MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Global Economy:
At the outset of 2023, encouraging developments in the global economy encompass the
easing of inflation and energy costs from their apex levels, along with Chinas decision
to terminate its zero-COVID strategy, which is projected to provide a stimulus to economic
growth. While the complete impact of these changes is yet to be fully realized, emerging
markets and developing economies are already experiencing a substantial upswing in growth
rates, reaching 3.6% this year compared to 2.8% in 2022. Inflation expectations are
presently stable, with a predicted decrease from 7.0% this year to 4.9% in 2024, due to
major central banks communicating the necessity for a more stringent monetary policy
stance. Moderating demand and escalating interest rates globally will further erode
inflationary pressures throughout 2023. The tightening of monetary policy by the majority
of central banks is anticipated to drive inflation back toward its targets leading it
toward the recovery path.
(Source: IMF - World Economic Outlook, April 2023, Euromonitor International - Global
Economic Outlook: Q1 2023)
Indian Economy:
Indian economy has increased in size from being 10th to 5th largest in the world in the
past nine years. According to Economic Survey 2022-23, Indian economy has staged a broad
based recovery across sectors and positioning to ascend to pre-pandemic growth path in
FY23 driven by several measures taken by the Government and RBI – the Central Bank of
India. According to Second Advanced Estimates of National Income 2022-23, the growth in
real GDP is estimated at 7.0% during the financial year 2022-23. Multiple agencies
worldwide projects India to be the fastest growing economy in the world with a growth
forecast expected in the range of 6.5 to 7.0% in FY23. Indias economic growth in FY23 has
been driven primarily by a rebound in private consumption, a significant increase in
capital expenditure (CAPEX) by Government and a sustained growth in private CAPEX due to
the strengthening of their balance sheet. The rebound in consumption was mainly driven by
an increase in consumer confidence due to universal vaccination and an overall improvement
in labour market conditions. This was reflected by ramp-up in infrastructure and
construction activity on the back of an increase in Capex by the Government. The growth in
credit ofitake, buoyant direct tax collections in FY23, retail inflation back within RBIs
target range in November 2022 and increase in employment generation in urban markets also
signaled the strength in the broad-based recovery of the economy.
Indias GDP growth is expected to remain healthy in FY24 backed by infrastructure led
growth model by the Government with an emphasis on transportation, housing, logistics and
last mile connectivity. This is further supported by crowd-in private investments,
improvement in consumption level and enhance affordability.
Infrastructure and Construction:
Increase in infrastructure investment provides a critical push to the potential growth
of the economy. The Government, in recent years, provided an increased impetus for
infrastructure development and investment through the enhancement of capital expenditure.
In the Union Budget of 2023-24, the Government has further increased the capital
expenditure outlay by approximately 33% to Rs.10 lakh crore which is nearly 3 times the
outlay in 2019-20. The increase in outlay is expected to ramp up the virtuous cycle of
investment and job creation. The continuation of 50 year interest free loans to states for
one more year is expected to spur investments in infrastructure and enhance growth in the
economy.
The Pradhan Mantri Awas Yojna (PMAY) which was launched in 2015 with an aim to provide
affordable housing to all gets a significant boost with an allocation of Rs. 79,000 crores
in FY24 nearly double the outlay in FY21. The FY24 budget proposal of enhancing and
modernizing Urban infrastructure by proposing to establish ‘Urban Infrastructure
Development Fund (UIDF) with an annual outlay of Rs. 10,000 crores through the use of
priority Sector Lending shortfall, to create urban infrastructure in Tier 2 and Tier 3
cities will improve the quality of living of people in this region. With a greater push
towards sustainability, states and cities are encouraged to undertake urban planning
reforms and actions to transform our cities into ‘sustainable cities of tomorrow.
The bullet of reforms launched by the Government such as the National Infrastructure
Pipeline (NIP), PM Gatishakti Scheme & such other schemes have increased
infrastructure development and have brought efficiencies and cost competitiveness. As part
of the NIP, the Union Government plans to invest over Rs. 111 lakh crore by 2025. Out of
the total NIP, Rs. 108 lakh crore worth of projects are under different stages of
implementation. The investments planned under the National Infrastructure Pipeline (NIP)
will be the key growth drivers for the construction sector and will drive the demand for
the cement and steel industries as well. The construction sector contributes roughly 8% to
the GDP. The significant capex outlay by Government since 2020 and multiple initiatives to
bring in private investment have ramped up the construction activity across the economy.
According to Second Advance Estimates published by Central Statistics O_ice (CSO), the
construction sector is likely to see a second year of strong growth of 9.1% in FY23.
Further, the strong focus of the Government on infrastructure led economic growth is
expected to bring significant opportunities in the sector over the medium term. Indias
construction sector is expected to record a CAGR of 10.8% during the 2022-2026 period.
Annual Construction Sector Growth Rate (YoY, in %) Port Infrastructure
Indian ports sector is seeing very high demand in handling cargo tra_ic driven by
increased external trade. The volume of cargo tra_ic handled at the Government-run Indian
major ports in FY23 has increased sharply and is the highest in the last one decade mainly
due to an increase in cargo handling capacity and a significant drop in turnaround time.
Indias 12 major ports witnessed an 8.8% rise in cargo tra_ic to 783 million tonnes (MT)
in FY23 (April22 – March23) compared to a growth of 720 MT achieved in FY22. While
cargo capacity also increased to 1598 million tonnes.
As per Union Budget 2022-23, a total of Rs. 1,709.50 crores have been allocated for the
Ministry of Shipping, Ports and Waterways. The Sagarmala project was introduced by the
Government for the modernisation of existing ports and terminals and to develop new ports
& terminals. Under this program, the cargo handling capacity is expected to enhance to
3,300+ MT by 2025 to cater to the rise in cargo tra_ic. A total estimated cost of Rs 5.5
lakh crore is targeted to be executed by 2035. Overall projects worth Rs. 1 lakh crore is
completed, Rs. 2.1 lakh crore projects are under construction and the remaining is under
development pipeline.
Real Estate:
The Indian real estate industry saw a remarkable growth in sales in the financial year
2022-23. During the fiscal year, the sector continued to witness a strong thrust for
housing demand from end-users across the major cities as well as in tier-2 and tier-3
towns. According to Anarock, the housing sales in the top 7 cities in the year 2022 have
created a new peak breaching the previous high of 2014.
Source: Anarock Research
The global conflict had put pressure on commodity prices leading to an increase in the
input prices of critical raw materials like cement, steel, iron ore, etc. required in the
construction industry which in-turn resulted in price-hikes by a majority of the
developers to mitigate the rise in construction costs. In order to curb inflation, RBI
also increased the policy rate by 250 bps during the year, in tandem with global central
banks. Despite these headwinds, Indias housing market stood tall with strong and
consistent demand from end-users.
Strong demand was driven by various factors such as rent favouring millennials becoming
the convinced buyers of residential homes due to aspiration of owing premium lifestyle
homes. The increased pace of urbanization and improvement in the job market & business
environment also supported the demand. According to several real estate experts, the home
loan rate in the range of 8-9.5% is still in the affordable zone. The commercial real
estate assets are also showing healthy demand for small and mid-size offices, retail shops
and warehousing spaces due to an increase in consumption levels.
The Government is also taking several measures to formalize, regulate and bring
sustainable growth in the sector. The Governments announcement of incentives and tax
breaks in the budget for 2023-2024 is expected to have a significant impact on the
infrastructure and real estate industries.
Outlook
According to NITI Aayog, Indian real estate sector is expected to reach a market size
of $1 trillion by 2030 from $ 200 billion in 2021 and will account for 13% of Indias GDP
by 2025. Any possible rate hike by RBI may impact the demand in the short to medium term.
The strong fundamentals of the economy, positive consumer sentiments and continued
aspiration for homeownership will drive the growth in the real estate sector in the medium
to long term.
Company Review:
Man Infraconstruction Ltd. (Man Infra) has been in business over last five decades. The
operations of Man Infra is divided into two business verticals viz., Construction and Real
Estate Development. Man Infra is an integrated EPC (Engineering, Procurement and
Construction) company with 59 years of experience and execution capabilities in Ports,
Residential, Commercial & Industrial and Road construction segments with projects
spanning across India. As a Real Estate Developer, Man Infra has delivered multiple
Residential projects in Mumbai and is recognized for its superior quality_construction
and_ timely_ project_ delivery._ The Company has extensive experience in construction
management and has inherent skills and resources to develop and deliver Real estate
projects.
EPC Introduction
The EPC or construction division of MICL is a 59 year old business has delivered over
50 million sq. ft. of construction across India. It earns EPC income by undertaking
infrastructure projects like ports, institution, Government residential projects etc. and
owned residential projects. It also has a possibility of earning income in form of PMC
fees from owned Real Estate projects for Professional management of site, material &
Labour.
Strengths
• Commitment to quality & timely delivery resulting in repeat business from
clients
• E_icient project monitoring and cost control
• Experience in constructing complex infra projects , high rise buildings,
townships & mass housing developments
• Owned Plant & equipment and limited subcontracting result in better
execution
Operational Performance
During FY22-23 Man infra was awarded one of the largest EPC orders from the ‘Port
of Singapore Authority (PSA) International through its subsidiary in India, Bharat Mumbai
Container
Terminals Private Limited (BMCT). PSA is working with JNPT to develop this Fourth
Container Terminal to cater to the increasing demands for container handling capacity and
facilitate maritime trade in the Country. The order will allow Man Infraconstruction
Limited to carry out the execution of Phase II works at JNPT, Navi Mumbai, Maharashtra.
The execution of the BMCT phase II project at JNPT Nhava Sheva, Navi Mumbai is on track
and ongoing as per the schedule.
EPC revenue from operations or the contract revenue, grew by 186% year-on-year to
INR918 crores, mainly driven by the fast execution of the BMCT project of ports, followed
by the residential projects of Dahisar and Mulund. The total outstanding EPC order book
stands at Rs. 984 crore as on March 31, 2023. Infra projects contribute 83% while
Residential Segment contributes 17% of the total order book.
Long Term Outlook
• Strategically selective in building its order book for the purpose of keeping it
financially strong and healthy
• Identifying opportunities in ports and continue bidding in Infrastructure and
Government sector
• The launch of upcoming real estate projects and that in pipeline is likely to
further strengthen order book and bring PMC fees
Real Estate Introduction
Man Infra operates Real Estate development business through its subsidiaries, Joint
Ventures (JVs) and associates. It has strategically adopted an asset light approach to
grow its real estate business through Joint Development Agreement (JDA) or through
Development & Marketing (DM) model. The Groups portfolio comprises of multiple
residential and commercial development projects in Mumbai Metropolitan Region (MMR)
catering to mid-premium to ultra-luxury segment. Its portfolio presence ranges from Tardeo
market at South Mumbai to Mira Bhayandar to the other suburbs including Mulund, Ghatkopar,
Juhu and Vile Parle.
Strengths
• Growth through asset light model and leverage partners capabilities for growth
• Capitalizing on Man Infras execution capabilities
• Maintain Project Discipline & tight project monitoring
• Focus on Cash Flow management to manage project risks
Operational Performance
The ‘Aaradhya Eastwind project measuring approximately ~ 1.0 lakh sq. ft. of
carpet area, was delivered during the financial year in July 2022. The project was
developed in a record-breaking time with 17 months before the scheduled timeline and was
fully sold at the time of receiving OC. The project was developed by MICL Developers LLP
(where Man Infra holds 99.99% stake). The ‘Aaradhya Highpark project located
near Dahisar, Thane developed by Man Vastucon LLP, (where Man Infra holds 99.99%),
comprise of 6 residential towers and 1 commercial tower having approximately 6.5 lakh
carpet area for sale. MICL delivered approximately 4.29 lakh sq. ft. of carpet area in
November 2023 comprising of four residential towers and 1 commercial tower -
‘Aaradhya Primus, again 16 months before the schedule. This phase is almost sold
out. As on 31st March, 2023, approximately 85% of the inventory from the
balance 2 towers – E & F has also been sold. The construction work of towers E
& F is as per schedule.
‘Aaradhya Oneearth project, a MHADA Redevelopment project is developed
by Man Realtors and Holdings Pvt. Ltd. (where Man Infra holds 62.79%) is located in
Ghatkopar East. It comprise of 7 Residential towers and 2 Commercial buildings spread
across ~5.0 lakh sq. ft. of carpet area. During 2022-23, MICL delivered 1.4 lakh sq. ft.
of carpet area comprising of 2 residential towers and 1 commercial tower –
‘Aaradhya Square. In FY23, the project also launched its final inventory, 2nd
commercial tower, measuring approximately 44,371 sq. ft. of carpet area. As on 31st
March, 2023, company have sold approximately 85% of the total inventory.
During the financial Year, MICL launched an exquisite luxury project ‘Aaradhya
Evoq at Juhu wherein Man Infraconstruction Limited holds 70% partnership interest.
The project has approximately 60,000 square feet of carpet area for sale and it has
already sold over 60% of the inventory.
In FY23, MICL also launched ‘Aaradhya Parkwood project near
Dahisar, which is being developed by Man Vastucon LLP where Man Infra holds 99.99%. The
project has approximately 5.31 lakh square feet carpet area for sale. Currently, the
project has launched two towers with 3.01 lakh sq. ft. of carpet area out of which over
50% is already sold since its launch. The Construction work of the project is in progress
and have completed plinth. ‘Atmosphere O2, located in Mulund West, Mumbai, is
being developed by Atmosphere Realty Pvt. Ltd. (where Man Infra holds 17.50% stake). It is
a Joint Venture (JV) between Man Infra, The Wadhwa Group and Chandak Developers. The
project consists of 3 residential towers of 47 storey each and 1 commercial tower -
‘The Gateway of 18 storey. The total RERA carpet area of the project is
approximately 7.12 Lakh Sq.ft. As on 31st March, 2023, approximately 85% of
total inventory has been sold. Currently, The residential towers – Tower D and E and
the commercial tower ‘The Gateway is at the final stage of finishing work and is
expected to be delivered during the year.
In FY23, MICL also launched the ‘Atmosphere Tower G located in Mulund
west. It measures approximately 3.17 lakh square feet carpet area for sale out of which
over 20% is sold as on March 23. The Construction work of the project has already started.
Man Chandak Developers LLP (where Man Infra holds 50%) in association with Shreepati Rise
LLP launched a premium Residential project ‘Insignia, at Vile Parle West,
Mumbai in Revenue sharing model. The project is being developed in phases and Phase 1
having a RERA carpet area of approximately 36,455 sq. ft. got delivered 19 months before
the timeline in May-23.
Long Term outlook
• Continue to explore opportunities in redevelopment space in Mumbai real estate
market
• Strong revenue visibility from the upcoming projects and from projects in
pipeline
Financial Performance:
| Particulars |
Consolidated |
Standalone |
|
FY 2022-23 |
FY 2021-22 |
YoY |
FY 2022-23 |
FY 2021-22 |
YoY |
|
Rs. in crores |
% |
Rs. in crores |
% |
| Total Revenue |
1,890 |
961 |
97% |
798 |
237 |
237% |
| Total Income |
1,938 |
1,163 |
67% |
881 |
312 |
182% |
| EBITDA |
414 |
247 |
67% |
137 |
61 |
124% |
| Profit before tax |
397 |
379 |
5% |
209 |
131 |
59% |
| Profit after tax |
259 |
216 |
20% |
166 |
106 |
57% |
The standalone revenue from operations for FY22-23 at Rs. 798 crore was higher than
previous year by 237% mainly on account of partly executing port order received during the
year and completing phase 1 of ‘Aardhya Highpark project and phase 2 of IPRCL.
The consolidated revenue from operations for FY22-23 at Rs. 1,890 crores was higher
than previous year by 97% primarily on account of revenue recognition from multiple
ongoing and completed real estate development projects and increase in revenue from
construction contracts.
On standalone basis, the Company reported a profit of Rs. 166 crore for FY22-23, higher
by 57% compared to previous year. The increase in profitability has been primarily due to
increase in revenues compared to previous year.
On consolidated basis, the company reported a profit of Rs. 259 crores for FY22-23
compared to profit of Rs. 216 crores in the previous year. The increase in profitability
was on account of the higher contribution from the real estate subsidiaries that started
recognizing revenue as well as due to rise in profitability in the standalone company.
As on March 31, 2023, the holding company Man Infra is virtually debt fee, has a Cash
& cash equivalent of Rs. 174 crores and Networth of Rs. 1,136 crores.
Risk Management:
The Company works in an environment which is affected by various factors, some of which
are controllable while others are outside the control of the Company. At Man Infra, we
have developed a robust risk management framework that reduces the volatility due to
unfavorable internal and external events, facilitates risk assessment,mitigation and
reporting procedures and enables timely reviews by the management. The following section
discusses some of these risks and steps taken by Man Infra to mitigate such risks.
1. Economic Risk
a. Risk: An unexpected development in any of the macroeconomic variables that may
adversely impact the Companys profitability or viability. Both Infrastructure and Real
estate are cyclical industries and they get impacted more by the changes in macroeconomic
variables like interest rate, GDP Growth, purchasing power, inflation, among others.
b. Mitigation Plan: Man Infra continues to be conservative and follows well defined
internal prudential norms. The Company has attempted to hedge against the inherent risks
of Real Estate business by following joint development model. It maintains a low debt
equity ratio, adequate liquidity and marquee clientele with a track record of timely
payments which helps in minimizing the impact of any downturn in the economy.
2. Policy Risk
a. Risk: Maharashtra finalized the rules under the Real Estate Regulation and
Development Act (RERA), 2016; its Housing Regulatory Authority was operational from May 1,
2017. The Authority has been setup to bring in more transparency and accountability from
developers, protect the interests of the buyer and also penalize the non-compliant
builders. RERA seeks to address issues like delays, price, quality of construction and
title among others.
Any such non-compliance with RERA regulations or delay in project delivery may result
in cost overruns and impact the Companys operations unfavorably. b. Mitigation Plan: Man
Infra has put in place processes that include milestone based time & quality checks.
It helps to ensure adherence to quality, cost and delivery as per the plan. All the
ongoing projects of the Group are registered under RERA.
The Company maintains financial discipline with regards to the investment and
subsequent cash flow generation from a project. The Company has a past track record of
delivering the projects before time and maintaining high quality standards.
3. Execution Risk
a. Risk: Real Estate and construction projects are subject to various execution risks
like regulatory hurdles, delay in receipt of approvals, availability of labour and raw
material, etc. Any such delay may result in cost overruns and impact the Companys
operations unfavorably.
b. Mitigation Plan: The Company deploys a well-defined standard operating procedure
– from project planning to delivery – and adheres to internal checks and
balances with regard to every project. Extensive diligence is carried out before entering
into partnerships for joint development.
4. Liquidity Risk
a. Risk: The Real estate business has significant initial outflow with staggered and
long-term inflows. As per RERA, the developer is required to set aside 70% of the funds
received for a particular project, in a dedicated escrow (bank) account and can only be
used for construction activities. Delays in project cycle; inadequate funding resources
may have an impact on the liquidity position of the Company.
b. Mitigation Plan: The Company maintains financial discipline with regards to the
investment and subsequent cash flow generation from a project. Moreover, the Company has
also been taking adequate measures to manage working capital cycles like monitoring and
closely following up with debtors.
For the EPC business, the Company also receives mobilization advances, which aids
liquidity management. On the consolidated level, the Groups balance sheet is low geared
with a Net Debt:Equity ratio of -0.1x as on March 31, 2023.
5. Input Price Risk
a. Risk: The Groups Real estate operations as well as EPC contracts are subject to
cost overruns due to increase in material cost or labour cost. The Companys earnings may
be affected by the volatility in the price of input.
b. Mitigation Plan:
For EPC projects, Man Infra has a price escalation clause where the increase in the
input cost is directly passed to the client. For development projects, Man Infra takes
this risk into account at the time of launch. Also, the Company usually sells the projects
in a phased manner which aids in covering the rise in cost of construction in subsequent
sale.
6. Sales Volume
a. Risk: The performance of the Company may be affected if there is a substantial
difference between the estimated and actual sales volume of the Real Estate development
projects.
b. Mitigation: The volume of sales in the Real Estate business depends on the nature
and location of the project, design & layout and the reputation of the developer. Man
Infra strives to build a worthy reputation in the industry by delivering superior quality
products and maintaining long-binding relationships with all its clients and stakeholders.
The Company constantly focuses on deploying the latest technologies for projects and
cost effective measures to enhance operational e_iciency resulting in timely delivery. Man
Infra also strives to offer distinctive features in its projects to stand out from the
competition.
Human Resources
The Company believes that its capability to preserve and continue its growth depends
largely on its strength of developing, motivating and retaining talent. It firmly believes
that highly motivated and empowered employees are its best assets to maintain a
competitive edge in the market. The management is committed to continuously upgrading
skills and competency at all levels with the aid of extensive training. The Company is
committed towards ensuring employees safe working conditions and social awareness. The
employee strength of the Man Group consists of over 700 employees as on 31st
March 2023.
The Companys employees possess the requisite qualifications and technical expertise to
execute projects across the Real Estate and construction services domain. The Companys HR
continues to focus on maintaining excellent work culture, employee development and
competitive compensation to ensure a motivated and empowered workforce.
Internal Control Systems
The Company has an adequate internal control system to safeguard all assets and ensure
their efficient productivity. The Company uses a quality management system for design,
planning and construction that complies with the international quality standards. The
Company has a suitable internal control system for the business processes, operations,
financial reporting, compliance with applicable laws and regulations. The company has
successfully implemented Enterprise Resource Planning Software in its Head Office and
across its Sites. The Internal Audit firm conducts periodical audits to ensure the
adequacy of internal control systems and adherence to management policies. Wherever deemed
necessary, internal control systems are also reassessed and corrective action is taken, if
required.
Cautionary Statement
This management discussion and analysis may contain forward looking statements that
reflects your Companys performance with respect to future events. The management believes
these to be true to the best of its knowledge at the time of preparation of this report.
The actual results may differ materially from those anticipated in the forward looking
statements as a result of many factors.
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