Annexure-5
1. INDUSTRY STRUCTURE AND DEVELOPMENTS: Over view of the Real Estate Industry
While the Indian economy has not been completely insulated from inflationary forces,
timely rate hikes and other interventions by the Central Bank have ensured that inflation
has not spiraled out of control and the economy has stayed on the growth path. With the
GDP forecasted by the RBI to grow at 7% for FY 2023 and 6.5% for FY 2024, India has
emerged as the fastest growing large economy in the world. This undercurrent of economic
stability and growth is also reflected in the relatively stable occupier activity seen in
the Indian office market.
The real estate sector is one of the most globally recognized sectors comprising
housing, retail, hospitality, and commercial. The construction industry ranks third among
the 14 major sectors in terms of direct, indirect and induced effects in all sectors of
the economy.
In India, the real estate sector is the second-highest employment generator, after the
agriculture sector. 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.
Market Size
While the Indian economy has not been completely insulated from inflationary forces,
timely rate hikes and other interventions by the Central Bank have ensured that inflation
has not spiraled out of control and the economy has stayed on the growth path. With the
GDP forecasted by the RBI to grow at 7% for FY 2023 and 6.5% for FY 2024, India has
emerged as the fastest growing large economy in the world. This undercurrent of economic
stability and growth is also reflected in the relatively stable occupier activity seen in
the Indian office market.
The real estate sector in India is expected to reach a market size Rs. 65,000 crore
(US$ 9.30 billion) by 2040. Retail, hospitality and commercial real estate are also
growing significantly, providing the much-needed infrastructure for Indias growing needs.
According to Savills India, real estate demand for data centres is expected to increase by
15-18 million sq. ft. by 2025.
FY 2022-23
Indian real estate sector has witnessed high growth in the recent times with rise in
demand for office as well as residential space. he Private Equity Investments in Indias
real estate sector, stood at US$ 4.2 billion in 2023. Government of India along with the
governments of respective States has taken several initiatives to encourage development in
the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime
opportunity for real estate companies. In the Union Budget 2023-24, the Finance Ministry
has announced a commitment of Rs.79,000 crore (US$ 9.64 billion) for PM Awas Yojana, which
represents a 66% increase compared to the last year. The Securities and Exchange Board of
India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform,
which will allow all kind of investors to invest in the Indian real estate market. It
would create an opportunity worth Rs.1.25 trillion (US$ 19.65 billion) in the Indian
market in the coming years. Responding to an increasingly well-informed consumer base and
bearing in mind the aspect of globalization, Indian real estate developers have shifted
gears and accepted fresh challenges. The most marked change has been the shift from
family-owned businesses to that of professionally managed ones. Real estate developers, in
meeting the growing need for managing multiple projects across cities, are also investing
in centralized processes to source material and organize manpower and hiring qualified
professionals in areas like project management, architecture and engineering. The need to
upgrade the familys primary dwelling to apartment complexes which offer more space and
amenities has lately been the mainstay for Hyderabads residential markets. The city has a
sound and well-planned network of roads, flyovers, under-passes and wide ring roads, and
the government is also investing further in the development of infrastructure projects,
such as the Hyderabad Metro Rail and the Outer Ring Road. These projects are expected to
make Hyderabad an even more attractive place to live and work in, which will further boost
the demand for housing.
Hospitality industry
The Indian tourism and hospitality industry has emerged as one of the key drivers of
growth among the services sector in India. Though COVID19 impact was the severest on this
sector, the sector is showing resurgence and it is predicted to grow at an annual rate of
6.9% to USD 490 billion by 2028 (9.9% of GDP), which should result in good demand and high
growth for the hospitality industry. Steady improvement in tourist arrivals and bookings
suggests a strong outlook for the hospitality sector, which is showing all signs of
revival and expected to grow in mid to long run.
2. OPPORTUNITIES, THREATS & CHALLENGES: A. Opportunities:
Demand for residential properties has surged due to increased urbanization and rising
household income, growing economy, regulatory reforms, policy support, rapid
urbanizations, relaxation in the FDI norms for real estate sector and consequential growth
in investments growth in population, rise in the number of nuclear families, easy
availability of finance, repatriation of NRIs and HNIs, rise in disposable income etc.,
are the advantages/opportunities for real estate sector.
Your companys well accepted brand, customer centric approach, well designed projects
in strategic locations makes it a preferred choice and for the customers and favorably
benefit the company.
Your companys business development strategy is being aligned towards less capital
intensive projects, sharing and development management models. Additionally, your company
is trying to focus on sourcing land with large capital requirements in our target
geographies under the residential co-investment platform with the company acting as the
development manager for these projects. Your company shall continue to improve its project
execution capabilities through continuously improving internal processes and internal
capability building. Optimizing return on capital and developing crisis and risk
management capabilities shall continue to remain the companys focus area.
B. Threats & Challenges:
The real estate sector has been facing a number of issues. Despite the real estate
sector contributing the third highest share to the Indian economy, the share in
outstanding loans from banks to the sector is extremely low. Regulatory environment,
substantial procedural delays with regard to land acquisition, land use, project launches
and construction approvals, rising cost of construction, policy changes and regulatory
bottlenecks may impact profitability and affect the attractiveness of the sector and
companies operating within the sector. Higher rates of statutory fees and other taxes
inflate the cost of construction, making affordable housing projects financially unviable
for the private sector developers. Shortage of manpower, unsold stock, scarcity of urban
land and clear titles are other threats /challenges.
COVID-19 and its impact
The Hospitality Division has been trying to come out of the Covid impact and the
recovery is steady though slow. The companys Construction division operations continue to
be also severely affected due to various reasons. The Company continues to monitor the
same while taking necessary steps to improve operations.
3. SEGMENT WISE-PRODUCT WISE PERFORMANCE:
A detailed status of projects being implemented by the company is given below:
Prajay Water Front city situated at Murharpally Village, Shamirpet:
Spread across 72 acres of premium property overlooking 100-acre lake. Phase I of the
project comprising of independent houses, villas and apartments is completed and handed
over to the residents. Currently the Phase II of the project comprising of 450 independent
houses constructed under the PMAY scheme to promote housing in the affordable segment, is
nearing completion.
Prajay Virgin County (SPV project) situated at Baghmankhal Village, Maheshwaram Mandal,
R.R. District:
a mixed venture of villas and apartments at Maheshwaram Mandal, near RGIA, spread
across 75 acres of land. Phase I of the project comprising of 233 villas is completed and
handed over to the residents. Presently the company has taken up the construction of 432
apartments in Phase II of the project.
Phase II of Prajay Virgin County is spread across 35 acres of land with a vision to
construct luxury villas. A few minutes drive from ORR exit no 14 near to Srisailam
Highway. Being in close proximity to Rajiv Gandhi International airport, 1200 Ac FAB City
& E-City, Hardware park, Tata Teleservices, Tata Advanced Systems, GMR Aerospace, TCS
HCL, IT SEZ Adibatla and TCS it is a great location for prospective home buyers working
around the area. The project is located minutes away to the Outer Ring Road making it an
ideal location for people working in Financial District, Gachibowli etc.
Prajay Megapolis (SPV Project) situated at Hafeezpet Village, Serilingampally Mandal,
R.R. District
Phase I of the project consists of 1113 flats comprising of 9 towers, with 3 basements
parking, ground + 18 uppers floors spread across 8 acres of land is fully completed and
handed over to the residents along with a clubhouse of nearly 1 Lakh sft. The phase II of
the project consists of 2000+ flats spread across 9 acres of land with a combination of
2.5, 3 & 4 BHK. The project is ideally located within 2 Kms from Hitech City which is
hub for operations of variations Multi multi-national companies and the IT sector.
Prajay Windsor Park situated at Pocharam, Ghatkesar Mandal, R.R. District
Prajay Windsor Park is spread over a large well defined land parcel of 11 acres with
834 apartments with 12 Lac sqft the project is primarily focused on sports. with premium
clubhouse & huge central park It is ideally located in close proximity to the emerging
IT corridor, close to the 6-Lane Hyderabad-Warangal highway, 1km distance from ORR exit no
9 and the upcoming Metro only 2 kms away.
Windosr park shares the neighbourhood with IT/Software companies like the 450 Ac
Infosys SEZ campus, Raheja Mindspace, Capgemini, ADP and Genpact which is surrounded by
Institutions AIIMS, NFC, CPRI, NGRI, CCMB and DRDO. Educational institutes like
Vidhyanikethan international school, Rotterdam International school, Rockwoods intl school
and many Engineering colleges. 70 mins drive from Hyd International airport.
Prajay Princeton Towers situated at L.B. Nagar, Saroornagar Mandal, R.R. District
a multi storied retail/commercial complex situated in the heart of the city L.B. Nagar,
well connected to metro & road. The entire building was constructed on a plot area of
7200 sq.yds with 3 basements, ground and 13 upper floors. Retail space from Ground to 5
floors, Office spaces on the 6th floor, followed by hotel rooms and convention centre from
the 7th floor up. The Hotel also includes a rooftop restaurant and bar along
with a infinity swimming pool on the terrace. Currently the retail space, office space and
convention centre are fully completed and in operation. However the interiors for the
hotel rooms and restaurant etc. are pending.
4. RISKS AND CONCERNS:
Your company is exposed to a number of risks such as economic, regulatory, taxation and
environments risks as well as sectoral investment outlook. Some risks that may arise in
the normal course of business that could impact its ability to address the future
development comprise credit risk, liquidity risk, counterparty risk, regulator y risk,
commodity inflation risk and market risk.
Market Risk: Market risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market prices. Market risk
comprises two types of risk: interest rate risk and other price risk, such as equity price
risk and commodity/ real estate risk. Financial instruments affected by market risk
include loans and borrowings and refundable deposits.
Credit Risk: Credit risk is the risk that counterparty will not meet its
obligations under a financial instrument or customer contract, leading to a financial
loss. The Company is exposed to credit risk from its operating activities (primarily trade
receivables) and from its financing activities, including refundable joint development
deposits, security deposits, loans to employees and other financial instruments.
Liquidity Risk: The Companys objective is to maintain a balance between continuity
of funding and flexibility through the use of bank deposits and loans. The company aims to
understand measure and monitor the various risks to which it is exposed and to ensure that
it adheres, as far as reasonably and practically possible, to the policies and procedures
established by it to mitigate these risks.
Market price fluctuation: The performance of your Company may be affected by the
sales realizations from the its projects. These prices are driven by prevailing market
conditions, the nature and location of the projects, and other factors such as brand and
reputation and the design of the projects. Your Company d tries to ensure steady cash flow
even during adverse pricing scenario.
Industrial cyclicality: The real estate market is inherently a cyclical market and
is affected by macro-economic conditions, changes in applicable governmental schemes,
changes in supply and demand for projects, availability of consumer financing and
liquidity. Your company is attempting to hedge these risks by adopting models comprising
joint ventures, residential platforms. However, any further significant down turn in the
industry and the overall investment climate may adversely affect the business.
Statutory approvals: This sector is heavily regulated by the central, state and
local governments. Real estate developers are required to comply with a number of laws and
regulations. Delays in approvals cause delay in project completion timelines, leading to
capital blockage and high interest burden to the developers.
5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
The Company has adequate internal control systems and procedures designed to
effectively control its operations. The internal control systems are designed to ensure
that the financial and other records are reliable for the preparation of financial
statements and for maintaining assets. The Company has well designed Standard Operating
Procedures considering the essential components of internal control as stated in the
Guidance Note on Audit of Internal Controls over Financial Reporting issued by the
Institute of Chartered Accountants of India. Internal Auditor conduct audit covering a
wide range of operational matters and ensure compliance with specified standards. Planned
periodic reviews are carried out by Internal Audit. The findings of Internal Audit are
reviewed by the top management and by the Audit Committee of the Board of Directors. Based
on the deliberations with Statutory
Auditors to ascertain their views on the financial statements including the Financial
Reporting System and Compliance to Accounting Policies and Procedures, the Audit Committee
was satisfied with the adequacy and effectiveness of the Internal Controls and Systems
followed by the company.
6. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
Revenue / loss from Operations: The companys revenues fell from 9304.97 Lakhs
during the previous year to Rs. 2982.78 Lakhs during the current year
EBIDTA: EBIDTA stood at Rs.70.46 Lakhs during the year as against Rs. 862.03 Lakhs
during the previous year with a decrease of Rs. 791.57Lakhs compared to previous financial
year.
Profits & ratios:
The company has incurred a loss of Rs.756.98 Lakhs during the financial year as against
a loss of Rs.119.69 Lakhs for the corresponding previous year. The basic earnings per
share stood at Rs. (1.08) for the current financial year as against Rs.(0.17) for the
previous financial year.
Shareholders funds:
There is no change in the capital structure of the company during the year under review
and the net worth of the company stands at a comfortable position of Rs.55928.75 Lakhs.
Loan Funds:
The company continues to get the support from its bankers and financial institutions.
The secured loans availed by the company stood at Rs.2995.13 Lakhs at the end of the
financial year.
RATIOS:
Debtors Turnover Ratio
Debtors turnover ratio for the financial year 2022-23 has decreased slightly to 0.20 as
against 0.54 for the financial 2021-22. There is a decrease in the ratio indicating
slowing of collections.
Inventory Turnover Ratio
Inventory turnover ratio for the financial year 2022-23 is 0.07 as against 0.07 for the
financial year 2021-22. There is no change in the ratio.
Debt Service Coverage Ratio
Debt Service coverage ratio for the financial year 2022-23 is 0.09 as against 0.19 for
the financial year 2021-22. There is a reduction in this ratio. .
Current Ratio
Current ratio for the financial year 2022-23 stood at 1.93 as against 1.08 for the
financial year 2021-22. The ratio has improved.
Debt Equity Ratio
Debt equity ratio for the financial year 2022-23 is 0.15 as against 0.46 for the
financial year 2021-22.
Net Profit Margin (%)
Net profit margin percentage for the financial year 2022-23 is (25.38) as against
(1.29) for the financial year 2021-22. The net profit of the company has decreased.
Return on Networth
Return on Networth for the financial year 2022-23 is (10.82) as against (1.71) for the
financial year 2021-22. The overall financial performance of the company is decreased.
7. MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL FRONT, INCLUDING NUMBER
OF PEOPLE EMPLOYED:
Your company believes that the quality of employees is the key to its success and is
committed to provide necessary human resource development and training opportunities to
equip employees with additional skills to enable them to adapt to contemporary
technological advancements. Industrial relations during the year continued to be cordial
and the Prajay group is committed to maintain good industrial relations through effective
communication, meetings and negotiations.
8. OUTLOOK:
Post implementation of The Real Estate (Regulation and Development) Act, 2016 (RERA),
developers are focusing firmly on selling their existing ready inventory and finishing
their near completion projects rather than launching new projects. With several smaller
realty developers interested in either monetizing their land parcels on outright basis or
entering into joint development or development management agreements, your Company
believes that RERA shall result in a consolidation in the sector. Overall, the Real Estate
sector is showing growth as compared to last year. Consequently, the Indian real estate
sector will emerge stronger, healthier and capable of long periods of sustained growth,
provided adequate policy/regulatory support. their land parcels on outright basis or
entering into joint development or development management agreements, your
CAUTIONARY STATEMENT:
The above management discussion and analysis contains certain forward looking
statements within the meaning of applicable security laws and regulations. These pertain
to the companys future business prospects and business profitability, which are subject
to a number of risks and uncertainties and the actual results could materially differ from
those in such forward looking statements. The risks and uncertainties relating to these
statements include but are not limited to, risks and uncertainties regarding fluctuations
in earnings, our ability to manage growth, competition, economic growth in India, ability
to attract and retain highly skilled professionals time cost over runs on contracts,
government policies and actions with respect to investments, fiscal deficits, regulations
etc.
|
By order of the Board of Directors |
|
of Prajay Engineers Syndicate Limited |
|
Sd/- |
|
Dantapalli Vijaysen Reddy |
Place: Hyderabad |
Chairman & Managing Director |
Date :04.09.2023 |
(DIN: 00291185) |
+91-9892691696
