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Indo Pacific Projects Limited is a listed real estate development company in Nagpur. Over the years the Company has created a reputation for itself by delivering an array of highly successful projects. The Company has developed large residential and commercial projects. This report presents an overview of operational and financial performance of the Company during the year 2016-17 and its strategy for future growth.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
In a subdued global economic environment, Indias micro economic performance remains stable in 2016-17. As far as real estate industry is concerned the overall performance continued to be subdued housing prices, rents and offtake of housing loans continued to be sluggish during the year. The Government has rolled out a plan to invest in infrastructure and improve the environment for doing business. Programmes such as affordable housing and smart cities are expected to benefit the real estate industry. This augurs well for the real estate industry.
The Companys strength lies in its ability to provide end to end comprehensive range of technical services for infrastructure development. It has provided domestic experience. The company has expert technical personnel. The successful past business track record has helped company in being qualified for mobilizing the resources for services to most of large project contracts.
RISKS AND CONCERNS:
Completion risk: This is the risk that the project may not be completed on time, or at all, due to various reasons such as cost overruns, technology failure, force majeure etc.
Price risk: This is the risk that the price of the projects output might be volatile due to supply-demand factors. If new capacities are coming up or if there is likelihood of fall in demand of the project output, the price risk is liigh. Rental market, from which most of the Company revenue comes, remains uncertain and hence it affects the Companys revenue and profits.
Economic risks: Even though policy rates have been reduced by RBI, it has not resulted in the desired reduction in interest rates for home loans. This has a direct impact on the real estate sector and the Company.
Operational risks: The operational risks faced by the Company include longer period for procurement of land, prolonged time taken for approvals, inability to complete and deliver projects according to the schedule leading to additional cost of construction and maintenance and erosion of brand value, appointment and retainment of quality contractors, inability to attract and retain talent, poor customer satisfaction, fraud and unethical practice, failure to comply with laws and regulations leading to fines, penalties and lengthy litigations. The Company addresses these issues through policies that ensure transparency in operations, timely disclosures and adherence to regulatory compliances leading to enhanced shareholder value.
INTERNAL CONTROLS AND THEIR ADEQUACY:
Your company has adequate internal control system commensurate with the size of its business across various profit and cost centers.
Defined roles and responsibilities and delegation of powers for all managerial position have been well documented and institutionalized. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements.
A comprehensive Management information System covers major operating parameters and is monitored regularly. Any material change in the business outlook is considered by the Board of Director. Material deviations from planning and budgeting are reviewed on a quarterly basis by the Board of Directors for corrective actions.
Economic environment throughout the world was rather subdued in 2016-17. Economic recovery in advanced economies was modest; while emerging markets and economies have not shown stellar growth for the last few years. India is the only large economy that has maintained a steady growth rate but the investment growth cycle is yet to kick in, given the weak global outlook and low capacity utilization levels across industries. A much needed reduction in interest rates for both businesses and consumers which can spur both demand and confidence has not yet materialised. Given the capital intensive nature of the business, the real estate industry in India has also been severely affected by the situation. The Management believes that the Company is well positioned to benefit from the opportunities that will emerge as the economic situation improves further. So, the outlook for 2017-18 is cautiously optimistic.
Statement in Management Discussion and Analysis report describing the Companys objectives, projections, estimates and expectations may be forward looking statements with the meaning of applicable laws and regulations. Actual results might differ from those expressed or implied.