CHD Developers Ltd Management Discussions

Global Economy

In response to disruptions from the global pandemic, many central banks in emerging market and developing economies employed asset purchase programs for the first time in their history. These programs were successful in lowering bond yields without triggering currency depreciations.

Despite the pandemic, the global economy is set to expand by 5.6% in 2021, its strongest growth in 80 years. This recovery is uneven and largely reflects sharp rebounds in some major economies. The global outlook is subject to significant downside risks, including the possibility of additional COVID- 19 waves and financial stress amid high debt levels of Emerging Market and Developing Economies (EMDEs). Policy makers will need to support the recovery while safeguarding price stability, fiscal sustainability and to continue efforts towards promoting growth-enhancing reforms.

Indian economy

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

Indias GDP (at constant 2011-12 prices) was estimated at 33.14 trillion (US$ 452.74 billion) for the second quarter of FY 2020-21, against 35.84 trillion (US$ 489.62 billion) in the second quarter of FY 2019-20.

With an improvement in the economic scenario, there have been investments across various sectors of the economy. In 2020, the total deal value in India stood at approximately US$ 80 billion. Of this, M&A activity contributed approximately 50% to the total transaction value. Private Equity-Venture Capital (PE-VC) companies expanded from US$ 36.3 billion in 2019 to US$ 39.2 billion in 2020.

Government data showed that Indias Foreign Direct Investment (FDI) equity inflows during the period from April 2020 to March 2021 stood at $59.64 billion which corresponds to a growth of 19%.

In November 2020, the Government of India announced 2.65 lakh crore (US$ 36 billion) stimulus package to generate job opportunities and provide liquidity support to various sectors such as tourism, aviation, construction and housing. Also, Indias cabinet approved the production-linked incentives (PLI) scheme to provide approximately 2 trillion (US$ 27 billion) over five years to create jobs and boost production in the country.

The first Union Budget of the third decade of 21st century was presented by Minister for Finance & Corporate Affairs, Ms. Nirmala Sitharaman in the Parliament on February 1, 2020. The budget aimed at energising the Indian economy through a combination of short-term, medium-term and long term measures.

Numerous foreign companies are setting up their facilities in India on account of various Government initiatives like Make in India and Digital India. Mr. Narendra Modi, Prime Minister of India, launched Make in India initiative with an aim to boost countrys manufacturing sector and increase purchasing power of an average Indian consumer, which would further drive demand and spur development, thus benefiting investors. The Government of India, under its Make in India initiative, is trying to boost the contribution made by the manufacturing sector with an aim to take it to 25% of the GDP from the current 17%. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy.

Indias GDP is expected to reach US$ 5 trillion by FY25 and achieve upper-middle income status on the back of digitization, globalization, favourable demographics and reforms. India is also focusing on renewable sources to generate energy.

It is planning to achieve 40% of its energy from non fossil sources by 2030, which is currently 30%, and have plans to increase its renewable energy capacity to 175 gigawatts (GW) by 2022.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report. It is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by 2040 as per a report by Price waterhouse Coopers.

The real estate sector

The real estate sector is one of the most globally recognised sectors. In India, real estate is the second largest employer after agriculture. 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.

Future prospects/outlook:

A cyclical downturn combined with impact of demonetization, GST and the implementation of the Real Estate (Regulation and Development) Act, 2016 has created uncertainty in the sector. Further owing to GST, IBC &NBFC crisis and the subvention scheme ban it has been tough for the sector to align itself with these new regulations, the measures have been instrumental to bring transparency, accountability and fiscal discipline over the last few years. Further COVID-19 situation prevailing in the country has worsened outlook where economy has come to complete standstill, it is expected that

some sort of economic activity especially construction activity will get kickstart only from 3rd quarter onwards.

In order to strengthen its topline and bottom line, the Company plans to foray into IT & Chemical business which are allied to Real Estate Sector as the Company has not signed any projects during the year.

Threats Risks And Concerns

The real estate market is inherently a cyclical market and is affected by macroeconomics conditions, changes in applicable government schemes, changes in supply and demand for projects, shortage in manpower, availability of consumer financing and illiquidity. The present COVED-19 situation has made the situation worse.

Risk management

The Company has a comprehensive risk management system, which analyses the nature of the risk, and prepares mitigation strategies. This framework ensures efficient risk monitoring, identification, assessment and mitigation of external as well as internal risk. The Board of Directors provides oversight and also reviews the Risk Management Policy. Additionally, an independent audit by internal auditors offers a second assessment on potential risks and mitigation measures.

Confidence risk

Confidence of the average Indian who forms a major proportion of the home buyer community needs to be restored for creating demand.

Risk mitigation. The GST regime and RERA have been acclaimed as a path breaking achievement by India, although their launch did result in short-term disruption. With these policies well in place, confidence in the real estate sector is building up - foreign direct investment has grown significantly. This reality, over time, will shore confidence of the Indian home buyer.

Demand risk

Indians need to have more money, in addition to confidence, to liquidate inventory and create demand.

Risk mitigation. Despite the temporary disruption in the real estate sector over the last few years, the basic drivers for real estate demand namely, urbanisation, nuclear families, growing aspiration and improving lifestyle remain intact. Moreover, the sharp drop in real estate prices owing to the prevailing gloom coupled with the increased earning of the average Indian (owing to improved corporate earnings) is expected to drive demand over the coming years.

Geographic risk

The Companys concentration in the NCR region could impede its growth.

Risk mitigation: The NCR market continues to be a growing and expanding market with real home buyers (not investors). Delhi NCR witnessed more than 2 million square feet of office space absorption. Traction in office space cascades to an uptick in demand for residential apartments. With better facilities such as utilities, roads and better connectivity, the demand for real estate in this area is expected to grow.

Delivery risk

Delivery, in real estate, is key to success and sustainable growth.

Risk mitigation: The management has taken strategic decisions to alter its business model which promises to strengthen its delivery commitment. For one, it has decided to outsource construction activities to reputed and experienced EPC contractors who will shoulder the entire responsibility of project construction to the end. And two, the Company has outsourced its marketing function to experts in the field who have the experience and expertise to match the project with the customer segment accurately.

Growth risk

The Company needs project launches to grow business.

Risk mitigation: The Company has launched CHD Green Park Residences, part of 200-acre integrated township - CHD City, Kamal. It has registered sale of the project, with an aim of completely selling the project over the next 24-30 months. Moreover, the Company has planned a slew of other projects which will be launched with the improving sentiment of the residential real estate market.

Funding risk

Real estate is a capital intensive business.

Risk mitigation: The Company has raised Rs 87 crore through through issue of equity shares and warrants on preferential basis to the promoter group and investors in the year 2017-18 and These funds was utilised in meeting the construction cost of four projects in Gurugram (Gurgaon) and Kamal. Further as the progress of the projects should help in securing payments from their customers strengthening organisational liquidity.

Human Resource

CHDs energetic and experienced team is the cornerstone of its success - for they essentially transform boardroom strategies into on-ground realities. As a result, the Company has put in place well-defined people-centric policies to facilitate the knowledge enhancement and career growth of its people. The Companys HR team looks into four key areas:

• Attract the best talent available in the industry

• Develop talent by entrusting of roles / responsibilities and honing skills

• Engage talent by improving standards and inculcating problem-solving techniques

• Inspire talent by embracing the vision and mission of the Company

Knowledge enhancement: Aligned to its comprehensive talent management programme, the Company developed and implemented its training calendar, which was formulated on need-based training and skill development exercises - imparted by in-house and external area experts. This enabled the Company to provide the necessary platform to every employee for skill development. Career progression was ensured through a transparent performance management system, which aimed to fill gaps, hone skills and improve communication.

Employee engagement: In keeping with the Companys philosophy that an engaged employee is an enthused team member, the HR team provided a number of engagement forums which provided a platform for every team member to make a contribution to organisational and operational improvement. Employees are addressed at multiple forums by the top management and department leaders to keepisEpjthem abreast of changing business realities and emerging organisational challenges.

Outlook

The Indian real estate market is expected to touch US$ 200 billion by 2021 And contribute around 13% to Indias GDP by 2025. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs.

Projects in progress

CHD Vann

As the name suggests, Vann (Jungle in English) is where natures beauty, fragrance and serenity will awaken your body, mind and soul.

Spread across over 10 acres, Vann brings a fresh new perspective to life in a metro, with a forest cover of 5 acres providing an incredible experience of forest living right in the heart of a thriving city. The sole aim is to develop a lifestyle that has its roots in nature.

Located at Sohna Road, Gurgaon, Vann is perfectly suited for those who want a serene lifestyle with the utmost convenience.

At Vann, the centre piece of the residential apartment is the lofty double height ceiling which gives you the luxury of ample sunshine and unobstructed view of the forest from two levels. All the towers are of varying heights which make sure that they all get beautiful views throughout the year.

106 Golf Avenue

106 Golf Avenue offers you a lifestyle indulged by a privileged few.

It presents the perfect opportunity to exercise supreme affluence with the splendour and awe of a golf life. The lush green acres not only provide the perfect ambience to indulge in a game of pitch & putt, but also endow a life of absolute bliss and serenity.

Adorned with a golf course, this idyllic expanse of 12.34 acres has within its vast greenscape, one of the finest exclusive residential neighbourhoods. Sublime aesthetics of this exclusive residential project and the very best of leisure and recreational facilities redesigns the perception of opulence.

CHD Green Park Residencies

CHD Green Park Residences promises elegant English living in the heart of Kamal.

This project promises to create a unique world in itself with all state-of-the-art amenities like lush green park, schools, food court, hospital and fitness centre just a stone throw away, making it difficult for the residents to leave this residential abode.

CHD eWay Towers

CHD EWay Towers has been designed to become the landmark of the region. This Architectural wonder will be built using new age building materials for perfect interplay of Nature & Technology. Designed by R204, one of the leading Los Angeles (USA) based Architectural firm, this iconic tower truly reflects 21st century Architecture.

CHD Resortico

This project promises an unmatched experience of Mediterranean resort life. At CHD Resortico, tall towers stand overlooking winding pathways, undulating lawns, colourful flowering shrubs and an exquisite beach like pool. Where you lounge under a shack, get glorious tan on the sun-loungers, wade in the azure blue waters or work with your feet in the sand.

Projects completed

RESIDENTIAL

Avenue 71 Paradiso Bulevar

Spanish Meadows Lifestyle Premiere Gayatrilok Lifestyle Grand CHD Lifestyle Silver County Sri Krishnalok COMMERCIAL Daana Paani