rainbow foundations ltd Management discussions

Economic Review

It has been more than three years since the pandemic began but the world continues to face regular disruptions with several COVID-19 variants. However, the world is returning to normalcy on the health front, in large part due to rising vaccination. Concerted policy response from governments as well as central banks over the past two years has helped mitigate demand destruction and job losses inspite of this unprecedented pandemic. We are now faced with the challenge of spiraling inflation in many developed economies which is likely to lead to tighter monetary policy, crimping demand and giving rise to macro-economic uncertainty. To add to this, the Russian invasion of Ukraine has led to significant loss of life and large scale human suffering. Further, the war is continuing to cause damage to global supply chains, particularly in fuel and food, further exacerbating inflationary pressures and increasing pressure on emerging economies.

The real estate sector continues to grow at a scorching pace. With the entering of new global property developers into Indian market during the past few years, India offers a good opportunity in the real estate sector.

While the short-term outlook seems challenging given external supply shocks and geopolitical tension, we do believe the government is doing the right things to ensure a sustainable growth path for the country. The union budget presented this year was very supportive of the long-term growth of the real estate sector in India through its focus on urban infrastructure and the digital economy. The governments sharply expanded capital expenditure target for the year is expected to create job opportunities and higher economic activity.

Real Estate Sector

Indias real estate sector in general and the housing segment in particular, has shown quick recovery from the Covid- induced crisis. The second wave was much more severe with a far higher number of casualties. However, its impact on the real estate sector was short-lived. With lessons learnt from the first wave, developers have dealt better with the second wave especially with respect to online real estate sales and managing worker shortages. The residential sector has shown healthy growth after several years of slow down

At the same time, the pandemic has led to a paradigm shift in the attitude of customers towards residential properties. The uncertainty caused by the pandemic has reinstated the importance of home ownership. New trends emerged as a result of the pandemic such as preference for larger sized apartments, inclination towards reputed developers and a rising demand for township projects.

While the residential segment witnessed strong revival, the recovery for commercial sector has been moderate. The biggest challenge to office space demand has been the work from home trend, while local restrictions and delay in consumption recovery has been a challenge for the retail real estate sector

Government Initiatives

The union budget presented this year was supportive of the long-term growth of the real estate sector in India through its focus on urban infrastructure and the digital economy. The Governments rising focus on infrastructure capex will create a backdrop of opportunity for the real estate sector. Some of the key measures include Housing for all, Urban Development Plan, Digitalization of Land Records, Withdrawal of Interest Deduction Benefit for Affordable Housing etc

The Central Government continued its focus on boosting availability of affordable homes under the Pradhan Mantri Awas Yojana (PMAY). The establishment of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund proved beneficial in enabling completion of stuck projects by providing last mile funding for such projects. The completion and turnaround of such stuck projects may be a sentiment booster for the industry.

Operational Review

During the year under review, the turnover of the company has increased to Rs.4024.05 Lakhs as compared to previous year turnover of Rs. 3,601.92 Lakhs, the profits has increased to Rs.134.89 Lakhs as compared to previous year Profit of Rs. 29.98 Lakhs,

The Earning per Share (‘EPS) for the year is Rs. 0.29 as compared to Rs. 0.54 in the previous year..

Opportunities

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. Demand for quality housing is immense in India and long-term structural drivers of consolidated supply and growing demand with moderate price growth are in place. 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.

Risk and Threats:

Though the industry is in the early stages of a multi-year up cycle, we continue to keep a watchful eye for any of the following challenges which, if they fructify, will impact this upward trajectory:

- High input cost increase due to geopolitical tensions or otherwise

- Steep increase in interest rates in general and mortgage rates in particular

- Significant economic slowdown in India

Segment Wise or Product Wise Performance

The Company is operating in a single segment and has only domestic sales. Therefore the requirement of segment wise reporting is not applicable.

Internal Control Systems and Adequacy:

The Company has an appropriate internal control system for its various functions with the ultimate objective of improving efficiency in its operations, better financial management and Compliance with regulations and applicable laws and providing protection against misuse or losses from unauthorized use or deposition.

An internal control framework to ensure all assets are safeguarded and protected against loss from unauthorized use or disposition, and transactions are authorized, recorded and reported correctly. The framework includes internal controls over financial reporting, which ensures the integrity of financial statements of the company and reduces the possibility of frauds

Human Resources

The Company provides a work environment that encourages free expression of opinion, decision making and responsible execution of the task. We are committed to attract, retain and recognize talent. Being entrepreneurial in spirit, we encourage fresh minds and innovative ideas. We believe that our integrated yet decentralised way of working provides our employees with the opportunity to develop leadership capabilities and business acumen. They gain valuable insights by balancing professional knowledge with perspectives learned through industry experience and customer relationships

Business 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 FY 2023- 24 will witness a healthy sales momentum backed by solid structural foundation, sustained demand and relatively affordable mortgage rates. Financially strong and reputed developers with superior execution capabilities stand to benefit disproportionately from the ongoing cyclical upturn.

We expect to further scale our sales momentum in FY 2023-24, given our exciting launch pipeline and robust balance sheet. We look forward to adding a projects to our portfolio in FY 2023-24, which is amongst our top priorities and which will enable us to grow rapidly going ahead.

Cautionary Statement

Statement in the management discussion and analysis describing the companys objectives, estimates, projections and expectation may be forward looking statements within the meaning of applicable laws and regulations. Actual results could differ materially due to economic conditions effecting demand, supply, prices, change in government policies, tax laws and other incidental factors.