ajmera realty infra india ltd Management discussions

Economic overview

Global economy

During the first half of FY23, the global economy encountered various difficulties, including fluctuating prices of essential goods and resources, elevated inflation, and disruptions in supply chains resulting from the Russia-Ukraine conflict. However, the economy demonstrated resilience in the second half as it began to recover from the impacts of the pandemic and geopolitical tensions. Central banks implemented synchronized rate hikes and stricter monetary policies to effectively address these challenges, combat inflation and stabilize the markets. According to the International Monetary Funds (IMF) projection, global economic growth is expected to bottom out at 2.8% in CY23 and subsequently rise to 3.0% in CY24. In contrast, advanced economies are expected to experience a growth rate of 1.3% in CY23. Global inflation is expected to decrease gradually to 7.0% in CY23 and further to 4.9% in CY24.¹

Global Economic Growth (%) economic indicators, exemplify strong economic fundamentals for the country. India has emerged as one of the fastest growing major economies and clocked a growth of 7.2% in FY23, reveals the National Statistical Office (NSO).²

RBI GDP Forecasts (%)

Indian economy

The Indian economy remained relatively robust amid global economic headwinds. This buoyant performance along with overall optimism and compelling macro-

Source: RBI Press Release dated April 06, 2023

Stronger prospects for manufacturing, services, agriculture and related industries, along with improved business and consumer confidence, are expected to support domestic consumption. Additionally, the nations stable inflation rates, increased disposable income, and focus on infrastructure development are anticipated to propel economic growth in the future.

Industry overview

Indian real estate sector

Real estate sector in India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021. Indias real estate market is estimated to increase at a CAGR of 19.5% during 2017- 2028. The market anticipates it to reach US$ 650 billion, representing 13% of Indias GDP by 2025. In 2022, Indias real estate sector experienced price growth of 6%. Increasing share of real estate in the GDP would be supported by increasing industrial activity, improving income level and urbanisation.

FY23 continued recovery in Indias real estate sector after a prolonged period of decline. All segments, including residential, commercial, retail, and warehousing, witnessed growth given the positive outlook and increased consumer confidence. Additionally, there has been a tremendous surge in property demand in major Indian cities, prompting developers to launch new projects. The property sales index demonstrated a substantial annual growth of 36%, with sales volume surpassing pre-pandemic levels in 2019. This upswing can be attributed to renewed confidence in residential real estate as a secure investment option.

Source: https://www.ibef.org/industry/real-estate-india

The property markets in major cities are anticipated to maintain an upward trend in the coming year as a result of the surge in both pent-up and new demand. The depreciation of the rupee has piqued the interest of foreign investors who are considering purchasing real estate in India in the near future. The credibility of developers and their track record of successful projects will play a crucial role for prospective homebuyers in making their decisions.³

City-specific real estate overview Mumbai

Mumbai, Indias financial hub, is home to a vibrant and diversified culture that sets it apart from other global megacities, resulting in a steady rise for housing demand in Mumbai. This has instilled confidence in real estate developers, prompting them to initiate new projects. In 2022, new property releases in the top seven cities climbed by 42% to nearly 4,02,000 units, compared to 2,78,650 in 2021. It is expected that new releases would increase by 35% to approximately 5,44,000 units in 2023.⁴ Positive trends in the residential and commercial spaces have given city developers hope for better prospects in 2023.

Residential real estate

With a population of over 20 million people, Mumbai is one of Indias most populous cities. Despite challenges such as rising construction cost, interest rate hikes, and geopolitical concerns, 2022 has been a remarkable year for residential real estate. From April 2022 to April 2023, 1,28,427 properties were registered in Mumbai.⁵ The daily average number of property registrations stood at 352, ranking April 2023 second only to April 2022.Source- Maharashtra Govt- Dept. of Registrations and Stamps (IGR); Knight Frank India Research Luxury segment launches were twice that of the average quarterly figure seen in the last eight quarters. The data indicates that robust sales performance in the segment has led to an upward trend in capital values in the suburban submarkets.

Office real estate

While the quarterly leasing activity in Mumbais commercial spaces has slowed down, it continues to remain reasonably strong, recording a gross leasing volume (GLV) of 3.05 million square feet in Q4 of FY23. Fresh leases accounted for 1.35 million square feet in the total GLV, dominated by smaller-sized transactions below 50,000 square feet. The IT-BPM, BFSI and Professional Services sectors were the most active during the quarter and emerging segments such as GCCs and Flex Space continue to gain traction.

Rental rates in the city have increased by 1-2% since the third quarter of FY23. Due to the present low vacancy rates, key projects owned by institutions and prominent developers are estimated to see rental growth in the coming quarters across all submarkets.⁷

Bengaluru

Indias IT capital, Bengaluru, is a thriving hub for IT companies and start-ups, resulting in a significant demand for real estate. The citys real estate market is growing steadily, providing a range of choices for buyers and investors. The citys infrastructure, including metro lines, flyovers, and highways, has been developing rapidly to support the markets growth. With a well-connected international airport and extensive road network, the city offers excellent connectivity to other parts of the country.

Residential real estate

Bengaluru, a prominent information technology hub, contributed to 43% of the real estate launches. In

March 2023, the KR Puram to Whitefield Metro route further boosted this micro market. The combined area of Bellandur and Sarjapur Road in the citys southeastern sector and the eastern quadrant accounted for 52% of residential unit releases in Q4 FY23. Ready-to-move-in projects continue to attract buyers, but limited availability and decline in unsold inventory are expected to maintain high demand.

The real estate market experienced a shift in project launches, with mid-segment projects accounting for 54%. High-end and luxury projects accounted for 14-15% of launches, reflecting a growing preference for upscale properties. The market is exhibiting favourable inclination towards houses priced over H 1.3 crore, and this demand is expected to persist in the coming quarters.

Affordable housing primarily located in peripheral areas like Jigani, Chandapura, Hoskote, and Mysore Road, increased in market share, accounting for 32% of Q4FY23 launches. With end-users increasingly preferring larger apartments, developers are focused on such configurations in their new projects. The 3 and 4 BHK apartments account for 54% of these launches. Among the mid-segment category, specifically out of the approximately 4,195 units, 3 and 4 BHK apartments comprised around 68% of the total allocation.⁸

Offices and commercial spaces

Bengalurus office real estate market in the Asia-Pacific region is gaining momentum on the back of key information technology companies and innovative high-tech start-ups. With the gross lease volume

(GLV) in Q4 of FY23 was 2.3 million square feet, fresh leases contributed to 95% of the volume. The Outer Ring Road submarket accounted for 41% of the GLV, followed by Peripheral East and Professional Services. Despite a 32% drop in project completions, Bengaluru is expected to see a full-year supply of 12-13 million square feet, driven by the demand for quality spaces and faster construction of speculative projects. The vacancy rate remained steady at 9.5% during Q4 FY23, with an anticipated rise in vacancy levels in the coming quarters.⁹

Trends and opportunities

Strong demand

An intensifying demand for real estate, especially in the affordable housing segment, provides a significant opportunity for developers. This has been driven by growing aspirational population, higher disposable incomes and a revival in the employment sector. Meeting this demand can lead to substantial returns on investment and market expansion.

Infrastructural development

Ongoing infrastructural development projects, such as the development of smart cities, transportation networks and industrial corridors, create opportunities for real estate developers. Proximity to improved infrastructure enhances the value and attractiveness of properties, driving demand and potential profits.

8https://www.cushmanwakefield.com/en/india/insights/bengaluru-marketbeat ⁹https://www.cushmanwakefield.com/en/india/insights/bengaluru-marketbeat

Technology adoption

The adoption of technology in real estate opens numerous opportunities. Digitisation, virtual property tours, big data analytics and Internet of Things (IoT) applications streamline processes, enhance customer experiences and provide valuable market insights. Developers that embrace technological advancements can gain a competitive edge and cater to the evolving preferences of tech-savvy customers.

Sustainable development

Rising demand for sustainable buildings offers significant opportunities for developers, as green buildings with energy-efficient features attract environmentally conscious buyers and tenants. Government incentives and expedited approval processes encourage developers to invest in this sector.

Government initiatives and policy reforms

Government initiatives and policy reforms, such as the Pradhan Mantri Awas Yojana (PMAY), the Real Estate Regulatory Authority (RERA) and tax incentives, create a favorable environment for real estate development. Developers who align their projects with these initiatives can benefit from financial incentives, increased customer trust and a supportive regulatory framework.

Threats and challenges

As the real estate industry continues to evolve, the industry faces a multitude of threats and challenges. Rapid technological advancements, changing market trends, and regulatory complexities pose constant hurdles. Moreover, competition intensifies as new players enter the market. Navigating these obstacles requires strategic planning, innovation, and adaptability to ensure continued success in this dynamic landscape.

Company overview

Ajmera Realty, a leading real estate developer in India, is renowned for its unwavering commitment to excellence.

With a legacy built on intelligence, quality, innovation, comfort, and opulence, Ajmeras constructions are a testament to its rich legacy. With over five decades of experience and delivering over 20 million square feet of projects and over 45,000 units, the Company has thrived on the trust and faith of its customers. Employing robust in-house systems and protocols, Ajmera ensures the highest quality standards in all their residential and commercial spaces. With a customer-centric approach, their new-age structures redefine the real estate landscape, exceeding conventional expectations.

Operational overview

In FY23, the Company launched two remarkable projects named Ajmera Manhattan and Ajmera Prive. It received requisite necessary approvals for Ajmera Eden and expanded its footprint by acquiring a valuable land parcel at Vikhroli, positioning itself strategically in the market. With unparalleled construction efforts, the

Company accomplished a remarkable feat of 36 hours of nonstop concrete pouring at Manhattan. Moreover, the company is nearing the completion of its of three projects- Sikova, Greenfinity, and Nucleus C Wing.

To add to its list of achievements, the Company also received the occupancy certificate (OC) for Nucleus AB wing and its commercial space, solidifying its reputation as a trusted developer.

Project-wise operational highlights

Project	Location	Carpet Area Sold (Sq. ft.)	Sales Value ( Rs Cr)	Avg. Realization Rate (Rs /Sq. ft.)	Collections (Rs Cr)
Aeon, Zeon, Treon	Mumbai	12,754	30	23,484	88
Manhattan	Mumbai	1,98,457	572	28,815	167
Sikova	Mumbai	44,910	82	18,190	97
Greenfinity	Mumbai	14,161	38	26,965	56
Prive	Mumbai	7,005	33	46,696	5
Nucleus	Bangalore	89,761	85	9,416	110
Lugaano	Bangalore	645	1	9,559	5
Casa Vyoma & Engima	Ahmedabad	2,526	2	9,187	4
Total		3,70,219	842	22,739	532

Financial highlights

The Company has delivered strong performance throughout FY23, achieving sales of H 842 crore. This impressive success can be attributed to the sales momentum gained from both existing projects and successful new launches, such as Ajmera Manhattan and Ajmera Prive, fast-paced execution and strong demand for quality homes in the sector. With industry reforms and sustained homebuyer demand, supported by an unchanged repo rate, the company holds a highly optimistic outlook for its growth strategy and the future of the real estate sector.

Additionally, the Company achieved a remarkable 58% growth in PAT, reaching H 72 crores, with a PAT margin increase of 695 bps to 16%. This demonstrates operational efficiency and faster execution capabilities showcased in projects like Sikova and Greenfinity. The Company also successfully reduced its debt by 7% on a Y-o-Y basis, resulting in a debt/equity ratio of 1.07:1 for FY23. These achievements reflect the Companys diligent debt management efforts and the growth of sales collection.

Abridged consolidated profit and loss account

Rs in crore

Particulars	March 31, 2023	March 31, 2022
Revenue from operations	431	484
Other income	10	6
Total income	441	489
Total expenditure	345	427
Profit before tax (PBT)	96	62
Share of profit/(loss) of Associate/Joint Venture	-	-
Tax expenses	25	15
Profit after tax (PAT)	72	46
Non-controlling interest	0	1
Other Comprehensive Income/ (loss)	0	0
Adjusted Profit After Tax	72	45
EPS ( /share)
Basic EPS	20.22	12.75
Diluted EPS	20.22	12.75

Abridged consolidated balance sheet

Rs. in crore

	March 31,	March 31,		March 31,	March 31,
Liabilities
	2023	2022	Assets	2023	2022
Shareholders Funds	774	710	Trade receivables	138	265
Minority Interest	119	101	Inventories	1,175	999
Borrowings	826	868	Loans and advances	280	450
Others	189	325	Cash and bank balances	40	35
Provisions	14	15	Others	287	269
Total liabilities	1,922	2,018	Total assets	1,922	2,018

Key financial ratios

Particulars	March 31, 2023	March 31, 2022	Variance	Reasons
Current ratio	13.40	5.46	100%	The surge in revenue and repayment of borrowings has impacted the ratio favourably
Debt-equity ratio	1.07	1.22	-19%	Debt repayment
Debt service coverage ratio	1.05	1.01	2%	An increase in operating margin and repayments of borrowings has tendered a favourable ratio
Return of Equity (ROE)	2.02	1.27	95%	The surge in revenue and repayment of borrowings has impacted the ratio favourably
Inventory turnover ratio	0.40	0.50	-5%	Reduction in revenue as compared to last year
Trade payable turnover ratio	0.16	0.15	0%	Reduction in revenue as compared to last year
Trade receivables turnover ratio	2.15	2.18	-6%	Increase in Trade receivable in comparison to Revenue due to present market conditions giving a favourable ratio

Internal control systems and risks management

The Company has implemented internal control systems, ensuring financial reporting accuracy, operational and strategic objectives achievement and compliance with laws and regulations. An Enterprise Resource Planning (ERP) system standardises processes and automates operations. The primary objective of internal control systems is to ensure asset acquisition, efficient utilisation and adequate protection. A strong risk management system is in place to assess and mitigate risks, as well as ensure prompt reporting.

Risks and mitigation measures

Risk category	Risk description	Mitigation
Economic risk	Fluctuating demand for properties influenced by macroeconomic conditions can impact cash flow management and profitability.	Diversifying property portfolio, conducting market research and maintaining strong financial
Regulatory compliance risk	The real estate industry in India is highly regulated, making it challenging for the Company to obtain necessary approvals and permits for projects.	position Adapt strategies, ensure due diligence and establish strong internal controls for compliance
	Frequent changes in government policies could affect operations and profitability.
Competition risk	In an intensely competitive market, the Company faces pressure from both established players and newcomers.	Monitor competitors, differentiate offerings and maintain customer loyalty
	Financing projects can pose a challenge due to the considerable capital investment required and	Manage sources of funds, monitor interest rates and ensure credit
Financial risk	potential fluctuations in interest rates or credit availability.	availability
Social risk	Real estate development carries significant environmental and social impacts and failing to manage these responsibly can lead to reputational damage and financial penalties.	Manage environmental and social impacts
Technological risk	Online portals offer services such as virtual tours and property listings, challenging traditional business model of the Company.	Adapt to online portals, embrace technology to remain competitive.

Company also faces the ongoing risks associated with economic fluctuations and geopolitical uncertainties. Economic downturns can impact the demand for properties, making it crucial to anticipate and mitigate potential risks. Furthermore, geopolitical events such as policy changes, trade disputes, or global crises can significantly affect market dynamics and investor sentiment. To stay resilient in the face of these uncertainties, we prioritize comprehensive risk management strategies, staying informed about market trends, and fostering strong relationships with our clients and partners. By addressing these challenges head-on, we aim to maintain our position as a trusted and reliable real estate provider in a rapidly changing world.

Human resource

The Company considers its human capital to be its core growth driver. It attracts and maintains a skilled workforce engaged in real estate development tasks, from sales to construction. Leveraging its strong brand recognition, the company attracts top industry talent while investing in employee training for successful project execution and personal growth. The HR department plays a crucial role in the Companys growth strategy, realigning priorities and objectives to align with market dynamics.

Training and employee welfare initiatives

The Company has also established a comprehensive training system to equip employees with necessary skills and knowledge to excel in their roles. Regular feedback, performance appraisals and recognition of exceptional performance are integral components of this system. Recognising and rewarding outstanding performance is an essential aspect of the Companys employee recognition programme, ensuring that employees feel valued and supported.

Employee health and safety

The Companys specialised safety team conducts regular safety inspections and risk assessments to detect and mitigate potential hazards. In addition, the Company prioritises the well-being and mental health of its workforce by fostering a supportive and inclusive work culture, encouraging a healthy work-life balance and providing resources for employee well-being.

Continuous communication policy

The Company has a diverse workforce that is empowered by an inclusive growth culture. The Companys commitment to inclusivity motivates individuals to engage in voluntary projects beyond their primary responsibilities, providing them with opportunities to enhance their creative thinking skills. This proactive and inclusive approach effectively establishes a seamless connection between the aforementioned initiatives, promoting a harmonious and collaborative work environment.

Outlook

The impressive sectoral indicators and the Companys enhanced execution capabilities point towards its sustained growth momentum. With a comprehensive portfolio of existing ongoing and upcoming projects, the Company has revenue visibility of approximately INR 4,050 crore. Among the completed and advanced-stage projects, the Company anticipates realising H 305

crore within the next 6 to 12 months. Additionally, the mid-stage projects hold a revenue visibility of H 1,677 crore, expected to be realised over the next 36 months. In the years ahead, it is estimated that the upcoming launches in FY24 have a promising revenue potential of H 2,050 crore.

The Company aims to achieve a 5x growth trajectory through unlocking of its land bank development potential and through low-capex acquisitions, such as joint ventures (JVs), joint development agreements (JDAs), or development agreements (DAs). The Companys outlook remains optimistic, with strong sales activity expected, supported by dynamic policy measures, improved infrastructure and a positive business environment.

Cautionary statement

In this Management Discussion and Analysis, statements describing the Companys objectives, projections, estimates, expectations or predictions may be ‘forward-looking statements, within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.