rajsanket realty ltd Management discussions

ECONOMIC OVERVIEW

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. As per the Central Statistics Office (CSO), GDP growth stood at 6.8 per cent in FY19, lower than 7.2 per cent in FY18. However, Indias labour force is expected to touch 160-170 million by 2020, based on rate of population growth, increased labour force participation, and higher education enrolment, among other factors, according to a study by ASSOCHAM and Thought Arbitrage Research Institute. India has retained its position as the third largest startup base in the world with over 4,750 technology start-ups.

INDUSTRY STRUCTURE AND DEVELOPMENT

The real estate sector is one of the most globally recognised sectors. The real estate sector comprises four sub sectors - housing, retail, hospitality and commercial. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

During FY 2019, the sector has shown growth of around 8% which is primarily due to some green shoots at the beginning of 2018 for the real estate sector, but they drooping away later in the second half of the financial year as the NBFC crisis led to financial pressures for the sector. Non availability of funds could lead to a substantial business slowdown for developers who were primarily reliant on NBFC financing. NBFCs were the key lenders to the real estate developers over many past years but with current financial crises with them, NBFCs are reluctant to continue to aggressively fund real estate developers. While deep pocket established developers with steady delivery track records still have ample access to capital through both debt and equity, however, many other real estate developers are facing the pressure. Well capitalized developers would expand their business with a lot of strategic acquisition opportunities available in the industry.

Government Initiatives:

The Government of India along with the governments of the respective states has taken several initiatives to encourage the development in the sector. The Smart City Project, where there is a plan to build 100 smart cities, is a prime opportunity for the real estate companies. Below are some of the other major Government Initiatives:

• Under the Pradhan Mantri Awas Yojana (PMAY) Urban, more than 8.09 million houses have been sanctioned up to May 2019.

• In February 2018, creation of National Urban Housing Fund was approved with an outlay of Rs 60,000 crore (US$ 9.27 billion).

Opportunities and Challenges

Opportunities

1. Demand will remain concentrated in the affordable and the mid end segments. Projects having developed infrastructure will garner more positive response in the coming year.

2. A conducive environment for equity participation has been created which presently is dominated by debt inflows.

3. Consolidation among developers to continue in the coming year. With the reforms like implementation of GST, Insolvency and Bankruptcy Code and RERA implementation and the impact of NBFC liquidity crunch, small developers who are overleveraged shall result in accelerated consolidation.

Challenges

It is obvious that along with available opportunities the business has also to face challenges/threats at times. The Management of your Company finds the following business challenges to have their impact in the years to come:

• Increased cost of finance

• Unanticipated delays in project approvals

• Availability of accomplished and trained labour force

• Increased cost of manpower

• Rising cost of construction

• Over-regulated environment

SEGMENT WISE PERFORMANCE

The company operates in only single segment. Hence segment wise performance is not applicable.

RISKS

In the course of its business the Company is exposed to stiff competition from other established developers in the market. In addition, it is exposed to certain market related risks, such as increase in interest rates, customer risks, changes in the government policies and unanticipated delays in project approvals. However, with the competitive advantages, as aforementioned, the Company is well posed to mitigate all such risks.

INTERNAL CONTROL SYSTEMS

The Company has a proper and adequate system of internal controls commensurate with the size of the Company and the nature of its business to ensure that all the assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded and reported correctly and adequately.

The Companys internal controls are supplemented by internal audits, review by management and documented policies, guidelines and procedures. 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.

HUMAN RESOURCES

Employees are at the heart of your Company and the biggest differentiators. Its their inexorable commitment that helps your Company to create spaces that enhance quality of life. Keeping the spirits high at workplace needs a sound mental and physical fitness and deep-rooted culture which promotes work life balance.

Our people are our most important asset and we value their talent, integrity and dedication. We offer a highly entrepreneurial culture with a team based approach that we believe encourages growth and motivates our employees. The Company plans with prudent knowledge management leading to enhanced skills and capabilities and market ability to promote real estate business in the current time.

FINANCIAL PERFORMANCE

During the year under review, Your Company has registered total income of Rs.33,41,68,847/- (Previous year Rs. 1,16,93,77,559/- ) and incurred net loss after tax of Rs.9,30,21,938/- against (Previous year net loss of Rs. 4,84,96,360/-).

CAUTIONARY STATEMENT

Certain Statement in this Managements Discussion and Analysis detailing the Companys objectives, projections, estimates, expectations or predictions are "forward-looking statements" within the meaning of applicable securities laws and regulations. These statements are subject to certain risks and uncertainties. The actual results may be different from those expressed or implied since the companys operations are affected by the many external and internal factors, which are beyond the control of the management.