Eldeco Housing & Industries Ltd Management Discussions.

Cautionary Statement

Certain Statements found in the Management Discussion and Analysis may constitute "Forward Looking Statements" within the meaning of applicable securities laws and regulations. These forward looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable.

The Company does not undertake to make any announcement in case any of these forward looking Statements become materially incorrect in future or any update made thereon.

Business Overview

Eldeco City, the integrated township in 133 Acres at I.I.M Road, Lucknow comprising of villas, plots, group housing and convenient shopping has received completion certificate for its infrastructure development. Possessions of most of the villas and plots have been handed over. Approximately 450 families have moved in. The construction of Eldeco City Kutir and Sukriti (EWS/LIG) is nearing completion and possession it to be offered soon.188 units of LIG and 184 units of EWS were allotted through two rounds of draws conducted under supervision of Lucknow Development Authority and the balance 48 units of Eldeco Sukriti have been upgraded and are being sold directly to the exclusion of LDA. The Capital City Club is fully operational with all the facilities in place. Apart from row housing and plots, Eldeco City has a number of bulk plots which are being monetized by launching of fresh projects as per market conditions. Eldeco City Breeze a group housing project located within Eldeco City, comprises of approximately 2 lacs sq. ft of built up area. Most of the units in Breeze are sold and possession has already been offered. Eldeco City Arcade, a shopping complex within Eldeco City, has received completion certificate and execution of sale deed and possession of most of the shops has happened. Construction of Eldeco City Arcade 2 is going at a good pace and is on schedule. We shall soon be launching Eldeco City Arcade 3. We have recently launched an affordable group housing project Eldeco City Dreams comprising of 96 units having 1 BR and 2 BR apartments only. We have received a good response and 60% of the units were booked in a weeks time even before commencement of construction. Future strategy of Eldeco City involves strategic launching of more projects on bulk lands within the development.

Eldeco Saubhagyam, a group housing project comprising 11 towers and a convenient shopping spanning approximately 11.9 lac sq. ft built up area is situated at Shaheed Path, Raibareilly Road. 9 towers are complete and possessions have been offered with registration and possession in progress. Construction work of T1 is going on as per schedule the structure work is complete and finishing work in going on. In final and last phase of Eldeco Saubhagyam, Tower 5 (T5) will be launched soon. Construction of T5 has already commenced. Eldeco Saubhagyam Arcade a convenient shopping comprising of 20 shops is on advance stage of completion with finishing work going on. A majority of units in these 10 towers and convenient shopping have been booked.

Eldeco Eternia, a premium group housing of more than 4.30 Lacs sq. ft. of built up area at Sitapur Road is completed and registrations and possessions for all 3 towers (T1, T2 and T3) has happened. Completion Certificate for Eternia has been received and the complex has also been handed over to Residents Welfare Association. Integrated with Eldeco Eternia is the proposed high end block- Eldeco Luxa and along with a convenient shopping Eldeco Eternia Arcade which shall be launched soon. The construction of Eldeco Luxa has commenced and the structure of Tower L2 has reached 4th floor. Structure work of Luxa Arcade is complete and finishing work will be done as and when we launch the Project. As this is a high-end project, the Company will bring the construction to a certain stage before launching the project in order to achieve higher realizations.

Eldeco Samridhi, the project comprising plots and villas spread in approx. 8 acres, was launched in 2013-14, which got a steady response from the market. Registrations and possessions of majority of the plots and villas has been done and many families are staying in the complex. With infrastructure work and services in place, services of the complex have been taken over by Nagar Nigam and Jalkal Vibhag. The Residents Welfare Association has been formed and registered and we shall soon handover the complex to RWA.

Eldeco Shaurya, is a 43 acres township project situated at Bijnore road, Lucknow consisting of plotted development and villas. Most of the units released for sale are booked. The infrastructure work and services is complete and the project has received completion certificate. Possession of plots has been offered and registration and possession is going on. Construction of all the villas is completed and the possession of most of these villas has happened. Club at Eldeco Shaurya is complete and operational. We shall soon be launching a convenient shopping and 3 gated projects within Eldeco Shaurya comprising of Plots and Villas.

Eldeco Regalia, a 33 acres township project situated off IIM Road, Lucknow consisting of plotted development and villas, got enormous response from the market. Out of 418 units comprising plots/villas, majority of the units were booked in space of 60 days in the middle of adverse impact of demonetization. The development work has commenced and is going on at scheduled pace. Construction of all the sold villas is also under progress and should be completed as per schedule.

Eldeco Elegante, a commercial project consisting of approx. 52000 sq. ft. built up area at Vibhuti Khand, Gomti Nagar,

Lucknow, received completion certificate and the possession has happened and few shops/offices have become operational.

Industry Structure & Developments

Real estate sector of India in undergoing structural changes for the last couple of years. The combined effect of demonetization, GST and RERA is that there is a slowdown in absorption levels, rise in customer litigation and shift in preference towards ready to move in inventory. This is causing consolidation in industry structure. Given the huge latent demand for all kinds of real estate in our country and the paucity of professional developers, it is expected that the efficient developers will gain in strength in the coming years.

Market Size/Growth Prospects

The Indian real estate sector is expected to reach a market size of $180 billion by 2020. The housing sector alone contributes 5-6 % to the countrys Gross Domestic Product (GDP).

The Company primarily operates in the geographical market of Lucknow. Being the capital of the most populous state of the country, Lucknow offers tremendous growth opportunities to the Company. Over the last decade there has been tremendous growth in population and augmentation of social and physical infrastructure. Being an old and established developer with a blemish free track record, our Company is best placed to participate in and contribute to this growth. Though overall there is fall in market sales figures, but our Company is confident of gaining market share in Lucknow.

Opportunities and Threats

With Budget 2018, the government continues to boost the affordable housing sector by setting up an Affordable Housing Fund (AHF) under the umbrella of the Pradhan Mantri Aawas Yojna. Both Central and State Governments continue to roll out schemes to boost real estate demand in order to revive the sector. A number of smaller players are exiting the industry, which also presents our Company with an opportunity to consolidate As seen in the Business Review, the Company has successfully delivered a number of large projects in the last few years. It is now important to cautiously replenish the project pipeline in order to maintain the same level. Unavailability of marketable lands of large sizes is a threat which can bring down Company topline in a few years. However, we are confident that we shall be able to tie up reasonable projects in this period given the consolidation in the industry. We are currently in advanced talks for a number of mid-size land parcels for township projects in Lucknow.

A few other universal challenges for the industry are:

• Policy uncertainty principally with respect to implementation of RERA

• Adverse impact of GST on under construction projects

• Rising consumer and judicial activism

On the plus side, there is less uncertainty on the approval processes. Costs are stable. Industry efforts in training labour are bearing fruit. There is increased recognition of the sector as an organized industry with relative ease of institutional funding options On the whole, the opportunities and growth prospects outweigh the threats especially for a professionally managed Company with a good execution track record.

Internal Control System and their Adequacy

The Company has an adequate system of internal controls in place. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or losses, compliances with regulations and for ensuring reliability of financial reporting. The Company has continued its efforts to align all its processes and controls with global best practices in these areas as well.

Some significant features of the internal control systems are:

• Preparation and monitoring of annual budgets for all operating and service functions;

• A well-established multi-disciplinary Internal Audit team, which reviews and reports to management and the Audit Committee about the compliance with internal controls and the efficiency and effectiveness of operations and the key process risks.

• Audit Committee of the Board of Directors, comprising independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards as well as reasons for changes in accounting policies and practices, if any

• Anti-fraud programme.

The Board takes responsibility for the total process of risk management in the organization. The Audit Committee reviews reports covering operational, financial and other business risk areas. The business risk is managed through cross functional involvement and communication across businesses. The results of the risk assessment and residual risks are presented to the senior management.

Material Developments in Human Resources

Human resource continues to be the backbone of the Eldeco business. The Company lays strong emphasis on attracting and retaining the best talent. Personal developmental initiatives including training, both technical and managerial, are regularly conducted to enhance human potential. The Company had 50 (Fifty) employees on roll.

The Companys objective going forward would be to nurture and harness core management teams and explore outsourcing which will enable us to enhance management bandwidth and focus.

Financial Performance Vis-a-vis Operational Performance

The Company has exhibited growth in its profits. The Companys profit after tax is Rs. 2534.89 lacs (Consolidated) against Rs. 2371.30 lacs (Consolidated) in the previous year. The following table sets forth the breakup of the Companys expenses as part of the net profits.

.(Rs. in Lacs)
Standalone Consolidated
31st March, 2018 31st March, 2017 31st March, 2018 31st March 2017
Revenue:
1) Revenue from operations 7435.48 7270.28 10898.30 16908.95
2 ) Other Income 352.76 157.06 465.02 540.73
Total Income 7788.24 7427.34 11363.32 17449.67
Expenses:
1) Cost of material consumed, construction and other related project cost 5646.92 3031.79 8005.05 10732.08
2) Changes in inventories of finished goods, project in progress (2315.10) 1474.14 (2110.94) 1248.05
3) Employee benefit Expense 414.43 313.82 455.16 414.16
4) Finance cost 170.84 558.16 196.86 301.59
5) Depreciation and amortization expense 24.44 36.05 27.10 50.54
6) Other expenses 1065.65 604.86 1133.97 1009.50
Total Expenses 5007.19 6018.82 7707.20 13755.91
Profit before Tax (PBT) 2781.05 1408.52 3656.12 3693.76
Tax Expenses:
1) Current tax 961.51 479.44 1205.95 1275.87
2) Deferred tax (77.85) 19.40 (80.41) 17.44
3) Earlier year Taxes - - (4.32) 29.15
Total Tax Expenses 883.66 498.84 1121.23 1322.46
Profit after Tax 1897.39 909.68 2534.89 2371.30
Total Other comprehensive income 0.35 0.55 0.35 0.55
Total comprehensive income for the year 1897.75 910.24 2535.24 2371.85