Cautionary Statement
Statements in this report on Management Discussion and Analysis may be forward looking
statements within the meaning of applicable laws or regulations. These statements are
based on certain assumptions and reasonable expectation of future events. Actual results
could however differ materially from those expressed or implied. Important factors that
could make a difference to the Companys operations include material availability and
prices, cyclical demand and pricing in the Companys principal markets, changes in
government regulations, tax regimes, economic developments within India and other
incidental factors. The Company assumes no responsibility in respect of the
forward-looking statements herein, which may undergo changes in future on the basis of
subsequent development.
(a) Industry structure and developments: Indian Economic Overview
The financial year 2023 started on a rather gloomy note with the Russia-Ukraine
conflict and the resultant energy price inflation often Indias Achilles heel. India has
weathered the storms of the previous year remarkably well and remained an oasis of calm in
troubled global macro conditions. Led by efficient vaccination roll out, India emerged
stronger than some of the other larger economies. To fight the inflationary pressures,
global central banks led by the US Fed have raised benchmark policy rates substantially.
This also forced RBI to raise policy rates by an unprecedented 250 bps in the financial
year 2023 fastest increase in policy rates in last two decades. However, given the fiscal
prudence adopted by the Indian Government during the early part of the pandemic period,
Indian macro conditions remain conducive of robust growth in spite of the above normal
inflation seen recently which remain manageable to a large degree. Despite the challenges,
Indian economy managed to grow by 7.2% in FY23 (Source: NSO), showcasing the structural
nature of growth.
The Indian economy appears to have moved on after its encounter with the pandemic,
staging a full recovery in FY22 ahead of many nations and largely ascending to the
pre-pandemic growth path in FY23 and beyond. At the same time three key challenges remain
entrenched largely from global macro side which will pose hindrance to Indias growth
potential. First, inflation is likely to remain at an elevated level even though it may
have already peaked. Secondly, aggressive tightening of monetary policies across the
central banks of advanced economies is likely to cause a global slowdown this year,
impacting trade and may also result in capital outflows and a rising imbalance in the
balance of payment account. Third, higher energy prices is likely to keep the current
account deficit at a higher level thus pressuring the currency. Additionally, on the
domestic front - uneven spread of the recovery has meant that parts of the economy have
still not reached their pre-pandemic levels leading to slower rural recovery.
The governments focus has rightly been on sectors such as infrastructure,
construction, and manufacturing that create jobs for workers across all skills.
Production-Linked Incentive (PLI) Schemes for various industries rolled out over the past
few years have started to bear fruit. Though still in infancy, these sectors have huge
potential to effectively kick-start the manufacturing engine for the country thus
diversifying the growth drivers for the country. Growth is expected to be brisk in FY24 on
the back of robust credit growth, positive capital investment cycle given the demand as
well as the strengthening of the balance sheets of the corporate and banking sectors.
Further support to economic growth will come from the expansion of public digital
platforms and path-breaking measures such as PM GatiShakti, the National Logistics Policy,
increased spending on various transportation infrastructure and the PLI schemes to boost
manufacturing output. RBI expects GDP growth for FY24 to be 6.5% which will translate into
general optimism in the economy and job sentiments.
Indian real estate industry overview
Real estate sector in general and housing sector in particular has always played a
critical role in shaping the global economies. The multiplier effect of housing sector
through direct and indirect as well as through induced impact is significantly large on
both the GDP as well as employment generation. There are a number of ancillary industries
which support the growth of real estate construction sector, like cement, steel, other
non-ferrous metals, tiles, glass, brick, and certain consumer durables etc. Further, the
industries that provide the inputs to these ancillary industries also gain momentum.
Hence, due to the inter-linkages among all the sectors of economy, the overall economic
impact of a real estate far exceeds the direct impact especially in employment generation.
India by virtue of its demography and development cycle is at a place where demand for
quality urban housing is immense. This is only going to strengthen with each passing year
as India graduates from being a low income economy to a middle income economy. As per
industry estimates, India would see creation of 100 million new households who will become
‘home ownership capable by virtue of rise in income levels by the end of the decade.
This creates a ‘once in a lifetime opportunity for the Indian real estate industry.
Due to the structural nature of demand, Indian real estate industry has continued to
gain momentum during FY23 despite the uncertainties posed by global economic slowdown as
well as steep interest rate hikes. While the market for office spaces staged a comeback in
the post-pandemic period with ‘back to office normalization, the residential market
further gained on the momentum seen in FY22. Despite the 250 bps repo rate hike, the
robust performance of the sector especially in the housing segment signifies the strength
of the underlying demand for property.
(b) Opportunities
We are very optimistic about the affordable and mid-income segment of the housing
market over the longer term. We believe that as India moves from a low-income economy to a
mid-income economy, this segment of the market will grow faster. Residential real estate
is consolidating in favour of organised and branded developers at an accelerated pace.
Though the industry is in the early stages of a multi-year upcycle, we continue to keep
a watchful eye for challenges like cost increase due to geopolitical tensions, increase in
interest rates, constant regulatory changes, recession in economies etc., which, if they
fructify, will impact this upward trajectory. Further, the lending to real estate
developers by the NBFCs and HFCs was already limited after the crisis in real estate
sector and the pandemic has further deteriorated the liquidity situation for many
developers who had to resort to alternative funding in absence of long term loans from
banks.
Segment wise or product-wise performance
The Company operates in single segment of real estate development. However, the Company
does not have any construction projects as on the date of this report.
(c) Outlook
The real estate sector is one of the most globally recognized sectors. In India, real
estate is the second largest employer after agriculture and its share in Indias GDP is
slated to double by the end of this decade. The real estate sector comprises four sub
sectors - housing, retail, hospitality, and commercial.
As the sector trends on the growth path it has to realign to face new realities and
meet greater expectations. 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. It is also expected
that this sector will incur more nonresident Indian (NRI) investments in both the short
term and the long term.
The Company does not have any project and has no plan to take up any real estate
project in near future.
d) Risks and concerns
The real estate sector is heavily dependent on manpower. During the pandemic, the
sector was badly hit due to reverse migration of construction workers which affected the
construction activity severely, leading to delayed timelines for project completion.
Hence, there is a need for development of technologically less labour intensive
alternative methods of construction. Further, the increase in land prices, inputs costs
are also risks to the industry. Higher interest cost would dent margins and may have a
direct effect on the customers cash flow as well. Increase in end product prices coupled
with tight liquidity may impact demand. The various taxes and levies would add to the
costs and this is likely to squeeze margins as end product prices may not go up
correspondingly. The company has a Risk Management Policy, which is being periodically
reviewed.
The Company does not have any project and has no plan to take up any real estate
project in near future.
(e) Internal control systems and their adequacy.
The internal control commensurate with the activities is supplemented by continuous
review by the management. The internal control system is designed to ensure that every
aspect of the companys activity is properly monitored.
(f) Discussion on financial performance with respect to operational performance.
The details of financial performance and operation performance are given in the
directors report.
(g) Material developments in Human Resources / Industrial Relations front, including
number of people employed.
The Company does not have any employee. The KMPs are deputed by the holding company.
(h) Details of Significant Changes in key financial ratios:
Significant Changes in Key |
FY 2023 |
FY 2022 |
Changes |
Reason for change |
Financial Ratios : |
|
|
|
|
| (i) Debtors Turnover: |
NA |
NA |
NA |
NA |
| (ii) Inventory Turnover: |
NA |
NA |
NA |
NA |
| (iii) Interest Coverage Ratio |
NA |
NA |
NA |
NA |
(iv) Current Ratio: |
0.04 |
0.02 |
137.09% |
Improvement in Current ratio is due to reductions in Current
Liabilities |
| (v) Debt equity Ratio: |
1.01 |
0.78 |
28.95% |
Marginal variance |
| (vi) Operating Profit Margin (%) |
NA |
NA |
NA |
NA |
| (vii) Net Profit Margin (%) |
NA |
NA |
NA |
NA |
(i) Disclosure of Accounting Treatment:
In preparation of these financial statements, the Company has followed the prescribed
Indian Accounting Standards and no different treatment had been followed.
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