Ganesh Housing Corporation Ltd Management Discussions.

Indian Economy

Along with the Covid-19 pandemic, which was the ultimate headliner for most of 2020, came a series of worldwide lockdowns and setbacks impacting business and lives across the globe. India, particularly, witnessed the world’s largest nationwide lockdown sending the economy in a tailspin. This was followed by a gradual reopening across the country and normalcy returned with a stoic recovery momentum across key economic segments. This growth ride was on account of the pent-up business needs in lieu of fiscal impetus and regained consumption demand. This optimistic sentiment led to record property registrations and uptick in sales velocity. Also, since the in_ux of PE and FDI investment is on rise in FY 2020-21, the sentiment remains bullish for the Indian economic outlook.

The Indian real estate sector can expect substantial economic recovery and robust growth in the forthcoming year. There was a dip in the future sentiment score as observed in Q1, 2021. However, that gap can be justified as a mirrored response for the market uncertainties prevailing in Q1, on account of the second Covid wave. That being said, there is no cause of worry for the industry as it is well-geared to mitigate the risk on ground. The ongoing production with uninterrupted supply chains will help the sector rebound with more finished goods catering to the discerning home buyers. Furthermore, the industry has managed to avoid labourers’ reverse migration by reassuring them with food, shelter, and daily wages, with all the safety measures in place.

Outlook

2020 was the year that changed everything, and 2021 will be the year Indian real estate adapts to that change through its time-tested resilience, digital insurgency, and innovation. While 2021 may still be reeling with a pandemic-affected economy, the plans for a sector-wide recovery have already been laid out. Backed by positive economic fundamentals, healthy demand, and quality supply infusion across sectors, India’s real estate sector is prepared for robust growth.

When the second wave of the pandemic erupted as a successive crisis, our faith in the nation’s resistance didn’t waiver, and so, India did overcome the meltdown. From here, the future seems positive now.

Taking cues from the key trends of the pandemic, the residential real estate sector is going to be the fastest to get back on its feet. Owing to the aspirations of our citizenry – in tier 1 and tier 2 towns alike – to own bigger and better homes having multiple facilities and amenities, the pandemic has created a strong structural trend for the country’s ever growing housing market. Conducive factors in this recovery will be the multi-year low house prices and multi-decade low home loan interest rates.

INDUSTRY DEVELOPMENTS AND OVERVIEW Indian Real Estate Market

The year 2020 was perfectly positioned for the Indian real estate sector to take _ight. After 3 years of disruptions in the form of demonetisation, GST, RERA, and the NBFC crisis, transparency and efficiency were slowly trickling into the system. The year, if not the whole decade, will be mentioned with a recall for the pandemic, which affected every person in the country. The nationwide lockdown that followed threw markets into turmoil, bringing more pain and distress to the realty industry. In the face of this unprecedented crisis, the real estate sector displayed remarkable resilience. Once the unlocking process was initiated in the Q2 of 2020, both the residential and office markets started showing promising signs of revival. Further, uncertainties surrounding the economy reduced in the last quarter of the year, which led to an increase in the revival momentum with the markets tracing a swoosh-shaped recovery path.

The year 2021 started on a positive note for the real estate market with the residential and commercial real estate segments both reflecting healthy stats. While the residential market was recording a strong bounce from Q4 2020, the office segment was also getting back on its feet. Offices resumed operations across cities, some at full occupancy while others on a rotational or hybrid model, giving employees the flexibility of location. The onset of the pan-India vaccination drive in March, 2021 gave a further boost to the stability notion in the market. Demand continued to grow and business appeared to be moving towards pre-Covid levels. However, the growth was dampened by another wave; the rate of Covid infections in the country began to spike. As the month of March progressed, the severity of the pandemic was more pronounced and menacing than the levels in 2020. Consequently, mobility curbs and lockdown restrictions became a reality once again. With some states already having such curbs in place, offices have had to return to the work-from-home mode of operation, for the time being. The heightened damage caused by this pandemic and its resurgence have both played a key role in rekindling fear and reinforcing mobility curbs within the country.

KEY GROWTH DRIVERS

1. Residential and Commercial Sectors’ Growth

2021 packs great potential for both residential and commercial real estate businesses. The last few years saw the office spaces gaining traction in most cities with IT/ITeS players contributing to majority of the leases. The warehousing sector is also expected to spread territorially in the time to come. Rapid urbanisation and white-collar migration will further growth in the commercial sector, which, in turn, will translate into higher residential demand. With concepts like ‘Housing for All’, affordable housing will continue being a key growth driver in real estate.

2. Suburban Cities Gaining Traction

Markets like Pune, Chennai, Hyderabad, and Bangalore have seen a steady rise in demand for homes. We are optimistic that similar trends will continue in FY 2021-22 as well, and thus, the affordable housing segment in corresponding suburban areas (Goa, Coimbatore, etc.) would also be in higher demand.

3. Rise in Co-living and Co-working Spaces

Over the past few years, there has been a prominent shift in the buying pattern of customers, especially the millennial customers. They have a greater inclination towards co-living spaces, which are more dynamic as compared to the usual rented spaces. On the other hand, the gradual but promising rise in gig-based economy has led to a higher demand for co-working spaces in major cities like Bengaluru, Hyderabad, and Pune. This trend is set to grow in 2021 too. As per a Knight Frank’s report, the co-living concept is gaining widespread acceptance in India, and even though the concept is novel, it is expected to stay. This trend will strengthen the organised rental market in cities like Bengaluru, NCR, and Pune, just the way co-working spaces worked for shared office spaces.

4. Technology Reshaping the Sector

Smart technology and innovation is no longer at distance from the real estate sector. In terms of construction, the key players are anticipated to adapt latest technologies like data gathering, artificial intelligence, and machine learning. Pre cast solutions will revolutionise the traditional construction practices through technology, automation and value engineering. These will play a key role in redefining the Indian realty sector. With the improving construction quality, technology will also help boost timely completion of projects, and smart homes will continue leading the customers’ choice. With more and more ambitious projects populating the sector, we expect high growth in this particular segment. As per industry estimates, the Indian smart home market, currently valued at about $893 Million, is expected to grow manifolds in the next five years.

5. Wide Acceptance of Sustainable and Green Living

An increasing number of developers and sellers have voiced their support for green technology, and with a favourable stance from the Government, we can expect more environmentally-sustainable designs in the future. The customers, too, are seen opting for smart homes, making way for sustainable living.

6. Redefining of Luxury Housing

We are confident that our age-old concept of luxury housing will undergo radical metamorphosis in the coming few years. A more consumer-focused modelling coupled with the industry moving towards achieving a holistic and elevated living experience would be the shift.

FY 2020-21 was a year of reforms in the industry with an increased focus on transparency and customer centricity from both, the policy makers and the developers. The regulatory framework has helped bring the trust quotient back to the industry. Moreover, a systematic implementation of the Government reforms will help in reviving consumer sentiment, which will eventually push the growth of residential segment in the coming quarters. We expect the new year to be more promising for developers and home buyers, where growth will be led by positive changes in the business ecosystem.

AHMEDABAD REAL ESTATE MARKET

Back in 2020, when the Covid-19 crisis hit, it disrupted the supply chain of realty raw materials, led to reverse migration of labourers, and bestowed fund constraints upon the developers. The sector went through a major digital transformation as developers shifted online to market their projects and engage with customers, and Government bodies, such as NCLAT and RERA started addressing homebuyers online.

The Apr-Jun 2020 quarter saw the lowest number of new launches since 2013 and sales remained 75% lower than the previous quarter. Invoking Force Majeure helped push the losses down as the ongoing projects were granted a nine-month extension under Real Estate (Regulation and Development) Act, 2016. The suspension of Insolvency and Bankruptcy Code (IBC) for the year, too, proved to be a relief for developers.

With the construction industry coming to a standstill during the nationwide lockdown, Ahmedabad witnessed no new prominent launches in Apr-Jun 2020. As a result, the city saw the addition of only 32 new project registrations under RERA in the studied quarter, against 57 in Jan-Mar 2020. While developers experimented with virtual site visits, buyers remained reluctant to invest in real estate due to uncertainties around employment. Site visits witnessed a decline of around 90% each, as buyers deferred or cancelled their home purchase plans.

The woes of the residential sector, which had witnessed a slowdown over the past few years, were further exacerbated following the Covid-19 outbreak. The pandemic triggered a demand collapse, with housing sales volume witnessing a Y-o-Y decline of 62% in Q1 FY 2020-21 across the top 8 cities.

However, large developers with a good track record benefitted from the recovery in demand, while smaller developers were the worse-hit as Covid also led to a consolidation in the sector. On the contrary, this consolidation also pushed an increase in the share of listed players. The market share of the top 10 listed realty players has nearly doubled in the current year, increasing from 11% of sales in FY 2019-20 to 19% in 9M FY 2020-21. Larger developers have been benefiting from demand consolidation and better credit availability. In terms of launches as well, their market share has increased from 11% in FY 2019-20 to 22% in 9M FY 2020-21. Sales data for the April-June quarter is not yet in; however, we see that from April till date, there is more than a 50% decline in housing project sales in the top 7 cities against the previous quarter. This is especially true for MMR, Pune, NCR, and Bengaluru. Housing sales in Q2 2021 may reduce by as much as 55% against the first quarter, which saw approx. 58,280 units sold in the top 7 cities The residential segment outlook had been showing healthy improvement in the last two quarters on the back of increased traction in this segment. However, due to a substantial increase in Covid cases since March 2021, the outlook for residential launches and sales loosened in Q1, FY 2021-22. Despite the prevalent challenges, more than 80% respondents still remain that our residential market would either grow or remain steady in the next six months in the context of launches, sales, and prices. The overall sales volume from completed and under-construction inventory would reduce by 40-60%. The preference for completed inventory is expected to continue, thus, favouring the developers with higher proportion of such projects.

However, the steep reduction in home loan rates may aid housing demand to some extent, with the interest rates having dropped below 8% for the first time in 15 years. The second wave could impact the Indian economy by prompting people to save, rather than spend. This is in contrast with the first wave in 2020, when the economic slump came primarily because of the supply disruptions, a natural side-e_ect of the prolonged nationwide lockdown. However, the second wave might bring microscopic financial changes too, which could particularly impact home purchases in the country that require big-ticket investments.

Housing market in India’s top 8 cities (April-June 2020)

Sales Down 79%
Project launches Down 81%
Inventory 738,335 units

Source: PropTiger DataLabs

AHMEDABAD RESIDENTIAL SECTOR

In 2020, Ahmedabad emerged as the most affordable housing market in India, among its peer metropolitan cities, with an a_ordability ratio of 24. However, this was pre Covid. The real estate developers say the pandemic in Q1 2020 pushed developers to negotiate more aggressively with potential buyers on price and payment terms to sustain sales levels. This has caused the average price level to drop 2 % Y-o-Y in Q1 2020. The residential pricing in Q1 2020 in Ahmedabad ranged between Rs. 1,000-6,000 depending upon the area.

Amid a rising number of Covid-19 cases in India, Ahmedabad reported a grim real estate scenario in Apr-Jun 2020. In addition to liquidity constraints, developers had new challenges in the face of the mass exodus of migrant labourers and the non-availability of raw materials due to restricted imports from China. In the wake of the Covid-19 pandemic and imposition of a lockdown in Ahmedabad, residential launches fell sharply in Q2. The quarter still managed to record 525 new unit launches, though down by 50% both on a Q-o-Q as well as Y-o-Y basis. Surprisingly, mid-segment units priced between Rs. 4.5 Million to Rs. 10 Million dominated the market as against affordable units, accounting for 56.5% of total new launches in Q2. The affordable segment with units priced up to Rs. 4.5 Million, accounted for around 19% of the quarterly launches. The share of high-end and luxury units, above the price of Rs. 10 Million, was significantly higher at 25% as compared to single-digit contribution in previous quarters. The trend seen in Q2 may be attributed to financially strong local developers, who continued pursuing their projects, irrespective of the market sentiment, with hopes of pushing stability and improved transactions in the near to medium term.

The affordable housing stock priced within Rs. 50 lakh remained the most popular. The luxury segment, too, reported a spike in the buyer interest during this quarter. With Covid-19 altering buyer preferences to some extent, several buyers attested their a_nity for risk-free investments, i.e. ready-to-move-in properties offered by branded developers, priced above Rs. 1 Crore. Moreover, post the recent earthquake tremors in several parts of the State, the city reported a sudden increase in demand for low-rise and independent homes. As against the previous quarters, properties on the outskirts also received an increased number of enquiries. Contrary to the widespread expectations of home buyers, the city did not witness any major price corrections in Apr-Jun 2020. The unsold inventory remained unchanged in Ahmedabad and stood at 8,000 units with QTS (Quarters to Sell) standing at 3.

Going ahead, the quantum of new launches is expected to remain stable with some downward pressure. However, the city’s residential segment would recover gradually due to the continuing labour shortage. Normalcy is likely to be restored once the Government gives more leeway and opens up inter-district transport, and developers make arrangements for migrant workers to travel to project sites. Overall, in the next 2-3 quarters, demand for new residential units is likely to remain muted with a number of developers su_ering from liquidity pressures and home buyers facing income uncertainty.

Table 2:

Transactions (in mn sq m):

Market

2019 quarterly average

Q1 2020 Q2 2020 Q3 2020 Q3 2020 as % of 2019 Qtr average
Kolkata 0.03 0.04 - 0.02 62%
Chennai 0.12 0.12 0.01 0.07 57%
NCR 0.20 0.19 0.00 0.09 43%
Mumbai 0.23 0.23 0.12 0.10 42%
Bengaluru 0.35 0.39 0.05 0.11 30%
Ahmedabad 0.04 0.05 - 0.01 15%
Hyderabad 0.30 0.20 - 0.04 14%
Pune 0.14 0.13 0.06 0.01 10%
Total 1.33 1.35 0.24 0.44 33%

Source: Knight Frank Research Note: Blanks denote negligible numbers Table 2:

New Completions (in mn sq m):

Market

2019 quarterly average

Q12020 Q2 2020 Q3 2020 Q3 2020 as % of 2019 Qtr average
Ahmedabad 0.11 0.24 - 0.14 125%
Bengaluru 0.37 0.37 - 0.10 27%
NCR 0.29 0.03 0.04 0.06 20%
Mumbai 0.18 0.24 0.10 0.03 15%
Chennai 0.04 0.30 - 0.03 15%
Pune 0.10 0.02 - - 0%
Hyderabad 0.25 0.25 - - 0%
Kolkata 0.14 0.01 - - 0%
Total 1.13 1.46 0.15 0.33 29%

Source: Knight Frank Research Note: Blanks denote negligible numbers

The Indian office market had been largely unaffected by the economic slowdown until the end of 2019. Rather, ever since 2014, this market had become quite a hot-cake, in terms of market volumes and rent growth. However, the lockdowns, enforced to contain the spread of the Covid-19 pandemic, also led to a containment for this market. Q2 2020 felt the brunt of the pandemic with most of the top 8 markets having enforced a strict lockdown for a large part of the quarter. This caused the volume of transactions and new completions to fall sharply.

Extreme disruptions in the economic environment and an uncertain revenue outlook caused businesses to defer expansion plans and rather, focus on controlling costs. While the lockdowns were eased by the end of Q2 2020, social distancing norms and remote working ensured that corporate offices were working at 30-50% capacity in most industries. With the economy unlocking in Q3, market traction started to improve in tandem as total transactions and office completions recovered by 80% and 126% respectively, from the preceding quarter. Transactions exceeded new completions during this period and helped keep rental levels fiat or positive in 4 of the 8 markets under coverage, while rentals fell in the range of 1-6% in rest of the markets.

In the case of commercial real estate, we believe technology (IT-BPM), engineering, and manufacturing sectors will drive the demand in 2021. Technology-based companies will broaden their office portfolio over the next 3 years as demand for artificial intelligence, machine learning, and robotics is expected to grow significantly, and Indian talent is being considered favourably for high-end R&D activities.

Ahmedabad Commercial Sector

The office market has run colder than the residential market, as occupiers had largely refrained from taking up space since March last year due to the bleak business environment. Significant supply additions in the recent past along with _agging demand have kept rents under pressure as the vacancy during the period was touching highs owing to lockdowns. However, the last quarter of 2021 brought some heat back on for the office market as occupier interest rekindled hopes of improvement with the resumption of economic related activities. But with the second wave of the pandemic, the sentiments were again impacted.

AHMEDABAD MARKET SNAPSHOT

PARAMETER 2020 2020 H2 2020 H2 2020 Q4 2020

Q4 2020

CHANGE (YOY)

CHANGE (YOY)

CHANGE (QOQ)

New completions mn sq m(mn sq ft) 0.48 (5.1) 4.90% 0.23 (2.52) 12.9% 0.09 (1.0) -34%
Transactions mn sq m(mn sq ft) 0.12 (1.3) -15.1% 0.08 (0.82) -14.5% 0.07 (0.8) 1174%
Weighted average transacted rental INR/sq m/month (INR/sq ft/month)* 442 (41) -4.50% - - - -
Stock mn sq m (mn sq ft)* (31.54) 2.93 19% - - - -
Vacancy (%)* 45.20% - - - - -

Note - 1 square metre (sq m) = 10.764 square feet (sq ft). *End of period number. Source: Knight Frank Resarch

QUARTER SNAPSHOT

Q1 2020 Q2 2020 Q3 2020 Q4 2020
Transactions mn sq m (mn sq ft) 0.05 (0.5) - (-) 0.01 (0.1) 0.07 (0.8)
Transactions as % of 2019 Quarterly average 127% 0% 15% 197%
New completions mn sq m (mn sq ft) 0.24 (2.6) - (-) 0.14 (1.5) 0.09 (1.0)
New completions as % of 2019 Quarterly average Source: Knight Frank Resarch 213% 0% 125% 82%

Indian Retail Sector

The retail sector has been the worst-affected segment in this Covid-19 crisis. The pandemic-induced lockdown had forced all malls to temporarily shut down affecting their business adversely. Malls have been amongst the last to open in 2020 during the unlocking phase, and the fear of virus has kept the consumer footfalls down. As a result, the PE investment dropped by 76% in 2020.

Several mall owners in India had announced a partial/full-rent waiver for the lockdown period in 2020, taking a major hit on the revenues. Some had extended this partial waiver for the rest of the financial year, also offering to waive off a portion of the minimum guarantee or a fixed portion of rents, readjusting to a higher percentage of revenue share.

Significant losses to retailers and the fear of eviction forced mall owners to enter into such arrangements.

The retail sector was barely starting to recover from the crisis, when the second wave of Covid-19 infections struck the nation in March-April, 2021. The new lockdown in several parts of the country has forced retail assets to shut down again. This derailment is limited to certain states presently, but, if it spreads to other states, it may lead to a much bigger loss damaging a majority of the retail asset owners. Such high levels of uncertainty have kept investors away from retail assets, and only one major deal was transacted in Q1 2021.

In Q1 2021, PE investments in retail assets jumped to US$ 484 Million from US$ 220 Million in 2020, owing to the monumental deal between Blackstone and Prestige, which involved multiple retail, office, and hospitality assets as part of the larger transaction.

Ahmedabad Retail Sector

Along expected lines, the festival season triggered our city’s retail sector positively, and to be specific, the main streets experienced a marginal rise in consumer footfall and demand for non-essential retail categories of the likes of apparel, jewellery, and cosmetics. Higher business transactions in these niches fostered higher demand for space take-up in these niches. To further stamp this observation, a few ongoing lease deals got finalised in the popular streets of Prahladnagar and peripheral areas like Bopal.

However, despite early signs of recovery in the main streets, many retailers, mainly the small-scale ones, continue to remain hesitant as they struggle breaking the rental costs even, given the perceptible slowdown in business ever since the Covid-wave first stuck. Many have chosen to close their operations as the consumer tra_c and consequent sale conversions remain low, but such has not been the case with their heavy rentals.

With malls recording no new transactions as their old retailers vacate spaces particularly in the good and average grade ones, the overall mall vacancy rate has undergone a worrisome hike of 119 bps on a Q-o-Q basis.

Over the next few quarters, we shall continue to closely monitor both, the new space take-ups and retailer movement/exits across main streets, malls, and mixed-use complexes in the city, to gauge the impact of the pandemic on the retail sector as well partake the expected timeline for recovery.

Sectoral Demand Prevails Amid Sluggish Sales

Despite the sales momentum remaining slow during the last quarter of the year, retail stores, particularly in the consumer electronics, hypermarkets, and CDIT sector across malls and prominent main streets, have been witnessing higher volume sales and footfall conversion rates due to focused and largely need-based shopping behaviour of consumers.

However, other categories like apparel, beauty & wellness, lifestyle, entertainment centres and multiplexes, gymnasiums, and luxury retail continue to witness much lower traction from their 2019 numbers. The F&B segment, comprising small-scale and local players, was the first one to recover and show some sign of activity, even though they continue to operate for limited hours. E-commerce sales, which have been high for consumer durables and electronics goods, have registered improvements in the segments comprising apparel and lifestyle products as well, during the last quarter of the year, which also coincided with the festive season. Retailers have been practicing the utmost caution with social distancing measures in place to facilitate their consumers with a better shopping experience and instil trust.

Rentals Continue to Remain Stable

Even amidst the low traction and negligible demand for new space take-ups in the city’s retail sector, the lease rentals continue to remain stable when compared to pre-Covid times. Mall and main street rentals, which were already experiencing a downward pressure, have surprisingly reinforced stable parameters in these uncertain times and de_ed any further decline despite retailer requests for rent renegotiations and revenue-share arrangements. With only a few instances of landlords agreeing to marginal renegotiations and waivers, the city’s retail sector did not witness any major drop in rentals.

OPPORTUNITIES AND THREATS Opportunities Consolidation

The Indian real estate sector has been in a consolidation phase from the past few years and has picked up its pace, given the several reforms and disruptions it witnessed.

After the IL&FS default, NBFCs have been mandated by RBI to reduce their exposure to real estate sector, which has created funding issues for smaller real estate developers, who anyway do not have access to bank funding. In such cases, these players face a double whammy: Issues with funding, on one hand, and existing deal cancellations due to halt in construction activity, on the other hand. This opens up new avenues of growth for organised developers, who can show a proven track record with healthy balance sheets, to take over the projects of smaller developers at attractive valuations. It allows them to increase their portfolio, offerings, and improve home-buyer confidence. The ongoing consolidation is expected to accelerate further amidst the pandemic, and established, well-capitalised players stand to gain further market share.

A_ordable Housing

A_ordable housing remains of interest to housing players and the government as well, given the fact that housing options are scanty for the economically weak and low-income segments. The government’s constant push for affordable housing has shifted the focus from high-end and luxury segments to the affordable segment. According to ANAROCK research, during the past 5 years, the share of launches in the affordable segment across the top 7 cities of India, has risen. This participation is expected to increase further in the near future owing to subsidies provided by the

Government to promote affordable housing. Via the Union budget of 2021, the Government announced several measures to boost affordable housing demand. They rolled out additional tax benefits of up to Rs. 1.5 lakh on interest paid for affordable housing loans till March 2021. Also, in order to encourage real estate developers into focusing on affordable housing projects, the Government has extended the date of approval for these projects for availing tax holiday on profit earned by developers by one year till March 2021.

Digital Real Estate Sales

In the modern marketing landscape, digital marketing tools have claimed the throne. Irrespective of the industry, their usage has become popular, and so, for real estate companies too, digital marketing tools are needed. With a sharp focus on building consumer experience and connection through digital means, established brands will be ahead of the curve, with a competitive ‘digital-enabled’ edge for their businesses. According to the report ‘Real Estate in a Digital Age’, around 94% of millennials and 84% of baby boomers searched for their future homes online. Social media platforms can be extensively used to promote listings, maintain relationships with existing customers and find new prospects. Covid-19 has forced real estate companies to focus much more on digital marketing and online platforms.

Monetary Easing

The real estate sector performance has always been closely linked to the country’s economic fundamentals and monetary policies. The Reserve Bank of India cut its benchmark repo rate by 250 bps since February 2019 to 4.0%, which is the lowest ever repo rate, in its attempt to support the slowing economy from further deterioration due to Covid-19. Monetary easing initiatives are expected to provide an impetus to housing demand and encourage home buyers and real estate developers, once the economy revives.

Threats

Regulatory Hurdles

Unfavorable changes in government policies and the regulatory environment can adversely impact the performance of the sector. There have been procedural delays with regards to land acquisition, land use, project launches, and construction approvals, which cost resources, financials, and time. Retrospective policy changes and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operating within the sector.

Business overview

Ganesh Housing Corporation Limited has completed 3 decades of its operations in and around the city of Ahmedabad. Further GHCL has meticulously developed and sold over 22 Million sq. ft. of space in residential, commercial, retail and infrastructure development segments. At present the Company is developing 0.9 Million sq. ft. of space and having largest developable land bank with potential development of more than 50 Million sq. ft. space.

The specialisation of GHCL is into the residential segment. GHCL focuses on middle and high income group. During the year under review the Company launched a project called Malabar County III behind Nirma University, Ahmedabad in affordable housing segment. GHCL is continuously striving to improve the quality of its offerings to its customers.

FINANCIAL PERFORMANCE CONSOLIDATED

INCOME: Total Income decreased to Rs. 182.04 Crores in FY 2020-2021 from Rs. 277.33 Crores in FY 2019-2020.

EBITDA: Earnings Before Interest, Tax and Depreciation increased to Rs. (37.73) Crores in FY 2020-2021, from Rs. (50.41) Crore in FY 2019-2020.

PAT: Profit After Tax increased to Rs. (105.25) Crores in FY 2020-2021 from Rs. (119.62) Crores in FY 2019-2020.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor:

RATIOS 2020-21 2019-20 Di_ _ in % REMARKS
Debtors Turnover Ratio 2.93 3.26 -0.33 -10.12% Debtors Turnover Ratio has declined on account of less than expected realisation from the sales.
Inventory Turnover Ratio 0.46 0.51 -0.05 -9.80% Inventory Turnover Ratio has declined marginally on account of less than expected realisation from the sales.
Interest Coverage Ratio -0.47 -0.63 0.16 -25.40% Interest Coverage Ratio has improved on account of reduction in Debt Liabilities.
Current Assets 2.66 3.40 -0.74 -21.76% Current Ratio has improved with the conversion of Inventory into Sales realisation and reduction in debtors.
Debt Equity Ratio 0.92 0.91 0.01 1.10% Debt Equity ratio is stable on account of further reduction in Debt Liabilities.
Operating Profit Margin -22.99% -19.08% -3.91% 20.49% Operating Profit Margin Ratio has declined due to fall in EBIT on account of less than expected realisation from the sales.
Net Profit Margin -61.35% -43.50% -17.85% 41.03% Net Profit Margin Ratio has declined due to fall in PAT on account of less than expected realisation from the sales.
Return on Net worth -17.87% -16.68% -1.19% 7.13% Return on Net Worth has declined on account of decline in PAT on account of less than expected realisation from the sales.

HUMAN RESOURCE

GHCL strives to built a pool of talented employees across all the levels in the hierarchy of administration. They will fit into the requirements of the organisation which will eventually achieved its preconceived objects and missions. GHCL takes requisites steps in order to attract, retain and motivate employees at all levels. Due to the employee oriented policies the attrition rate is very low. The total employee strength as on 31st March 2021 stood at 120 employees.

INTERNAL CONTROL SYSTEM

Ganesh Housing identified new risks and re-evaluated old risks during the year, in the process of considering risk mitigating strategies. Some of the risks, that the Company’s core businesses are exposed to, include credit risk, market risk, operational risk, and legal risk. GHCL has also analysed specific risks related to the management of investments and the environment within which it operates. The Company manages cost-escalation risk through processes aimed at optimising costs with our suppliers and sorting rigorous contracts and procurement. To manage project execution risk, Ganesh Housing evaluates track records and performance capabilities to ensure the right contracts are on board. As a part of the monitoring system, a project review is done every week on timelines and budgets to evaluate project cost and costs to completion.

CAUTIONARY STATEMENT

The Management Discussion and Analysis report containing your Company’s objectives, projections, estimates and expectation may constitute certain statements, which are forward-looking within the meaning of applicable laws and regulations. The statements in this Management Discussion and Analysis section of the report could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include raw material availability and prices, cyclical demand and pricing in the Company’s principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.