Macroeconomic Overview
Financial year 2020-21 was one of the most challenging year in the
recent history. Innumerable lives, jobs and growth prospects were lost due to the Corona
virus induced Pandemic. The unprecedented health hazard continued to disrupt the lives and
livelihood of the millions of people, impacted further by the second wave of pandemic
throughout the nation. However it is heartening to know that with great coordinated
efforts of the Government and the Central banks which announced slew of welfare and
economy stimulus measures and coupled with rapid vaccination drive across the country,
situation is being managed efficiently and economy has gradually recovered. Indias
GDP growth stands at -7.3% for the Financial year 2020-21 and the Reserve Bank of
Indias projections indicate a strong revival of the economy with GDP growth expected
to be at 9.5% for Financial Year 2021-22.
Indian real estate sector overview
Prior to the pandemic, the real estate sector was expected to
contribute around 13% of Indias GDP by 2025 (from around 6-7% in 2017), according to
ANAROCK Research. The pandemic nearly stalled the markets in H1 2020 and the sector was
virtually written off at the early stages of the pandemic on the expectations of a
subsequent economic fallout. However, in the face of this unprecedented crisis, the sector
displayed remarkable resilience and recovered ahead of expectations. Both the residential
and office markets have shown promising signs of revival from Q3 2020 onwards.
Outlook
Despite the setbacks during first half of FY 2020-21, the realty sector
witnessed a strong bounce back in the second half of FY 2020-21. The real estate sector
survived a challenging environment and showed robust signs of recovery, backed by
innovative sales and marketing efforts and continuous improvements in processes. Digital
marketing and virtual tours of projects acted as a saviour for the industry. The ‘new
normal that emerged during this time is characterised by hybrid work models
including home offices and flexible workspace with an enhanced focus on sustainability,
wellness and user experience. The sector is anticipated to undergo further consolidation.
Data available with Housing.com show that while demand and supply both remained adversely
impacted during the first two months of the April-June quarter of 2021, a period when most
states remained in partial lockdowns to contain the second wave of the coronavirus spread,
home sales and new launch numbers started to pick up in June, when states began the
gradual opening-up process. Indian real estate sector has witnessed high growth in the
recent times with rise in demand for office as well as residential spaces. Demand for
residential real estate revived in the second half of FY 2020-21, as homebuyers took
advantage of low mortgage rates, reduction in the stamp duty rate in the various states
and incentives rendered by developers. Residential sales in this quarter recovered to
>90% volumes recorded in 2020 across the top seven cities.
With demand sentiment improving, execution of projects back at
pre-covid levels and incentives for buyers like lowest interest rates and schemes for
achieving housing for all by the Government of India, we trust that the coming years will
be better operationally. Apart from the emotional value, housing has gained more
prominence during this period due to human safety and security concerns and we believe
this will augur well for us with quality products and vast project pipelines across
regions.
Opportunities
The COVID-19 pandemic has re-defined the conventional way of business.
With the commencement of vaccination drive and recovery from the pandemic, brighter
prospects are expected for the Indian economy towards the latter half of 2021. India could
well be on its way to becoming the fastest growing economy in the world.
Government of India along with the governments of respective States has
taken several initiatives to encourage development in the real estate sector. The Smart
City Project, with a plan to build 100 smart cities, is a prime opportunity for real
estate companies. Some positivity has been seen in the market as a result of various
policy initiatives taken by the government last year. The following Government
announcements have all been made at a positive pace:
Under Union Budget 2021-22, tax deduction upto Rs. 1.5 lakh on interest
on housing loan, and tax holiday for affordable housing projects have been extended until
the end of fiscal 2021-22
The Atmanirbhar Bharat 3.0 package announced by Finance Minister Mrs.
Nirmala Sitharaman in November 2020 included income tax relief measures for real estate
developers and homebuyers for primary purchase/sale of residential units of value up to
Rs. 2 crore
Under the "Housing for All" scheme, 20 millions houses are to
be built by 2022, GST rate brought down to 5% Real Estate Investment Trust (REIT) platform
will allow all kind of investors to invest in the Indian real estate market. It would
create an opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the Indian market in
the coming years. The residential sector is expected to grow significantly, with the
central government aiming to build 20 million affordable houses in urban areas across the
country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union
Ministry of Housing and Urban Affairs.
(Source: IBEF)
Threats, Risk and Concerns:
The real estate market is inherently a cyclical market and is affected
by macroeconomic conditions, changes in applicable governmental schemes, changes in supply
and demand for projects, availability of consumer financing and liquidity. While the
management of your Company is confident of creating and exploiting the opportunities, it
also finds the following challenges:
• Concern due to ongoing pandemic situation, anticipated third
wave;
• Delays in project approvals;
• Rising cost of construction;
Companys Segment-wise or product-wise performance
The Company has only one reportable segment, namely development of Real
Estate property and one geographical segment, namely within India.
Your Company reported a total revenue of Rs. 33,230 Lakhs in 2020-21
against Rs. 1,21,836 Lakhs in 2019-20, and EBITDA of Rs. 26,266 Lakhs against Rs. 29,973
lakhs in the previous year. The Company reported profit after tax of Rs. 288 Lakhs in the
current year as compared to loss of Rs. 4,891 Lakhs in the previous year.
Your Companys consolidated revenues stood at Rs. 33,121 Lakhs for
the year under review against Rs. 1,22,787 Lakhs in the previous year, and EBITDA of Rs.
26,066 Lakhs in 2020-21 as compared to Rs. 29,751 Lakhs reported in the previous year. The
Company reported a consolidated profit of Rs. 61 Lakhs in 2020-21 as compared to
loss of Rs. 5,179 Lakhs reported in the previous year. After the disruptions in the first
half cause by the Pandemic, the Company saw a significant turnaround in the second half
with sales almost reaching the pre-pandemic levels. During the period, Company also
launched Emami Nature, Jhansi, a flagship 100 acres self-sufficient fully integrated
plotted township. The project has received very strong response and within 9 months of its
launch, achieved sales of more than 40%.
Key Financial Ratios
The key ratios arising out of Companys performance are as
follows:
| Ratios |
2020-21 |
2019-20 |
Explanation for change of 25% or more as compared to
previous FY |
| Interest Coverage Ratio |
1.03 |
0.80 |
Company achieved significant improvement in
Interest Coverage Ratio due to reduction in interest cost by 32% from Rs. 37,044 Lakhs in
FY 2019-20 to Rs. 25,234 Lakhs in the current year resulting from (a) reduction in total
borrowings from Rs. 2,47,408 Lakhs in FY 2019-20 to Rs. 1,67,220 Lakhs in the
current year and (b) reduction in average interest cost by 2.52% from 14.38% in FY 2019-20
to 11.86% in the current year |
| Current Ratio |
1.17 |
1.28 |
- |
| Net Debt- Equity Ratio |
14.73 |
25.81 |
Company achieved significant improvement in
Net Debt-Equity Ratio due to (a) Reduction in Debt from Rs. 2,45,711 Lakhs in FY 2019-20
to Rs. 1,65,721 Lakhs inFY2020-21and(b)IncreaseinNetworthfromRs.9,520LakhsinFY2019-20to
Rs. 11,253 Lakhs in FY 2020-21 |
*Consolidated
Discussion on financial performance with respect to operational
performance/ financial highlights
A comparative table showing the synopsis of the Profit and Loss
statement for 2020-21 v/s 2019-20 is provided hereafter:
| P & L Snapshot* |
2020-21 |
2019-20 |
| Total revenues (Rs. Lakhs) |
33,121 |
1,22,786 |
| Total expenses (Rs. Lakhs) |
7,055 |
93,035 |
| EBIDTA (Rs. Lakhs) |
26,066 |
29,751 |
| EBIDTA margin (%) |
79% |
24% |
| EBIT (Rs. Lakhs) |
25,906 |
29,526 |
| EBIT margin (%) |
78% |
24% |
| Profit /(loss) before tax (Rs. Lakhs) |
639 |
(7,585) |
| Profit/(loss) after tax (Rs. Lakhs) |
61 |
(5,179) |
| Basic EPS |
0.16 |
-13.69 |
Human resources
The Company believes that the quality of its employees is the key to
its success. It is therefore committed to equip them with appropriate skills, enabling
them to seamlessly evolve with ongoing technological advancements. The Companys
employee strength stood at 100 as of 31st March, 2021.
Internal control systems and their adequacy
The Companys internal control system has been continuously
monitored and updated to ensure that assets are safeguarded, established regulations are
complied with and pending issues are addressed promptly. Further, the Audit Committee
reviews reports presented by the internal auditors on a routine basis. The Committee takes
note of the audit observations and, initiates corrective actions, wherever necessary. It
maintains a constant dialogue with statutory and internal auditors to ensure that internal
control systems are operating effectively.
Cautionary statement
This statement made in this section describes the Companys
objectives, projections, expectation and estimations which may be ‘forward-looking
statements within the meaning of applicable securities laws and regulations.
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