and convenience translation from Indian rupee amounts to U.S. dollar amounts), relating to the consolidated financial statements of HDFC Bank Ltd. and subsidiaries (the “Bank”) and our report dated July 10, 2007 relating to management’s report on the effectiveness of internal control over financial reporting appearing in the Annual Report on Form 20-F of the Bank for the year ended March 31, 2007, and to the use of our reports dated July 10, 2007, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Prospectus.

 

/s/ Deloitte Haskins & Sells
DELOITTE HASKINS & SELLS
Mumbai, Maharashtra, India
July 10, 2007
EX-99.1 6 dex991.htm CERTIFIED COPY OF THE RESOLUTIONS PASSED BY THE BOARD OF DIRECTORS OF HDFC BANK Certified copy of the resolutions passed by the Board of Directors of HDFC Bank

Exhibit 99.1

 

LOGO   

HDFC Bank Ltd.,

Process House, 2nd Floor,

Kamala Mills Compound,

Senapati Bapat Marg,

Lower Parel, Mumbai - 400 013.

Tel. : 2498 8484. Fax: 2496 5235

CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF HDFC BANK LIMITED HELD ON 17TH MAY, 2007.

“RESOLVED THAT pursuant to Section 81 and other applicable provisions, if any, of the Companies Act, 1956, (including any amendment thereto or re-enactment thereof) (the “Act”), and in accordance with the provisions of the Memorandum of Association and Articles of Association of the Bank and subject to the regulations /guidelines, if any, prescribed by the Reserve Bank of India, the Securities and Exchange Board of India and all other concerned or other relevant authority from time to time to the extent applicable, and subject to the approval of shareholders and such other consents and approvals as may be necessary and subject to such conditions and modifications as may be considered necessary by the Board of Directors (hereinafter referred to as “the Board” which term shall be deemed to include any Committee thereof for the time being exercising the powers conferred on the Board by this Resolution) or as may be prescribed or made, in granting such consents and approvals and which may be agreed to by the Board, equity shares and/or equity shares through depository receipts and/or securities convertible into equity shares at the option of the Bank and/or the holders of such securities, and/or securities linked to equity shares and/or any instrument or securities representing equity shares and/or convertible securities linked to equity shares (all of which are hereinafter collectively referred to as “Securities”) be created, issued, offered in the course of one or more public or private offerings in domestic or one or more international markets, to investors (whether residents and/or non-residents and/or strategic investors and/or institutions or banks and/or incorporated bodies and/or individuals and/or trustees and/or stabilization agents or otherwise and irrespective of whether or not such investors are members or not) through a prospectus and/or an offer letter and/or a circular and/or on private/preferential placement basis, for, or which upon exercise or conversion of all securities so issued and allotted could give rise to the issue of an aggregate value upto/not exceeding INR 4,200 crores or USD 1,000,000,000 (US Dollar One billion), whichever is higher, (including green shoe option) at the relevant time(s) of issue of securities, such issue and allotment to be made at such times, in one or more tranches at such price or prices, at a discount, equal to or at a premium to market price or prices, in such manner and where necessary in consultation with the lead managers and/or underwriters and/or other advisors or otherwise on such terms and conditions as the Bank, may, in its absolute discretion, decide at the time of issue.

RESOLVED FURTHER THAT Mr. Aditya Puri, Managing Director; Mr. Paresh Sukthankar, Country Head (Credit, Market Risk & HR), Mr. Vinod Yennemadi, Country Head (Finance, Administration, Legal & Secretarial) and Mr. Sashi Jagdishan, Head (Finance), be and are hereby severally authorised to:

 

a) Finalise all the terms relating to the proposed issue of securities including amendments or modifications thereto as may be considered necessary by them.

Regd.Office : HDFC Bank Ltd., HDFC Bank House, Senapati Bapat Marg, Lower Parel (West), Mumbai -400 013.


b) Appoint or engage any agency(ies) whether in India or abroad, decide, amend or modify the terms of appointment of all agency(ies) appointed or to be appointed hereafter, including payment of fees, commission, out-of-pocket expenses and other charges, in accordance with approval from RBI where necessary and to renew or terminate the appointment so made, as they may in their absolute discretion think fit.

 

c) Finalise, approve and sign the preliminary as wel1 as final prospectus/offering circular/registration statement for the aforesaid issue of securities with the authority to amend, vary, modify the same as may be considered desirable or expedient and for the purpose aforesaid to give such declarations, affidavits, certificates, consents to authorities as may be required from time to time.

 

d) Accept the proceeds of the said issue and to finalise the allotment in respect of the subscription in consultation with Lead Managers to the issue, and to do all such acts, deeds and things as may be necessary or thought fit by them in this regard.

 

e) Sign, execute and issue American Depository Receipts, letters of allotment, depository agreement, undertakings, deeds, powers of attorney, declaration and all other document(s) and to do all such acts, deeds and things to comply with all the formalities as may be required in connection with and incidental to the aforesaid issue including for the post issue formalities.

 

f) Obtain the necessary approvals/permissions from any authority(ies) and make, sign or deliver necessary applications, filings, deeds, documents, writings, etc. and to receive/collect any approvals from such authority(ies).

 

g) Make, sign, execute or deliver listing application(s) or any other filings, deeds, documents, writings, etc. and to do or perform all acts, deeds and things which are necessary and expedient to give effect to this resolution.

RESOLVED FURTHER THAT pursuant to the Article of Association of the Bank, a facsimile of the Common Seal of the Bank be affixed, if required, on any agreement(s), document(s) or paper(s) executed outside India in lieu of the Common Seal, in presence of any one of the Directors of the Bank, and any one of the executives of the Bank viz. Mr. Paresh Sukthankar, Country Head (Credit, Market Risk & HR), Mr. Vinod Yennemadi, Country Head (Finance, Administration, Legal & Secretarial) and Mr. Sashi Jagdishan, Head (Finance), who shall countersign the same as a token thereof.

RESOLVED FURTHER THAT for the purpose of giving effect to any creation, issue, offer or allotment of equity shares or securities or instruments representing the same, as described above, the Managing Director be and is hereby authorised, on behalf of the Bank, to do all such acts, deeds, matters, and things as he may, in his absolute discretion, deem necessary or desirable for such purpose, including without limitation, the entering into arrangements for managing, underwriting, marketing, listing, trading, acting as depository, custodian, registrar, paying and conversion agent, trustee and sign all deeds, documents, and writings and to pay any fees, commission, remuneration and expenses relating thereto.


RESOLVED FURTHER THAT the Managing Director be and is hereby authorised to delegate all or any of the powers herein conferred to any one or more executives of the Bank.

RESOLVED FURTHER THAT the Company Secretary be and is hereby authorised to include a Special Resolution to this effect in the Notice convening the 13th Annual General Meeting of the Bank.”

 

Certified True copy
For HDFC Bank Limited

/s/ Sanjay Dongre

Sanjay Dongre

Executive Vice-President – Legal

& Company Secretary,

Date: 6th July, 2007
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-----END PRIVACY-ENHANCED MESSAGE-----