GLOBAL ECONOMY
It has been a near-normal year after two years of pandemic induced
challenges but the global economy continues to face headwinds of rising inflation and
tapered growth. The rise in central bank rates to fight inflation and Russia war in
Ukraine continue to weigh on economic activity with its impact likely to spill over to FY
2023 as well. The rapid spread of COVID-19 in China also dampened growth in FY 2022, but
the reopening has paved the way for a recovery. Stronger than expected private consumption
and investment amid tight labor markets and greater than anticipated fiscal support helped
major economies.
For emerging market and developing economies, growth is projected to
rise modestly, from 3.9% in FY 2022 to 4.0% in 2023. Growth in emerging and developing
Asia is expected to rise in FY 2023 to 5.3% after the deeper than expected slowdown in FY
2022 to 4.3% attributable to Chinas economy. Growth in China is projected to rise
reflecting rapidly improving mobility and full reopening.
Global inflation is set to fall, although more slowly than initially
anticipated, from 8.7% in FY 2022 to 7.0% in FY 2023 as the massive and synchronous
tightening of monetary policy by most central banks should start to bear fruit. Commodity
prices have generally seen a correction since October 2022. Oil prices also are projected
to fall by 24% by IMF in FY 2023, whereas non-fuel commodity prices are expected to remain
broadly similar.
INDIAN ECONOMY
The Indian economy continues to remain fairly resilient in the last
year despite the global headwinds. However, it will see a moderation in growth in FY24 to
5.9%-6.3% as per various estimates as against 6.9% in FY23. Rising borrowing costs and
slower income growth will weigh on private consumption growth, and government consumption
is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal
support measures. Despite this, India will remain one of the fastest growing economies in
a challenging global environment.
Volatile commodity prices have impacted profitability, particularly of
MSMEs, while export-oriented sectors face headwinds from a slowdown in their major
markets. The headwinds of higher input cost and challenging global environment will
continue in FY 24 also. The increase in repo rate by RBI by 250 bps since the beginning of
FY 2023 to contain inflation is expected to slow down the growth rate as the full effect
of rate hikes will be felt in FY 2024.
RBI though is expected to continue its accommodative stance to growth
as seen in its April 2023 Monetary Policy Committee meeting where rates were maintained.
Indias banking system has been largely insulated from recent failures of certain banks
globally. Interest rate risk, the root cause of stress at some banks in the US, is
relatively lower for Indian banks. Loans which form about 70% of asset book of banks in
India are largely floating in nature. Also, the base interest rates in India are higher
than global peers, making the sensitivity of investments to mark-to-market losses
relatively lower.
INDUSTRY STRUCTURE & DEVELOPMENTS:
Indian real estate sector has witnessed high growth in the recent times
with rise in demand for office as well as residential spaces. The residential real estate
market in India had astounding progress in 2022, setting new sales records of 68% year on
year, further demonstrating the industrys prominence as one of Indias fastest growing
industries. After 2 years of being affected by COVID, Tier 2 and Tier 3 cities have arisen
as fresh major real estate trends in 2022, and the real estate market has set
unprecedented benchmarks which continued its growth momentum from 2021 amid the global
slowdown.
The post-pandemic picture for real estate sector is a paradigm shift
from before. The pandemic has reinstated the importance of home ownership and the attitude
of customers towards residential properties has seen a substantial shift. Preference for
larger sized apartments, inclination towards reputed developers and a rising demand for
townships projects are just some of the emerging trends.
According to the Economic Times Housing Finance Summit, about three
houses are built per 1,000 people per year compared with the required construction rate of
five houses per 1,000 population. The current shortage of housing in urban areas is
estimated to be 10 million units. An additional 25 million units of affordable housing are
required by 2030 to meet the growth in the countrys urban population.
MUMBAI REAL ESTATE
Mumbai, being the largest real estate market in the country is set for
a major boom, which will further add to the overall surge. For close to 5 years, Mumbai
has resembled a gigantic construction site. A new coastal road, a metro rail and a trans
harbour link are among the many ongoing infrastructure projects that are meant to
transform Indias commercial capital into a modern and efficient city. As these projects
complete over the next few years, new micro markets will open up in and around Mumbai, as
commuting would become easier. That will boost real estate development further.
OPPORTUNITIES AND CHALLENGES
Opportunities
As India awaits policy reforms to pick up speed, your Company firmly
believes that the demand for Real Estate in a country like India should remain strong in
the medium to long term. Your Companys well accepted brand, contemporary architecture,
well designed projects in strategic locations, strong balance sheet and stable financial
performance even in testing times make it a preferred choice for customers and
shareholders. Your Company is ideally placed to further strengthen its development
potential by acquiring new land parcels.
Housing Demand
The pandemic has nudged a lot of fence-sitters to convert into
first-time home buyers and existing ones to upgrade to larger homes by re-establishing the
security that homeownership offers, resulting in rising housing demand across segments. An
expected economic recovery along with the belief of housing prices bottoming out amongst
consumers and rising income levels are some of the factors which will drive the housing
demand going ahead.
Sector Consolidation
The highly fragmented Indian real estate sector has been in a prolonged
consolidation phase from the past few years and the pandemic has been one important factor
pushing weaker players out of business. The disruptions in the real estate sector have
ensured that no new player has an easy entry into the sector. As the sector moves towards
fewer big players in each region, the consolidation presents a lucrative opportunity for
the existing real estate developers to cater to the rising housing demand.
Affordable Housing
Affordable housing continues to remain a significant opportunity for
developers and key focus area of the government. While the tax benefit for firsttime
homebuyers and tax holiday for developers in affordable housing segment was rolled back in
Budget 2022, we believe it will not deter homebuyers decision of purchasing homes and
demand will continue to be strong in affordable housing segment.
THREATS & CHALLENGES
Regulatory Hurdles
Real estate sector is a highly regulated sector and any unfavorable
changes in government policies and the regulatory environment can adversely impact the
performance of the sector. There are substantial procedural delays with regards to land
acquisition, land use, project launches and construction approvals. Retrospective policy
changes and regulatory bottlenecks may impact profitability and affect the attractiveness
of the sector and companies operating within the sector.
MONETARY TIGHTENING AND FUNDING ISSUES
There has been a contrasting trend in real estate lending over the past
few years wherein reputed, low leveraged developers continued to enjoy easy access to
liquidity as the lenders remained selective and weaker developers struggled with limited
sources of capital. The Reserve Bank of India has so far maintained accommodative stance.
Going ahead, we expect to see monetary policy remain tight and gradually ease as the
central bank tries to support the economic recovery and also balance inflation. A nascent
economic recovery along with rising interest rates could impact the real estate sector in
the near term as cost of housing loans shoots up and rise in the cost of funding for the
developers, who are already facing margin pressure due to commodity cost inflation.
OTHER CHALLENGES
While the management of your Company is confident of creating and
exploiting the opportunities, it also finds the following challenges:
• Unanticipated delays in project approvals;
• Availability of accomplished and trained labour force;
• Increased cost of manpower;
• Rising cost of construction lead by increase in commodity
prices; and
• Over regulated environment
SEGMENT-WISE/FINANCIAL & OPERATiONAL PERFORMANCE
Real Estate Business Overview:
After 2 years of being affected by COVID, the residential real estate
market in India had astounding progress in 2022, setting new sales records demonstrating
the industrys prominence as one of Indias fastest growing industries. Your Company
managed to achieve reasonable volume of sales from its ongoing projects and was able to
add re-development projects to its portfolio during the year and has some in pipeline. Out
of all the on-going projects, the construction activity at "the mist" phase
ii located at Karjat which was expected to get completed by December, 2022 got
completed in August, 2022.
In respect of "GeeCee Aspira 206"at New Panvel,
Company had applied for full OC in October, 2022 and the same is expected by August or
September, 2023 (by the end of 2nd Quarter). "Proximus" project
at Chembur is progressing as per Schedule and is targeted to get completed in the next
financial year. The re-development project at "Laxmi Kunj" located at
Juhu, is progressing as per schedule and is targeted to get completed by end of December
31, 2024. The Commencement Certificate for residential cum commercial project in the name
of "GeeCee Emerald" at Kharghar was received upto 13th Floor
and the construction has started in full swing. The project is progressing as per
schedule.
Other than the above On-going projects, the Company is continuously
working to identify and start newer projects.
Investment & Financing Business:
The Company has large pool of liquid assets and there exists an
opportunity to invest it very efficiently. The Company oversees good opportunities to
invest its funds in risk free Inter-Corporate Deposits and interest bearing financial
instruments. The Company endeavours to maximize its return on surplus funds, within the
parameters of prudent investment norms giving highest regard to the quality of credit risk
to its investment/financing portfolio.
OUTLOOK, RISK AND CONCERNS Outlook
Post-pandemic, developers have moved away from the traditional way of
doing business and rightly focused on end-user customer demand with a strong focus on
innovation and digital transformation. We believe FY2023- 24 will continue the healthy
sales momentum backed by solid structural foundation, sustained demand and relatively
affordable albeit somewhat higher housing loan rates. Financially strong and reputed
developers with superior execution capabilities stand to benefit disproportionately from
the ongoing cyclical upturn.
While commodity cost inflation has been persistent and poses a risk to
operating margins, the price hikes taken so far by the real estate players have been well
absorbed. Interest rate hikes to contain inflation will increase the cost of capital and
hurt the weaker players, favouring the already well-capitalized developers like ours. We
look forward to adding a large number of projects to our portfolio in FY 2023-24, which is
amongst our top priorities and which will enable us to grow rapidly going ahead.
RISKS AND CONCERNS Market Price Fluctuation
The performance of your Company may be affected by the sales and rental
realizations of its projects. These prices are driven by prevailing market conditions, the
nature and location of the projects and other factors such as brand, reputation and the
design of the projects. Your Company follows a prudent business model and tries to ensure
steady cash flow even during adverse pricing scenario.
Sales Volume
The volume of bookings depends on the ability to design projects that
will meet customer preferences, getting various approvals in time, general market factors,
project launch and customer trust in entering into sale agreements well in advance of
receiving possession of the projects. Your Company sells its projects in phases from the
time it launches the project, based on the type and scale of the project and depending on
market conditions.
Financing Costs
The acquisition of land and development rights needs substantial
capital outflow. Inadequate funding resources and high interest costs may impact regular
business and operations. Your Company has always tried to build sufficient reserves
resulting out of operating cash flows to take advantage of any land acquisition or
development opportunity.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has adequate internal control systems commensurate with the
size and nature of its business. Well documented policies, guidelines and procedures to
monitor business and operational performance, all of which are aimed at ensuring business
integrity and promoting operational efficiency. All assets are safeguarded and protected
against loss from unauthorized use or disposition and the transactions are authorized,
recorded and reported correctly, financial and other data are reliable for preparing
financial information and other data and for maintaining accountability of assets. The
internal control is supplemented by extensive programme of internal audits and review by
management. The system has been designed to ensure that financial and other records are
reliable for preparing financial information and for maintaining accountability of assets.
All financial and audit control systems are also reviewed by the Audit Committee of the
Board of Directors of the Company. The Audit Committee of the Board reviews the adequacy
and effectiveness of the internal control systems and suggests improvements, if any for
strengthening them.
Your Company has also focused on upgrading the IT infrastructure - both
in terms of hardware and software. In addition to the existing system, the Company is
presently reviewing the process documentation to ensure effectiveness of the controls in
all the critical functional areas of the Company.
HUMAN RESOURCES
Your Companys closing headcount for F.Y 2022-23 were 48. GeeCee
Ventures Limited recognizes that its people are key to the success of the organization.
Your Company continued to make substantial investments in human capital to meet its growth
targets. The Companys business is managed by a team of competent and passionate leaders
capable of enhancing your Companys standing in the competitive market. The Companys
focus is on unlocking the people potential and further developing their functional,
operational and behavioural competencies.
The relations with all employees of the Company remained cordial and
there were no significant issues outstanding or remaining unresolved during the year. The
Board of Directors and the Management wishes to place on record their appreciation of the
efforts put in by all the employees.
We believe that our continued success will depend on ability to attract
and retain key personnel with relevant skills and performance.
KEY FINANCIAL RATIOS
In accordance with SEBI (Listing Obligations and Disclosure
Requirements) (Amendment) Regulations, 2018, the details of significant changes (i.e.
Change of 25% or more as compared to the immediately previous financial year) in key
financial ratios are given below:
| Ratios |
F.Y. 2022-23 |
F.Y. 2021-22 |
formulae |
Explanation |
| Debtors Turnover |
19.13 |
23.93 |
Net Credit Sales/ Average Trade Receivables |
|
| Inventory Turnover |
0.06 |
0.36 |
Cost of Goods sold/ Average Inventory |
Decrease in Inventory turnover ratio is majorly on account of
Non-Satisfaction of Performance Obligation as per IND-AS 115 of our real estate projects
and no acquisition of land in current year as compared to the previous year. |
| Interest Coverage Ratio |
|
|
Earnings before interest, taxes, depreciation and
amortization expenses/ Interest expenses |
|
| Current Ratio |
7.56 |
21.89 |
Current Assets/ Current Liabilities |
Decrease in current ratio is majorly on account of redemption
of debt instruments and increase in advances from customer during the current year. |
| Debt Equity Ratio |
|
|
Debt/ Equity |
- |
| Operating Profit Margin (%) |
31.37 |
25.60 |
Profit before tax/ Total Revenue |
Increase in operating profit margin is majorly on account of
increase in margin for sales in respect of the real estate segment during the current
year. |
| Net Profit Margin (%) |
26.11 |
19.59 |
Net Profit after tax/ Total Revenue |
Increase in net profit margin is majorly on account of
increase in margin for sales in respect of the real estate segment during the current
year. |
| Return on Net Worth |
1.84 |
3.57 |
Net Profit after Tax/ Shareholders Fund (Equity) |
Decrease in Return on Net Worth ratio is majorly on account
of Non-Satisfaction of Performance Obligation as per IND-AS 115 of our real estate
projects in current year. |
CAUTIONARY STATEMENTS
Statements in this Management Discussion and Analysis describing the
Companys objectives, projections, estimates and expectations may be forward looking
statements within the meaning of applicable laws and regulations and based on the fact
that the Resolution Plan for the Company has been implemented. These statements have been
based on current expectations and projections about future events. Such statements,
however, involve known and
unknown risks, significant changes in political and economic
environment in India or key markets abroad, tax laws, litigation, labour relations,
exchange rate fluctuations, interest and other costs and may cause actual results to
differ materially. There is no certainty that these forward-looking statements will be
realised, although due care has been taken in making these assumptions. There is no
obligation to publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise.
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