GLOBAL ECONOMY
It has been a near-normal year after two years of pandemic induced
challenges but the global economy continues to face headwinds of rising inflation and
tapered growth. According to The World Economic Outlook (WEO) update, the world economic
output growth slowed down to 3.4% in CY2022, after growing by 6.0% in CY2021. Growth in
emerging and developing Asia is expected to rise in CY2023 to 5.3%. Growth in China is
projected to rise reflecting rapidly improving mobility and full reopening
INDIAN ECONOMY
The Indian economy continues to remain fairly resilient in the last
year despite the global headwinds. Indias GDP grew by 6.9% in FY23 due to steadfast
domestic demand, governments unwavering focus on infrastructure spending and low
base effect. Indias banking system has been largely insulated from recent failures
of certain banks globally.
Real Estate Industry
Fiscal 2023 was a milestone year for the Indian Real estate sector with
all-time high sales. The sector showed healthy growth on the back of a high base achieved
in fiscal 2022. While the residential segment witnessed strong performance, commercial
office sector continues to remain sluggish with demand not yet reaching the pre-pandemic
levels. The challenges to office space demand has been the work from home trend and
slowdown in global economic growth. The global slowdown directly impacts sectors like
IT/ITeS which is the major occupier of office space in India. Retail real estate sector
though, is back to full swing with consumption recovering beyond pre-pandemic levels and
should continue the momentum
Mall Management
Shopping malls are an integral part of the community and a
one-stop-shop for all of a consumers needs - from shopping and dining to entertainment
and special occasions. Over the last few years, shopping malls have evolved from shopping
destinations to entertainment destinations. Additionally, malls today are synchronizing
with customers needs by offering constant engagement, activities, and niche
campaigns to cater to each target audience that visits the mall. In simple words, a
shopping mall has something for everyone in the family, regardless of age and gender.
With the worlds attention focused on health and safety, its not
surprising that the pandemic significantly influenced consumers buying patterns. In
response, the retail industry continued to strengthen the already existing trends besides
undergoing a digital revolution in order to keep up with changing consumer expectations.
In addition, a slew of trends emerged, shaping the future of malls in India after the
pandemic.
The market witnessed an increased consumer sentiment during the festive
season in 2021 which gave a promising start to 2022. It is worth contemplating CBREs
study wherein it was noted that from January 22 to April 22, the retail sector
transactions grew by 160%. The increase in consumer purchasing power and the opening up of
offices and travel spaces led to growth and made the market optimistic.
Retail infrastructure
While retail has had its share of challenges in the past two years, the
pandemic has also yielded the chance for a long-overdue great retail reset that may help
move many retailers into a more stable—and profitable—position. Getting there
will require balancing near-term challenges with long-term commitments and
transformational thinking.
THREATS AND CHALLENGES Risk Mall Management
The business of shopping malls falls among the several businesses that
have been severely dented by the Covid-19 pandemic. The digital revolution swept across
the world and brought the convenience of on-line shopping, malls did not continue to be
looked at as favourably as in the past by customers. However, the trend is changing post
pandemic periods.
Business Risk
The business of construction and development is heavily dependent on
the performance of the real estate market in India and could be adversely affected if
market conditions deteriorate. The real estate market is significantly affected by changes
in government policies, economic conditions, demographic trends, employment and income
levels and interest rates, among other factors. The development of real estate projects
involves various risks including regulatory risks, financing risks and the risks that
these projects may ultimately prove to be unprofitable.
Challenges faced by the industry
The dynamic global economic environment may have a direct impact on the
overall retail. The disruption of the supply chain caused by a pandemic-like situation may
cause raw material prices and overhead costs to rise, reducing the brands
competitive advantage in the market. Attrition in the workforce, counterfeit products,
innovation and new product development, rapidly changing consumer preferences, and data
breaches are a few significant concerns that could have an impact on the brands
overall performance. Amidst market volatility, E-commerce has quickly established itself
in the market and is now a significant factor in the expansion of organised retail. Value
brands and increased EBO penetration in tier II, tier III, and lower towns across the
nation will help in contribution to the growth of the organised format. While EBOs are
important for brands to create an impression in the customers mind and establish a
market presence, MBOs offer a pragmatic route towards success of a retailer as they offer
a wide variety of choice to the shoppers under a single roof. Transformation and
innovation for the year 2023
Vacant Mall Space in key Indian Cities
The impact of this disorderly mall construction reflects in vacant mall
spaces across the top 8 Indian cities. At a pan India level, Grade A mall vacancy is
recorded at 4.1% at the end of H1 2022. Grade B and Grade C vacancy stands at 16.1% and
33.5% respectively. Cities with a high percentage of Grade A mall stock or a lower base of
total malls, typically have a low overall vacancy at the city level. Per our findings, the
total vacancy across all grades at a pan India level stands at 16.6% at the end of the H1
2022 period. Chennai has the lowest vacancy of 9.9% across the markets under coverage,
followed by Kolkata at 11.7% and Mumbai at 14%.
Rental realizations
Leasing across high streets and malls in India is expected to soar past
the pre-Covid levels this year, according to real estate investment firm CBRE, which said
the country could see a 25% jump in new store openings in 2022 compared with the previous
year.
A sharp drop in Covid-19 cases in the country has helped the pace of
economic recovery and encouraged retailers to roll out the store expansion plans they had
put on hold after the pandemic broke out two years ago. This comes even as the
contribution of ecommerce to total sales has nearly doubled every quarter from the
beginning of the pandemic.
The rental realizations on the space leased depends upon the project
location, design, tenant mix (this is relevant in the case of shopping malls), prevailing
economic conditions and competition. Your Company has set up its retail property in prime
location and maintains a fresh ambience resulting in-crowd pull and attracting first time
kind of retailers. The mall promoters offered huge discounts during the remaining nine
months of the last fiscal as well, resulting in a huge dent in their overall income. The
nearly six-month-long lockdown followed by government regulations and restrictions wreaked
havoc on the retail segment. Weak consumer sentiment along with stringent lockdowns and
restrictions in the wake of the pandemic have significantly slowed down mall businesses in
India.
Economy Risk
Economic and market conditions can adversely affect the performance of
the Company. In particular, the decline in the performance of the global and Indian
economies as a result of the economic downturn can reduce demand and occupancy levels in
property markets. An increase in interest rates or an increase in the margin on which
finance can be obtained may increase the Company and the Subsidiarys financing costs
and such increase in interest rates may increase the cost of borrowing, which could have
an adverse impact on the Company and the Subsidiarys business, financial condition
and results of operations.
Financing costs
The acquisition of land and development rights needs substantial
capital outflow. Inadequate funding resources and high interest costs may impact regular
business and operations.
Your Company has always tried to build sufficient reserves resulting
out of operating cash flows to take advantage of any land acquisition or development
opportunity.
Outlook
The Company is optimistically envisages its business plan on the robust
Indian economy particularly the warehousing sector. Since the consumption pattern is
intact, the company anticipates a vibrant business outlook in relation to retail shopping
centres managed by the Company particularly during post pandemic periods.
Financial Performance Revenues
The income from Operations for the Company has increased by 7.63% to
INR 86.82 Crores in 2022-23 from INR 80.66 Crores in 2021-22.
Other Income
Other Income has decreased to INR 6.35 Crores in 2022-23 from INR 4.82
Crores in 2021 -22.
Operating Margin
EBIDTA (including other income) (Adjusted effect of Ind AS -116) for
2022-23 was INR 34.85 Crores as compared to INR 37.65 Crores in 2021-22.
Costs & Expenses
Employee Costs
Manpower cost for 2022-23 was INR 7.17 Crores, which increased from INR
6.53 Crores in 2021-22. In terms of percentage of Turnover, there was increase of 0.16 %
(as compare to 8.26% for 2022-23 with 8.09% for 2021-22).
Other Expenses
Other Expenses as a percentage of turnover has increased to 34.42% in
2022-23 as compared to 31.78 % in 2021-22.
Interest Expenses
Interest expenses for the year 2022-23 has decreased to INR 19.43
Crores from INR 20.40 Crores in 2021-22. In terms of percentage of Turnover, it has
decreased to 22.38% for 2022-23 from 25.28% for 2021-22.
Depreciation
Depreciation cost as a percentage of turnover has decreased to 19.12%
in 2022-23 to 21.84% in 2021-22.
Taxes on Income and Deferred Tax Provision
The Companys Deferred Tax Asset (net) has decreased from INR
67.37 Crores in 2021-22 to INR 63.99 Crores in 2022-23. The Company has made current Tax
provision of INR Nil and deferred Tax provision of INR 10.36 Crores [earlier provision
written back INR (0.84). Hence total Tax expenses works out to INR 9.52 Crores.
Profit before Tax
As a result of the foregoing factors, loss before tax increased from
INR (0.35) Crores in 2021-22 to INR (22.10) Crores in 2022-23.
Net Worth
The net worth of the Company has decreased from INR 73.32 Crores as on
March 31, 2022 to INR 51.45 Crores as on March 31, 2023. The decrease in amount of net
worth is on account of loss for the current year.
Income Tax Expense
Income tax expense was INR 9.52 Crores for 2022-23 and INR 12.01 Crores
for 2021-22.
Profit for the Year
As a result of the foregoing factors, loss after tax increased from INR
(12.37) Crores in 2021-22 to INR (31.62) Crores in 2022-23.
Earnings Per Share (EPS)
Basic and Diluted EPS was INR (5.49) for 2022-23 and INR (2.15) for
2021-22.
Borrowings
The total standalone outstanding borrowing is INR 92.59 Crores as on
March 31, 2023 and 98.99 as on March 31, 2022.
Cash and Bank Balance.
Cash and Bank balance increased to INR 18.21 Crores as of March 2023
from INR 12.27 Crores as of March 2022.
Investments
Total Investment of the Company was INR 77.08 Crores as of March 2023
and INR 94.00 Crores as of March 2022.
Current Assets & Liabilities
The Companys current assets primarily consist of debtors,
investment in liquid fund, inventories, cash and bank balances, loans and advances and
other current Assets. Total current assets as on March 31, 2023 were INR 94.45 Crores as
against INR 117.17 Crores as on March 31, 2022.
The Companys current liabilities primarily consist of short term
borrowings, trade payables, short term provisions and other current liabilities. Total
current liabilities as on March 31, 2023 was INR 194.63 Crores as against INR 190.36
Crores as on March 31, 2022.
Net Profit Margin
Net Profit Margin decreased by 21.08 % in 2022-23 as compared to
2021-22.
Return on Net Worth
Return on Net Worth increased from (16.87%) in 2021-22 to (61.45%) in
2022-23.
Debtors turnover Ratio
The debtor turnover ratio increased from 3.89 in 2021-22 to 5.09 in
2022-23.
Current Ratio
The current ratio increased from 0.62 in 2021-22 to 0.50 in 2022-23.
Internal Control System and Adequacy
Your Company has a proper and adequate system of Internal Controls, to
ensure that all assets are safeguarded and protected against loss from unauthorized use or
disposal and that transactions are authorized, recorded and reported correctly.
The internal control system is supplemented by extensive internal
audits, regular reviews by management and well-documented policies and guidelines to
ensure reliability of financial and all other records to prepare financial statements and
other data. Moreover, the Company continuously upgrades these systems in line with best
accounting practices. The Company has independent audit systems to monitor the entire
operations and the Audit Committee of the Board review the findings and recommendations of
the internal auditors.
Human Resources
The Company regards its human resources as amongst its most valuable
assets and proactively reviews policies and processes by creating a work environment that
encourages initiative, provides challenges and opportunities and recognizes the
performance and potentials of its employees. The industrial relations across different
locations of the Company were cordial during the year. The Company has, over the last few
months, built the team necessary to be able to build and execute the vision that has been
articulated in the preceding paragraphs. The total number of employees of the Company as
on March 31, 2023 stood at 61.
Cautionary Statement
Statements in Management Discussion and Analysis describing the
Companys objectives, expectations or predictions may be forward-looking within the
meaning of applicable securities law and regulations. Actual results may differ materially
from those expressed in the statement. Important factors that could influence the
Companys operations include stiff competition leading to price-cuts, high volatility
in prices of major inputs such as steel, cement, building materials, petroleum products,
change in government regulations, tax laws, economic developments within the country and
other factors such as litigation and industrial relations.
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