Replying to Yash Ved of IIFL, Deep Vadodaria says "We have satisfactory built more than 10 million sq. ft. The total area we are developing on EPC basis, from 10 ongoing projects, is approximately 2.0 million sq. ft."
Brief us about your current and upcoming projects in infrastructure and real estate space?
We are mainly engaged in development of civic urban infrastructure projects on EPC/turnkey and PPP basis for various civic bodies as well as reputed corporates. Our core strength is civil construction. As on September 30, 2015 our unexecuted orderbook stood at Rs. 252 crore, which mainly comprise Affordable Housing Projects for civic bodies worth Rs. 192 crore, a Multi-level Parking facility forAhmedabad Municipal Corporation (AMC) worth Rs. 41 crore, and a couple of projects for private developers like Adani group and Sandesh Group.
We are also executing a Slum Rehabilitation and Redevelopment project worth Rs. 41 crore on PPP basis for AMC near Shahibaug, Ahmedabad.
In the Real Estate (RE) space, at present we do not have any new project under execution as we want to wait for the demand from actual home occupiers. Currently, our focus is to liquidate the RE inventory with approximate book-value of Rs. 22 crore.
You are optimistic about Rajasthan. Tell us more about your orders here.
We are in race for more projects in Rajasthan as we believe Rajasthan is the new Sun-rise state having immense potential in Civic Urban Infrastructure. We have recently signed a MoU with the Government of Rajasthan at “Resurgent Rajasthan Partnership Summit - 2015”, for development of Urban Infrastructure as the State Government will facilitate smooth implementation of the projects by offering a “Single Window Service” through local concerned authorities.
The MoU of about Rs. 400 crore is for construction of Urban Infrastructure projects including affordable houses under Affordable Housing Policy that allows private developers to get Transferable Development Rights (TDR). We are planning to execute urban infrastructure projects, including affordable housing on land area of approximately 40 acres, within Rajasthan over a period
of four years.
What is your current order book position and where do you see it headed?
Our unexecuted orderbook as on 30th September, 2015 was Rs. 252 crore and post that we have received a Slum Rehabilitation and Redevelopment project worth Rs. 41 crore. Gujarat has become the first state in the country to take up projects for redevelopment of slums in urban areas under the Prime Minister’s Awas Yojana (PMAY) on PPP basis. We expect few more Slum Rehabilitation and Redevelopment project on PPP basis in next few months.
As far as orderbook on 31st March, 2016 is concerned, we are working towards a net orderbook of approximately Rs. 350 crore.
What will be your focus area going forward?
As a strategy, we want to leverage our core strength i.e. civil construction, moreso when the Affordable Housing space offers plenty of opportunities with the government’s initiatives such as Housing for All by 2022, Smart Cities, etc. While EPC orderbook will keep on growing in, almost, auto-mode, we are focusing to build our Slum Rehabilitation and Redevelopment orderbook on PPP basis. Apart from this, we will selectively take-up niche projects like Multi-level Parking, BRTS/Metrostations, etc. We believe the swift execution will be the key and for the purpose, we are working on a couple of modern, cost-effective and proven technologies that can ensure quick turnaround with adherence to the quality stipulations, too. Meanwhile, geographically, in the near future, we will consolidate our existing presence in Gujarat and Rajasthan.
What is your land bank?
As on September 30, 2015 we have a Land Bank of approx. 384,000 sq. mtrs. / ~94 acres available for future projects. Such propitious land bank also includes certain industrial land in vicinity of upcoming Auto Hub in Gujarat.
How much area are you developing either directly or for other Principals?
Currently we are not actively developing any of our owned Real Estate Project, although over the last 25 years we have satisfactory built more than 10 million sq. ft. The total area we are developing on EPC basis, from 10 ongoing projects, is approximately 2.0 million sq. ft.
What is your take on affordable housing?
We are very enthusiastic about this Affordable housing sector, moreso as it is now getting a significant push from the Pradhan Mantri Awas Yojana – “Housing for All by 2022” Scheme. It aims to construct more than two crore houses across the length and breadth of the nation within a span of next seven years. The poor under EWS and LIG categories in urban establishments are the target beneficiaries of the scheme and it also provides for empowerment to the woman of the country.
Currently the projects we are executing are under EWS, LIG and MIG categories. So, for player like us that are already active in Affordable Housing space, the focus of Central and various State Governments on creating more affordable houses presents a huge opportunity for growth in our core area of strength.
Your expectations from the Union Budget?
The Union Budget for FY2017 is going to be crucial. India has already experienced two consecutive failed monsoon and damage from unseasonal rains and floods. However, the economy has not witnessed major jolt on both inflation and growth. Compared to a year ago levels, certain economic parameters have undergone an improvement, for example, inflation has been reined in within RBI’s comfort zone, GDP growth has shown signs of recovery, the external account has received tremendous cushion with the bottoming-up of crude oil prices, which further assisted in improvement in fiscal deficit, CAD and inflation.
There are macro concerns on reduction in exports, slowing-down in FDI, China's economy growth and currency valuations, etc. The Union Budget should focus on maintaining fiscal prudence while also providing an enabling environment for growth. This could be attained through better targeting of government expenditure and further reduction in subsidies. On the revenue side, the governmentshould introduce measures to increase its disinvestment programme. In the scenario when the banks are passing through a rough-phase impacting the credit-offtake, the primary thrust should be on increase in government’s own capital expenditure. This could be done primarily through spending on infrastructure. Further, increased participation of corporates and municipals in the bond markets should be encouraged. While, the savings made on the subsidy bill should be directed towards the development of infrastructure for industries.
I think, with this backdrop, the following should be expected from the forthcoming budget:
- Increase in allocation towards critical infrastructure schemes/projects.
- Effective utilisation of the funds allocated to kick start initiatives such as Smart Cities, Housing For All by 2022, Make in India, etc.
- Income Tax exemption/rebate/relief for the contractors executing Affordable Housing Projects under “Housing for All by 2022” scheme. Cascading effect of this will further lower the cost of the houses for the poor under EWS and LIG categories.
- Exemption from MAT under 80IA for Infrastructure projects.
- Tax clarity with regards to Real Estate Investment Trust (REIT).
- Final directive on Real Estate (Regulation and Development) Bill.
- Increase in basic exemption limit for individual tax payer upto Rs. 5 lac.
- Exemption from service tax on lease rentals of commercial properties.
- Abolishment of Dividend Distribution Tax.
Brief us about your MoU with Kataria Group?
To gain from synergistic benefits and bring about better results than the sum of the parts, we have recently signed an MoU with the leading automobile dealer and an eminent logistics player “Kataria Group” of Ahmedabad. We will work jointly to acquire land and develop industrial and logistics parks near upcoming automobile hub at Becharaji in proximity to facilities of Suzuki, Honda, etc.
What is your revenue mix between infra and real estate space?
Currently about 75 percent of our revenue is from EPC business, which is expected to improve in the coming years. From our previous Real Estate project we have inventory with book value of approximately Rs. 22 crore. By the end of this financial year, a substantial portion will be liquidated.
What is your message to the shareholders?
Our Company has just got on the growth trajectory with a strong orderbook that offer sustainable margins. The projects we are currently focusing on are in our core area of expertise i.e. civil construction and such expertise would help us build orderbook that offer meaningful profitability.
The industrial land bank that we have is in close vicinity of the upcoming manufacturing facilities of two Auto majors which will further improve the profitability of your company. So the Civic Urban Infrastructure segment and Affordable housing segment are the key growth drivers that your company is currently focusing on. The industrial land development will give further aid to the company’s growth plans over the next 3-4 years.