Geecee Ventures Ltd Management Discussions.

GeeCee Ventures Limited has created a reputation for itself for delivering an array of highly successful projects and establishing industry benchmarks in sustainable development. GeeCee Ventures Limited is engaged in the development of residential housing cum commercial projects. Company has into 3 Business Segments viz. (i) Real Estate (ii) Investments /Financing and (iii) Wind Power Generation.

> Overview

Global Economy

Organizations across the globe are undergoing an unprecedented change and transformation in their businesses led by forces such as digital, increasing consumerization of IT, emergence of new platforms such as cloud services and increasing disruptions and competition from new-age companies. Technology access and usage has been largely democratized and mainstreamed. There has been a profound change in how technology is developed, delivered and consumed.

The global economy is projected to expand by 3.3% in 2019, while it is projected to grow by 3.6% in 2020. Growth is expected to level-off in the first half of 2019 and then strengthen in the latter half. Improvement in overall financial market sentiments, a gradual stabilisation in emerging markets, fading headwinds in the eurozone and policy stimulus in China are expected to act as growth enablers towards the end of 2020. In the meantime, central banks of major economies are likely to adopt an accommodative policy stance to boost growth, amid downward adjustments to inflation expectations.

However, the US was an outlier among advanced economies as its Gross Domestic Product (GDP) grew 2.9%, an increase of 70 basis points over the 2.2% growth registered in 2017. A strengthening US Dollar, neutral unemployment and minimal inflation were the primary catalysts behind this growth. Eurozone registered a GDP growth of 1.8% in the year, down from 2.4% in 2017, largely due to sluggish demand in the domestic market. At 6.6%, Chinas economic growth was lower than the 6.9% level recorded in 2017.

Indian Economy

India has emerged as the fastest growing major economy in the world and it is expected to be one of the top three economic powers of the world over the next 10-15 years backed by its strong democracy and partnerships. The implementation of structural reforms such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC) framework have been of critical importance.

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, has launched the Make in India initiative with an aim to boost the manufacturing sector of Indian economy, to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors.

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 has also plans to increase its renewable energy capacity from 57 GW to 175 GW by 2022.

> Industry Structure & Developments :

The real estate sector is one of the most globally recognized sectors. In India, real estate is the second largest employer after agriculture and is expected to grow at 30% over the next decade. Financial year 2018-19 was a significant year for the real estate industry from a regulatory standpoint with the implementation of landmark reforms/changes such as Goods and Services Tax Act (GST), Real Estate (Regulation and Development) Act, 2016 (RERA), Ind AS 115, Insolvency and Bankruptcy Code, 2016 (IBC), etc. that pushed the industry towards an improved ecosystem. These policy initiatives are making the real estate and other sectors more efficient and organized, as well as in increasing customers confidence with greater transparency and protection for home buyers.

The Government of India along with the governments of the respective states has taken several initiatives to encourage the development in the sector. The Smart City Project, where there is a plan to build 100 smart cities, is the prime opportunity for the real estate companies.

During the fiscal year 2018-19, majority of the launches as well as demand have been witnessed in the affordable housing segment. This was driven by incentives announced by the government under Pradhan Mantri Awas Yojana (PMAY) which pushed developers towards the affordable segment. Policy initiatives undertaken by the government in the past two years have contributed to increased home buyer interest in this segment.

> Highlights of Budget 2019

Central Budget announcements indicate the governments changing stand towards investment demand in real estate. Steps taken to provide exemption from notional rent tax on second property is focused towards improving real estate investment demand. For affordable housing, the government has extended the time limit for availing tax deduction by one year. Following are some of the key points of budget 2019:

i) Notional tax on unsold inventory to be charged after two years

At present developers are liable to pay tax on notional rental for unsold inventory one year after completion of the project. Finance Bill exempted developers from notional rent based tax for a period of two years.

ii) Extension of tax rebate for affordable housing projects by one year

Finance Bill extended time period up to March 2020 for approval of projects (affordable housing) under Section 80-IBA to claim 100% tax exemption on profits from such projects.

iii) Flexibility on utilization of capital gains

Finance Bill permitted investment of capital gains up to र 2 crore in two residential properties as against one property permitted previously (Section 54 of the Income Tax Act).

> Changes in GST Rates

In March 2019, GST Council approved lower GST rates for real estate sector by giving real estate developers an option to continue with the old GST rate of 12%/8% (on affordable housing project) with credit for input tax subject to certain terms & conditions. New projects starting from April 1, 2019 and the developers who opt for new revised rates will have the new tax rates of 1% for affordable housing projects and 5% for other housing projects, without the benefit of input tax credit. Commercial projects will continue to attract 12% GST with input tax credit. If commercial apartments such as shops, offices etc. in a residential real estate project in which the carpet area of commercial apartments is not more than 15% of total carpet area of all apartments than the commercial apartment will be charged at 5% GST.

Transfer of development rights (TDR) or Floor Space Index (FSI) (including additional FSI) and long term lease (30 years or more) will attract GST at the applicable rate, on reverse charge basis on the un-booked residential units on the date of issuance of completion certificate, or first occupation of the project, as the case may be.

> Opportunities and Threats :

With NBFCs restraining their lending to cash strapped developers, there exists a huge opportunity for organized developers with strong balance sheets and execution track records to partner smaller developers at attractive valuations. This should also allow organized developers to increase their portfolio strength, improve market share and inspire confidence in the minds of skeptical buyers. The ongoing shake up in real estate sector is a pre-cursor to a transparent business environment driven by reforms such as RERA which is improving transparency and rising consumer activism on account of poor delivery by stressed developers.

The government announced a big boost for affordable housing, which is expected to be the next big growth area. Under the Smart Cities program, a total of 100 cities will see the program positively impacting the lives of nearly 9.95 crore people with high-quality core infrastructure and more sustainable quality of life. The middle income and low income buyers will benefit with the availability of low interest rate home loans and low GST rate.

The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform which will help in allowing all kinds of investors to invest in the Indian real estate market. Mutual funds have been allowed to invest in REITs (Real Estate Investment Trusts) and InvITs, (Infrastructure Investment Trusts) which will give investors securitized access to realty assets in commercial segment.

The Real Estate (Regulation and Development) Act, 2016 has brought sweeping reforms and transparency in the sector, with equal protection for buyers. In Maharashtra, MAHA RERA, the regulatory authority appointed by Government of Maharashtra under the Act is fully functional and has been responsible for greater transparency in the Real Estate sector. It has incorporated mandatory disclosure clauses which provide clarity on project standards and time lines for completion. It has also incorporated measures to ensure that cash flow from projects are ideally used only for completion of the project. Consumers can now take prudent and confident decisions on their home purchases.

The industry has been some level of consolidation and new project launches happen only after the proper financial closure and regulatory approvals.

With the Government initiative of relaxation of Foreign Direct Investment (FDI) norms in the Indian real estate sector, there is renewed interest of investing in real estate stock of completed or under construction projects. This phenomenon is especially being seen in commercial real estate segment. The demand for real estate in a country like India should remain strong and with your Companys well-designed strategy and focus on making sound and informed strategic decisions catering to the market requirements makes it much preferred choice for customers and shareholders - medium to long term. Your Company is ideally placed to further strengthen its development potential by acquiring new land parcels.

With NBFCs restraining their lending to cash strapped developers, there exists a huge opportunity for organized developers with strong financial statements and execution track records to partner smaller developers at attractive valuations. This should also allow organized developers to increase their portfolio strength, improve market share and inspire confidence in the minds of skeptical buyers.

One of the hurdles to the real estate industry is continuous change in government policies and the regulatory environment can adversely impact the performance of the sector. There are substantial procedural delays with regards to land acquisition, land use, project launches and construction approvals. Retrospective policy changes and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operating within the sector.

Despite being the largest employer in the country, the construction sector faces manpower shortages. Further, the sector is heavily dependent on manual labor which increases the timelines for construction companies and results in supply getting deferred.

An overall positivity, propelled by a combination of factors, is expected to push growth in the finance industry over the long term.

The Indian financial service sector, comprising of range of institutions from commercial and co-operative banks, pension funds and NonBanking Financial Companies (NBFCs) to Mutual Funds, insurance companies etc. is diverse and expanding rapidly. Over the years, the Government of India has initiated several reforms to liberalize industry this industry and expand its reach to individuals and Micro, Small and Medium Enterprises (MSMEs) in need of credit and other financial services.

In the Investing/Financing business while there has been considerable improvement in macro variables, the same has not yet favourably impacted the corporate earnings owing to lower rural demand, currency headwinds and delay in the revival of investment cycle. It is expected to have picked on corporate earnings with full transmission of interest rate and impact of lower commodity prices translates to lower input costs for corporate. Medium term risk in the form of global growth slowdown and slow movement of critical reforms to push through may continue to weigh on market sentiments. Nevertheless, we continue to remain positive on equities as an asset class with expectations of improvement in corporate balance sheet and revival of investment cycle.

Investments are never risk free and are prone to various global and local issues which may at any time turn a profitable investment to loss making investment. Investments in Equity, Debt, and Mutual Fund are all asset class whose performance depends on the various factors which are not controllable. Other risks which affect financial services in India are slower than expected recovery of macro-economy, domestically as well as globally, or inability of Government to push through major economic reforms can delay the return of growth. The total transmission of rate cuts would reduce the long term returns on interest bearing investment and financing instruments.

Liquidity crisis in the NBFC sector has adversely impacted the availability of funds for the developers which have resulted in slowdown in the real estate segment. With the NBFC funding becoming scarce and costly, the established developers with good track record who have strong balance sheets and have access to alternative sources of funding will have edge over the other players in the segment and the pace of consolidation in the sector will further accelerate.

> Segment-wise/Financial & Operational Performance :

The Company has received Occupancy Certificate (OC) for "Cloud 36", project at Ghansoli, Navi Mumbai and the society is also formed. The Company will hand over the project to society in due course of time. The construction activity at Karjat - "The Mist" is progressing as per schedule. The Company has launched its third project "GeeCee Aspira 206" at Plot No. F-3, Sector 06, New Panvel East, Navi Mumbai, Raigarh-410206. Company has received the Registration Certificate of Project from Maharashtra Real Estate Regulatory Authority on 5th March, 2019 and presently this project is progressing as per schedule.

The Company has large pool of liquid assets and there exists an opportunity to invest it very efficiently. The Company sees good opportunities to invest its funds in risk free Inter-Corporate Deposits and interest bearing financial instruments. The Company endeavors to maximize its return on surplus funds, within the parameters of prudent investment norms giving highest regard to the quality of credit risk to its investment/financing portfolio.

The Wind Power Division of GeeCee Ventures Limited commissioned its operation in 2010 by setting up 5.35 MW Wind Turbine Generators in Jodhpur District, Rajasthan. The entire power generated from these wind turbines is supplied to the power deficit state of Rajasthan.

Your Company has booked revenue from real estate in the current financial year as per the Ind AS 115 "Revenue from contracts with customer" issued by MCA, effective from 1st April, 2019. The revenue from the real estate segment has been increased to र 10012.22 lakhs in F.Y. 2018-19 as compared to र6,786.73 lakhs in F.Y. 2017-18. The revenue from investments/financing has been decreased from र11,449.04 lakhs in F.Y. 2017-18 to र4,393.69 lakhs in F.Y. 2018-19.

Revenue from wind power energy segment has been increased from र229.46 lakhs in F.Y. 2017- 18 to र293.09 lakhs in F.Y. 2018-19.

The Company has earned revenue of र15,296.40 lakhs as compared to previous year revenue of र18,561.29 lakhs. Net Profit after tax has been increased from र3,008.12 lakhs in the previous year to र3,509.83 lakhs in the current year.

The Company has only one class of shares - Equity shares of par value of र10 each. The Authorised Share Capital of the Company as on 31st March, 2019 was र50,50,00,000/- divided into 5,05,00,000 equity shares of र10/- each.

During the year under review, Authorised Capital remained same as per previous year. Paid up Share Capital of the Company for the financial year ended on 31st March, 2019 was र21,72,65,430/- divided into 2,17,26,543 equity shares of र10/- each.

> Outlook, Risk and Concerns:

The real estate sector in India is heavily regulated by the central, state and local governments. Real estate developers are required to comply with a number of laws and regulations, including policies and procedures established and implemented by local authorities in relation to land acquisition, transfer of property, registration and use of land. These laws often vary from state to state.

OUTLOOK

In the last few years, the Indian real estate industry has witnessed a positive change in favour of organized players with strong brand equity. Implementation of Real Estate (Regulation and Development) Act (RERA) and Goods and Service Tax Act (GST) have not only ensure greater transparency and protection for home buyers, but have also rewarded more efficient and organized players in the industry by reducing the cost arbitrage benefits of the unorganized sector.

The outlook for the world economy, including the trade and investments, for next couple of years will remain positive. The performance of the Indian economy also picked-up as the year progressed, and this trend is expected to continue in FY 2019-20. In fulfilling the dispersed growth objective, the Government is committed to build world-class infrastructure that links to towns and cities and provides "housing for all by 2022." As far as real estate industry is concerned, policy breakthroughs such as Real Estate (Regulation and Development) Act will make the sector more efficient and organized in the long run. The housing cycle has also started showing positive signs in the form of improvement in cement demand, progress in the governments affordable housing scheme, step-up in execution under the Pradhan Mantri Awas Yojana Scheme and large infrastructure development project.

The Company has registered its projects under RERA and is already compliant with the provisions pertaining to RERA and its level of preparedness for adherence continues to be high. Company has a strong balance sheet and has been able to raise capital at competitive terms even during the challenging times. Company still continues to be a Debt Free Company for the F.Y. 2018-19.

Our Company has a proven track record in residential developments. In the last few years, it has expanded its presence in the residential segment with a superior delivery model and a successful foray into affordable housing.

The Company has a well-structured and robust risk management mechanism which continuously evaluates risk mitigation on an on-going basis. The risk management system is working smoothly and will be evaluated for stress test or modification upon change in size or nature of business. The Risk Management System is reviewed periodically and necessary changes are made, if required. The Company faces risks in real estate sector business mainly on account of following factors:

a) Market price fluctuation: The performance of your Company may be affected by the sales realizations of its projects. These prices are driven by prevailing market conditions, the nature and location of the projects, and the design of the projects.

b) Sales: The volume of bookings depends on the ability to design projects that will meet customer preferences, getting various approvals in time, general market factors, project launch and customer trust in entering into sale agreements well in advance of receiving possession of the projects.

c) Execution: Execution depends on several factors which include labour availability, raw material prices, receipt of approvals and regulatory clearances, access to utilities such as electricity and water, weather conditions and the absence of contingencies such as litigation. Your Company manages the adversities with cautious approach, meticulous planning and by engaging established and reputed contractors.

d) Land/Development rights - Availability:

The cost of land forms a substantial part of the project cost, particularly in Mumbai. Your Company acquires land/land development rights from the government and/or private parties. Delay in acquisition of Land Development Rights at reasonable cost, could affect the growth of the business.

The Indian economy currently stands at a strong footing with the interest rate rolling downwards, fiscal deficit mostly under control and the governments continued push for reforms and ease of doing business.

Further, the pay commission suggestion for hikes in pay-outs for government employees coupled with soft commodity prices are likely to result in a consumption driven growth.

The securities market risk usually defines the risk involved in the investments. The stark potential of experiencing losses following a fluctuation in security prices is the reason behind the securities market risk. Risk is the integrated part of the investment. The higher the potential of return, the higher is the risk associated with it. Systematic & Prudent asset allocation is strong tool to mitigate the securities market risk.

a) Policy and Regulatory Risks:

The real estate industry is easily affected by changes in government policies and regulations. There are considerable procedural delays with respect to approvals related to acquisition and use of land. Unfavorable changes in government policies and the regulatory environment may adversely impact the performance of the Company.

The Company attempts to mitigate these risks through its approach towards acquisition of

land based on the through due diligence and its transparent processes in developing the project. Besides, its focus on environment friendly and sustainable practices also helps in mitigating risks associated with environmental regulations.

b) Economic Risks:

GDP growth rate decelerated marginally during the year. Although there are signs of a turnaround, there are still downside risks. Lending rates for business and home loans continue to be high and there are risks associated with increase in policy rates if inflation rises. These can have a direct impact on a real estate sector and the Company. Besides, even as global economic growth witnessed a significant revival, investment outlays in Indian businesses, especially those in export-oriented industries, is yet to benefit from emerging trends.

GeeCee Ventures Limited is conscious of these risks and is taking measures to mitigate them. For instance, Companys focus on residential sector has been significant source of comfort during periods of slow economic performance.

The Company addresses these risks through a well-structured framework which identifies desired controls and assigns ownership to monitor and mitigate these risks. It also has a Code of Conduct for all Board members and senior management personnel. The Companys corporate governance policies ensure transparency in operations, timely disclosures and adherence to regulatory compliance.

> Internal Control systems and their adequacy

The Company has adequate internal control systems commensurate with the size and nature of its business. Well documented policies, guidelines and procedures to monitor business and operational performance, all of which are aimed at ensuring business integrity and promoting operational efficiency. All assets are safeguarded and protected against loss from unauthorized use or disposition and the transactions are authorized, recorded and reported correctly, financial and other data are reliable for preparing financial information and other data and for maintaining accountability of assets. The internal control is supplemented by extensive programme of internal audits and review by management. The system has been designed to ensure that financial and other records are reliable for preparing financial information and for maintaining accountability of assets. All financial and audit control systems are also reviewed by the Audit Committee of the Board of Directors of the Company. The Audit Committee of the Board reviews the adequacy and effectiveness of the internal control systems and suggests improvements, if any for strengthening them.

An independent internal audit firm appointed by the Company conducts periodical audits to ensure adequacy of internal control systems, adherence to management policies and compliance with the laws and regulations of the country. Their scope of work also includes internal controls on accounting, efficiency and economy of operations.

> Human Resources

Your Companys closing headcount for F.Y. 201819 was 48, as against 39 in financial year 201718. GeeCee Ventures Limited recognizes that its people are key to the success of the organization. Your Company continued to make substantial investments in human capital to meet its growth targets. The Companys business is managed by a team of competent and passionate leaders capable of enhancing your Companys standing in the competitive market. The Companys focus is on unlocking the people potential and further developing their functional, operational and behavioral competencies. The relations with all employees of the Company remained cordial and there were no significant issues outstanding or remaining unresolved during the year. The Board of Directors and the Management wishes to place on record their appreciation of the efforts put in by all the employees.

The ultimate aim of the management is to create a dependable work force that will play a key role in assisting the Company to achieve its goals in the various new business opportunities the Company is pursuing. To achieve the highest levels of organizational performance, Company has a well exercised approach to organizational and personal learning that includes sharing knowledge via systematic processes. In this process, the Company has appointed an external agency to secure protection of and safeguard the women employees against sexual harassment at workplace. Organizational learning includes both continuous improvement of existing approaches and significant change of innovation leading to new goals and approaches.

We believe that our continued success will depend on ability to attract and retain key personnel with relevant skills and performance.

> Key Financial Ratios

In accordance with SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the details of significant changes (i.e. Change of 25% or more as compared to the immediately previous financial year) in key financial ratios are given below:

Ratios F.Y.

2018-19

F.Y.

2017-18

Formulae Explanation
Debtors Turnover 2.67 1.11 Net Credit Sales/ Average Trade Receivables Increase in Debtors turnover ratio is majorly on account of higher revenue recognized in real estate business during current year as compared to previous year.
Inventory Turnover 0.51 0.60 Cost of Goods sold/ Average Inventory
Interest Coverage Ratio 1716.06 1803.74 Earnings before interest, taxes, depreciation and amortization expenses/ Interest expenses
Current Ratio 16.87 13.20 Current Assets/ Current Liabilities Increase in Current Ratio is majorly on account of decline in advance received from customers on account of higher revenue recognized in real estate business in current year.
Debt Equity Ratio - - Debt/ Equity
Operating Profit Margin (%) 28.83 16.71 Earnings before interest, taxes, depreciation and amortization expenses/ Total Revenue Increase in operating profit margin is majorly on account of higher revenue recognized in real estate business during the current year.
Net Profit Margin (%) 22.95 16.21 Net Profit after tax/ Total Revenue Increase in Net Profit Margin is majorly on account of higher revenue recognized in real estate business during the current year.
Return on Net Worth 8.02 7.63 Net Profit after Tax/ Shareholders Fund (Equity)

> Cautionary Statements

Statements in the Management Discussion and Analysis describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that would influence the Companys operations include cost of raw materials, tax laws, interest and power cost and economic developments and such other factors within the country and the international economic and financial developments.

The Company assumes no responsibility nor is under any obligation to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events.