AGI Infra Ltd Management Discussions.
Our Company is a reputed Punjab based company having its presence in the construction industry for more than 1 decade. Company has delivered a number of high-rise building Projects in Punjab which includes Residential Housing Projects and Commercial Building Project. Our residential portfolio currently covers projects catering to customers across all income groups. We believe that we have established a successful track record in the real estate industry in Punjab by developing versatile projects through our focus on innovative architecture, strong project execution and quality construction. We are also developing a residential colony project in the area of about 50 Acres which will have Villas .
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 urban and semi-urban accommodations space as well as office. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.
Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13% of the Countrys GDP by 2025. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs. Increasing share of real estate in GDP would be supported by increasing industrial activity, improving income level and urbanisation. Mumbai and Bengaluru have been rated as the top real investment destinations in Asia. The government also launched key policies for real estate sector, namely: Real Estate Regulatory Act, Benami Transactions Act, boost to affordable housing construction, Interest subsidy to home buyers, change in arbitration norms, service tax exemption, Dividend Distribution Tax exemption, Goods and Services Tax and Demonetisation.
The regulatory reforms witnessed in Indias real-estate sector has brought drastic change in buying patterns amongst home and commercial property buyers. The sector has grown nearly 8% during FY 2019 even as financial pressures and fast changing dynamics of the industry have created turmoil in the real estate market. Post parliamentary elections there is an expected rise in demand and that will infuse more interest amongst buyers and have its positive impact on the overall real estate market in the country.
Though there are a lot of discussions around how well real estate will perform and create value, the strong foot-hold that the sector has created over many decades will continue to ensure its niche and the goodwill it brings with it. While demand for housing and commercial properties in some markets may have been subdued, properties those are good and at prime locations are worthy and of great value to buyers.
Your Company is favourably positioned to benefit from recent regulatory changes affecting the Indian real estate industry, such as the introduction of the Real Estate (Regulation and Development) Act, 2016("RERA"), the implementation of a comprehensive national Goods and Service Tax ("GST") regime, currency demonetisation and the enactment of the Insolvency and Bankruptcy Code, 2016.
These reforms will create a level playing field in the real estate industry and benefit well-organised real estate developers, such as your Company, with established compliance processes and disciplined financial management. Your Companys core strengths, including customer-centric approach, established brands, commitment to transparency and strong corporate governance and internal compliance processes, together with focus on strategic land acquisitions, strong balance sheet and outsourced execution strategy position your Company favorably to benefit from the changing regulatory environment. In addition, as real estate developers with weaker processes and systems exit the industry due to the higher cost of doing business, there will be strategic acquisition opportunities in the industry for your Company.
Urban and rural infrastructure and road development is one of the top priority area for the government. A favorable business environment and numerous initiatives announced for the infrastructure sector in last budget is expected to provide demand boost for infrastructure services. Further liberalization on foreign direct investment for infrastructure projects in the country has increased the pace of infrastructural developments. There are several industries which are directly and indirectly dependent on the development of infrastructural sector. The Company will continue to seek growth opportunities with its focus on the infrastructure sector.
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).
Indian economy is expected to grow at 7.2% in 2018- 19, a tad higher from 6.7% in the previous fiscal, mainly due to improvement in the performance of agriculture and manufacturing sectors.
The Central Statistics Office (CSO) estimate is, however, a bit lower than 7.4% growth projected by the Reserve Bank for the current fiscal.
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.
India has retained its position as the third largest startup base in the world with over 4,750 technology startups, with about 1,400 new start-ups being founded in 2016, according to a report by NASSCOM.
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.
Indias foreign exchange reserves were US$ 411.905 billion in the week up to March 29, 2019, according to data from the RBI.
With the improvement in the economic scenario, there have been various investments in various sectors of the economy. Some of the important recent developments in Indian economy are as follows:
* Indias export is projected to reach on all time high of US $ 325-330 billion in 2018-19.
* Mergers and Acquisitions (M& A) activity in the country has reached US $ 129 billion in 2018.
* Income Tax collection in 2018-19 in the country reached at records level of Rs. 10.03 lakh crore.
* Companies in India have raised around Rs. 31731 crore through Initial Public Offer (IPO) in 2018.
* Indias Foreign Direct Investment (FDI) equity inflows reached US $ 33.49 billion between April 2018 and December 2018, with maximum contribution from services, computer software and hardware, telecommications, construction, trading and automobiles.
* Consumer Price Index (CPI) inflation rose moderated to 2.86% in March 2019.
* India has improved its ranking in the World Banks doing Business Report by 23 spots over its 2017 ranking and is ranked 77 among 190 countries in 2019 edition of the report.
* The World Bank has stated that private investment in India is expected to grow by 8.8% in FY 2018-19to overtake the private consumption growth of 7.4% and thereby drive the growth in Indias gross domestic product (GDP) in FY 2018-19.
* India is expected to retain its position at the worlds leading recipient of remittances in 2018, with total remittances touching US $ 80 billion, according to the World Banks Migration and Development Brief.
Your Company continues to capitalize on the market opportunities by leveraging its key strengths.
1. Brand Reputation: Enjoys higher recall and influences the buying decision of the customer. Strong customer connects further results in higher premium realisations.
2. Execution: Possesses a successful track record of quality execution of projects with contemporary architecture.
3. Strong cash flows: Has built a business model that ensures continuous cash flows from their investment and development properties ensuring a steady cash flow even during the adverse business cycles.
4. Significant leveraging opportunity: Follows conservative debt practice coupled with enough cash balance which provides a significant leveraging opportunity for further expansions.
5. Transparency: Follows a strong culture of corporate governance and ensures transparency and high levels of business ethics.
6. Highly qualified execution team: Employs experienced, capable and highly qualified design and project management teams who oversee and execute all aspects of project development.
REVIEW OF OPERATIONS
Your Company has earned total revenue of Rs. 8099.67 lacs in the current year as compared to the Last year revenue of Rs. 12272.53 Lakhs.
INTERNAL CONTROL S
The Company has robust internal control systems and procedures commensurate with its nature of business which meets the following objectives:
* Providing assurance regarding the effectiveness and efficiency of operations;
* Efficient use and safeguarding of resources;
* Compliance with policies, procedures and applicable laws and regulations; and
* Transactions being accurately recorded and promptly reported.
The Company continues to have periodical internal audits conducted of all its functions and activities to ensure that systems and processes are followed across all areas.
The Audit Committee of the Directors of the Company regularly reviews the adequacy of internal control systems through such audits. The Internal Auditor reports directly to the Audit Committee.
OPPORTUNITIES AND CHALLENGES
As India awaits policy reforms to pick up speed, your Company firmly believes that the demand for Real Estate in a country like India should remain strong in the medium to long term. Your Companys well accepted brand, contemporary architecture, well designed projects in strategic locations, strong balance sheet and stable financial performance even in testing times make it a preferred choice for customers and shareholders. Your company is ideally placed to further strengthen its development potential by acquiring new land parcels
While the management of your Company is confident of creating and exploiting the opportunities, it also finds the following challenges:
* Unanticipated delays in project approvals;
* Availability of accomplished and trained labour force;
* Increased cost of manpower;
* Raising cost of Construction;
* Growth in an auxiliary infrastructure facilities and
* Over regulated environment.
KEY FINANCIAL RATIO ANALYSIS
A comparative table showing synopsis of FY 2019 versus FY 2018 of Key Financial Ratio is provided below:
|Debtors Turnover||4.29||14.21||9.92||Company was maintaining accounts on % age completion method as per the ICDS, now shifted to INDAS from 01.04.2018. Sales are recognized only when rights in the property is transferred to the alottee.|
|Inventory Turnover||0.37||1.00||0.63||As above|
|Interest Coverage Ratio||1.59||1.98||0.39||As above|
|Current Ratio||1.61||2.07||0.46||As above|
|Debt Equity Ratio||1.53||1.43||(0.10)||-|
|Operating Profit Margin||11.45||9.49||(1.96)||-|
|Net Profit Margin||11.45||9.49||(1.96)||-|
|PAT/ NETWORTH||16.69||23.95||(43.52)||Company was maintaining accounts on % age completion method as per the ICDS, now shifted to INDAS from 01.04.2018. Sales are recognized only when rights in the property is transferred to the alottee.|
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. Actual results could differ materially from those expressed or implied due to various risk factors and uncertainties. We are under no obligation to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events and assume no liability for any action taken by anyone on the basis of any information contained herein.
|For and on Behalf of the Board of Directors|
|AGI INFRA LIMITED|