Kolte Patil Developers Ltd Management Discussions.

Indian economic overview

India retained its position as the sixth-largest economy and the fastest-growing trillion-dollar economy through a major part of the year under review (except in the last quarter of 2018-19). After growing 7.2% in 2017-18, the Indian economy is estimated to have grown 6.8% in 2018-19 as per the Central Statistics Office release, May 2019.

The principal developments during the year under review comprised a sustained increase in per capita incomes, decline in national inflation, steadying interest rates and weakened consumer sentiment from the second half of the financial year. The weaker sentiment was on account of a large non-banking financial company announcing its inability to address liabilities. This affected credit expansion, financial markets and consumer sentiment, which, in turn, resulted in slower GDP growth that declined to 5.8% by the fourth quarter of 2018-19, the slowest growth in a single quarter in years.

In 2018, the country attracted ~US$ 42 billion in FDI inflows as per the World Investment Report, 2019. Driven by strong policy reforms, India witnessed a 23-notch jump to a record 77th position in the World Banks latest report on the ‘Ease of Doing Business that captured the performance of 190 countries.

The commencement of the US-China trade war opened a new opportunity for India, particularly in the agro sector. Inflation (including food and energy prices) was estimated at 2.6% on an annual basis, one of the lowest in years and well below the Reserve Bank of Indias medium-term target of 4%. The rupee rebounded after touching a low of Rs.74.45 to a dollar to close the financial year at Rs.69.44. During the fiscal year under review, the Indian Government continued to invest deeper in digitization, renewable energy capacity generation and infrastructure building.

Key government initiatives

The Indian government continued to take a number of initiatives in strengthening the national economy.

Bank recapitalization scheme

In addition to infusing Rs.2.1 lac crores in public sector units, the Indian Government announced a capital infusion of Rs.41,000 crores to boost credit for a strong impetus to the economy in FY18-19. The Budget 2019-20 mandated that the Union Government will infuse Rs.70,000 crores to strengthen and enhance their lending capacity. (Source: Hindu Business Line)

Expanding infrastructure

Indias proposed expenditure of Rs.5.97 trillion (US$89.7 billion) towards infrastructural development in Union Budget 2018-19 is expected to strengthen the national economy. As of November 2018, total length of projects awarded under Bharatmala Pariyojana (including residual NHDP works) was 6,460 kms, for a total cost of Rs.1.52 trillion (US$ 21.07 billion). The Government has announced to invest Rs.10,000,000 crores (US$ 1.5 trillion) in infrastructure over the next five years in Budget 2019-20. (Source: IBEF)

Ujjwala Yojana and Saubhagya Yojana

With the help of this initiative, the Government has transformed the lives of every rural family, dramatically improving ease of their living by providing electricity and clean cooking facility to all willing rural families by 2022.

UDAN

This scheme is directed towards providing air connectivity to smaller Indian cities, enabling the common citizens to avail the option of travelling via air. Under this scheme, a number of airports are likely to be constructed.

The Insolvency and Bankruptcy code (Amendment), Ordinance 2018

Passed in June 2018, the ordinance provides significant relief to home-buyers by recognising their status as financial creditors. The major beneficiary comprised MSMEs, empowering the Indian Government to provide them a special dispensation under the code. (Source: PIB)

Pradhan Mantri Kisan Samman Nidhi

The Indian Government announced, in February 2019, the Pradhan Mantri Kisan Samman Nidhi, a scheme promising an annual assured income of Rs.6,000 (US$84.5) for any farmer owning =2 hectares of farmland. The budget for fiscal year 2020 allocated Rs.75,000 crores for the scheme, benefiting ~120 million land-owning farmer households.(Source: PIB)

Direct Benefit Transfer

The Direct Benefit Transfer initiative re-engineered the cash disbursement process in welfare schemes through simpler and faster flow of information/ funds to ensure accurate targeting of beneficiaries, de-duplication and reduction of fraud. In 2018-19 alone, this scheme is estimated to have transferred >H300,000 crores and the gains to have accrued since scheme implementation (upto March 2019), estimated at Rs.141,677.56 crores.

(Source: Live Mint, Economic Times, Reuters, PIB, Union Budget, World Bank, Times Now, Dbtbharat)

Indian economic outlook

The Indian economy appears to be headed for sustained sluggishness in 2019-20. Even as a new government is expected to remain pro-investment and pro-business resulting in a larger spending on infrastructure build-out, an economic revival appears some quarters away. The long-term outlook of the country appears to be positive on account of the various economic reforms, increasing aspirations, sustained consumption momentum and a national under-consumption across a range of products appearing to correct. (Source: CSO, Business Standard)

Indian real estate overview

The Indian real estate sector is one of the key sectors with a contribution to GDP estimated at 6-7%. The sector employs around 52 million individuals with the promise of generating 15 million new jobs across five years. India has moved up just one spot in the global real estate transparency index from 36 in 2016 to 35 in 2018.

The size of Indias real estate was estimated at US$120 billion in 2017 and is projected to reach a market value of US$ 1 trillion by 2030. The sector passed through a slowdown and as of 2018, India had an urban housing shortage of 10 million units.

The year 2018 is described as a revitalization mode for the Indians real estate sector for various reasons: the implementation of RERA resulted in the unorganized players either vacating the sector or merging their business interests with the larger organized players. The result is that aggregate real estate activity in the country declined.

Besides, during 2018, the slowdown induced the liquidity crisis, following which demonetization affected purchase decisions in some parts of the country. The implementation of GST created teething problems which affected real estate players.

One of the biggest impacts on the countrys real estate sector came from the slowdown in the Indian economy as a result of the non-banking financial crisis in the second half of 2018-19. This crisis resulted in a credit squeeze imposed by the banking sector on advances to the real estate sector, which, in turn, affected project progress across the country. The slowdown also affected consumer sentiment, as a result of which the overhang of sectoral inventory persisted through the course of the financial year.

Perhaps the only highlight of the sector was the growth of the affordable housing segment. As per the data shared by the ministry of urban affairs and housing, around 68.5 lakh houses have been approved so far for construction under the PMAY (U). Out of these, 35.67 lakh houses are under various stages of construction of which 12.45 lakh houses have already been completed. The total investment involved is Rs.356,397 crores. This segment outperformed the sectoral growth average and the national GDP growth for 2018-19.

The other segment to have grown attractively was warehousing, riding on the growing interest in logistic management following the implementation of GST in 2017.

In Union Budget 2019, the Indian government catalysed infrastructure development by allocating US$92.22 billion for the sector and bringing affordable housing under the ambit of ‘Infrastructure.

Through reforms like PMAY, CLSS, RERA and granting infrastructure industry status to affordable housing, the government provided a much-required momentum to housing, but there is still a shortage of 2 crores housing units and an expected requirement of almost 6 crores units by 2022 mainly from the LIG/MIG segment.

Despite the high ownership rates of houses, there is a significant housing shortage in India. The overall housing shortage is due to changing social and demographic patterns in India, such as rising urbanization and the nuclearization of families. For the Twelfth Plan period (2012 to 2017), shortage of housing units in India was been estimated at 18.8 million and 43.7 million in urban areas and rural areas, respectively. Approximately, 95.21% of the urban housing shortage occurred among the economically weaker sections and low income groups. The overall potential market for housing finance in the affordable segment would be Rs.5.6 trillion to Rs.12 trillion in the urban segment, the potential based on the housing shortage, the estimated price of an average house (RS.500,000 to Rs.800,000 per house) and the average housing loan amount at an LTV of 60% to 80%.

Affordable housing has been the biggest driver for growth in the real estate sector and the Pradhan Mantri Awas Yojana (PMAY) has reduced urban Indias housing shortage by 60%. More than 9 lakh houses of upto Rs.50 lakhs each have been completed in just over three years and over 30 lakh have been approved. Over 60 lakh houses have been sanctioned under the PMAY (U) till 2018, out of which 33 lakh are under beneficiary-led construction (BLC). (Source: Times of India, IBEF, JILL-FICCI report)

Government initiatives

The GST rate payable on affordable homes, with effect from April 2019, came down from 8% to 1%, and all other residential properties outside the affordable segment attract 5% GST instead of the 12% levied earlier. The new rate on affordable homes, defined as units that cost less than Rs.45 lakhs and with a carpet area of 60 square metres in metro cities and 90 square metres in non-metros, is far lower than the 3% rate mooted by a ministerial panel.

The GST Council removed the input tax credit (ITC). The developers of residential projects which are incomplete as on 31 March 2019, will have the option either to choose the old structure with ITC or to shift to the new 5% and 1% rates, without ITC. Builders will get a one-time option to continue paying tax at the old rates (e_ective rate of 8% or 12% with ITC) on ongoing projects (buildings where construction and actual booking have both started before 1 April 2019, but which will not be completed by 31 March 2019).

• Rollover of capital gains allowed for two houses as a one-time benefit of =Rs.2 crores

• Section 80IA benefits extended for one more year for affordable housing projects approved by 31 March 2020

• Under the Housing For All scheme, 60 million houses are to be built which include 40 million in rural areas and 20 million in urban areas by 2022

Government policies

• Pradhan Mantri Awas Yojana (PMAY) – Housing for all

Pradhan Mantri Awas Yojana is a social welfare flagship programme of the Indian Government, launched by honourable Prime Minister Shri Narendra Modi in 2015, to provide housing at an affordable price to the weaker sections of the society, lower-income group people, urban poor and rural poor. The Government invested Rs.26,405 crores in 2018. The Yojana commits construction of around 20 million houses at an affordable price by 31 March 2022.

• Real Estate (Regulation and Development) Act, 2016

The Real Estate (Regulation and Development) Act, 2016 which came into force in March 2016 has laid down a regulatory framework which will change the way the real estate sector operates in India. It aims to enhance transparency, bring greater accountability in the realty sector and set disclosure norms to protect the interest of all stakeholders. Speedy execution of property disputes will also be ensured in due course.

• CLSS (Credit Linked Subsidy Scheme)

The Credit Linked Subsidy Scheme for the Middle Income Group (CLSS for MIG) was announced on 31 December 2016 and is further extended till March 2020 for first time urban home buyers who have annual income between Rs.6 lakhs and Rs.18 lakhs. For the MIG I category (consists of individuals with an annual income of Rs.6-12 lakhs) an interest subsidy of 4 per cent is provided on a loan of upto Rs.9 lakhs. For the MIG II category (consists of individuals with an annual income of Rs.12-18 lakhs) an interest subsidy of 3 per cent is given on a loan of upto Rs.12 lakhs.

• Smart City Mission

The Government of India has launched the Smart Cities Mission on June 2015 to promote sustainable and inclusive cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘Smart solutions. The Government invested Rs.2.05 lakh crores in 2018.

City-wise commercial space demand (million sq ft) 2013-17

Cities Commercial space
Pune 16
NCR 25
Mumbai 26
(Source: IBEF)

Cumulative hosing demand-supply in top-eight cities, 2016-20 (‘000 units)

Category Demand Supply
Higher income group 717 351
Middle income group 1,457 647
Lower income group 1,982 25
(Source: IBEF)

Outlook

Going ahead, the year 2019 could be better, influenced by the outcome of the general elections, credit growth and infrastructure investments. Inventory liquidation is expected to continue through 2019 as; sectoral players are likely to de-leverage and enter joint development deals with smaller players. REIT listings could infuse liquidity in commercial real estate, accelerating the launch of properties related to logistics, manufacturing, consumer goods, IT and ITeS as well as the banking and financial services sectors.

According to a CBRE, Indian real estate is expected to witness the addition of nearly 200 million square feet in 2019 across all categories including office, retail, residential and logistics to reach 3.7 trillion square feet by 2019. Of this, nearly 40 million square feet development could come from new office spaces in 2019. Around 30% of the pipeline is expected from Special Economic Zones (SEZ) and technology parks. (Source: Economic Times, KPMG)

Interim Union Budget 2019-20 proposals

• The Government announced TDS threshold for deduction of tax on rent to be increased from Rs.180,000 to Rs.240,000

• The Government announced the rollover benefit of capital gains increased from investment in one residential house to two residential houses for capital gains up to Rs.2 crores.

• The Government announced tax benefits on affordable housing to be extended till 31 March 2020 under Section 80-IBA of Income Tax Act

• The Government proposed that the tax exemption period on notional rent on unsold inventories, extended from one year to two years

MIG housing incentives

For a middle income family under MIG-I with annual income above Rs.6 lakhs and up to Rs.12 lakhs, the carpet area cap increased from 120 sq. metres to 160 sq. metres in 2018.

For families with an income above Rs.12 lakhs and up to Rs.18 lakhs, the carpet area cap increased from 150 sq. metres to 200 sq. metres in 2018.

For MIG-I, the interest subsidy was pegged at 4 per cent, eligible housing loan amount Rs.9 lakhs and total subsidy Rs.2.35 lakhs.

For MIG-II, the interest subsidy was pegged at 3 per cent, eligible loan amount is Rs.12 lakhs and total subsidy is Rs.2.30 lakhs.

Key regulatory reforms

RERA: Aims at increasing transparency and accountability.

Impact: RERA has changed the dynamics of the residential market, with developers making offers on an all-inclusive basis. This box pricing is making it easier for buyers to evaluate the total cost of the house and whether it fits within their budget. Out of the total 35 states and union territories, >55% of the states and union territories had no appellate tribunals.

GST: Replaced the multi-layered taxation system with a unified tax economy.

Impact: Implementation of GST garnered a mixed view from various stakeholders from the real estate sector. The GST rate payable on affordable homes, with effect from April 2019, came down from 8% to 1%, and all other residential properties outside the affordable segment will attract 5% GST instead of the 12% levied before.

Ind AS 115: Directed the realty firms to shift from the percentage completion method to project completion method.

Impact: The change is expected to defer revenue recognition as it will be recorded only after project completion.

Insolvency and Bankruptcy Code:

Instilled urgency among stakeholders to resolve bad loans that affected the Balance Sheets of banks.

Impact: At the end of 2017, developers accounted for US$20 billion worth of stressed bank loans.

REITs: Aims at providing avenues for fundraising and alternative investments. Impact: >US$ 20 billion worth of REIT-able office stock remains under-utilized.

(Source: KPMG)

Sectoral demand drivers

National growth

India is the fastest growing major economy, growing at around 7%, generating a sustained increase in the demand for homes.

Increased incomes

Indias per capita income was estimated at Rs.126,406 in 2018-19 compared to Rs.1,14, 958 in 2017-18, recording an increase of nearly 10%. Per capita incomes are projected to rise by 5% per annum with average household incomes expected to grow by 1.5x over the next decade, leading to a surge in domestic consumption power.

Urbanization

India is possibly the fastest urbanising country with a third of the population residing in urban clusters. Indias urban population has nearly doubled since the start of the third phase of globalization in 1990, from approximately 220 million to 420 million currently. In comparison, the overall national population grew by 50% over the given time frame.

The number of million-plus urban agglomerations increased from 35 in 2001 to 53 in 2011.

Growing nuclear families

Family nuclearization is expected to add about 6-7 million households per year, strengthening the demand for homes.

Affordability

The Indian home has become a broadbased and mature market with no price increase in the last five years only enhancing product affordability.

Aspirations

As Indians travel more and are exposed to global lifestyle trends, there has emerged a deeper desire to live better, reflected in a larger incidence of gated communities, larger home sizes and deeper investments in home dcor.

Mortgage

The housing finance sector is probably one of the most effective drivers of home ownership on account of rate affordability and increased loan availability. The Indian market for mortgage finance is nascent, especially in non-metro India where the penetration is a mere 1% when compared with metro India where it is about 15 %, holding out multi-year growth prospects for the former.

Demographic dividend

Indias urban population is expected to surpass 850 million by 2050, of which 50% is expected to be in the age group of 19-58 years, a key demand driver.

Resource availability

The availability of land at reasonable rates in non-metro India has strengthened the growth of the real estate sector.

Encouraging policies

India plans to build 100 Smart Cities. The National Urban Housing Fund was kickstarted with an outlay of Rs.60,000 crores. The Indian governments vision is to provide ‘Housing for All by 2022. The implementation of enhanced sectoral accountability.

SWOT analysis

Strengths

Regulatory reforms:

The sector is expected to witness significant transformation with the implementation of RERA, GST and IBC, leading to higher transparency and accountability.

Inventory decline: The residential market has seen more launches, resulting in 11% decline in inventory in 2018 compared to 2017. With asset valuations remaining flat in last five years, affordability has improved significantly over time.

Office space: The commercial office space has reported rising rentals and improving occupancies, catalyzed by demand from the technology sector, manufacturing/engineering and financial services.

Weaknesses

Financing costs: Cost of funding remains high as land financing is available only from NBFCs, increasing cost and moderating returns.

Opportunities

Affordable housing: 90% of Indias housing shortfall is in the economically weak and low-income segments and affordable housing remains a key residential driver.

Sectoral consolidation: With stringent regulatory requirement and rising funding cost, there could be a sectoral shakeout.

Capital unlocking: The incidence of REIT has empowered players to seek alternative resources and mobilization opportunities.

Threats

Funding risks: NBFC funding to developers posted a 35 per cent CAGR over FY16-18 as companies faced operating cash deficits. However, NBFC funding declined sharply following an NBFC liquidity crisis starting from the second half of 2018-19.

RERA implementation:

RERA implementation has been lagging in most Indian states, affecting customer sentiment.

(Source: Economic Times, Knight Frank)

Cumulative housing demand-supply in top-eight cities, 2016-20 (‘000 units)

Category Demand Supply
Higher income group 717 351
Middle income group 1,457 647
Lower income group 1,982 25

(Source: IBEF)

Company review

Kolte-Patil Developers Limited is one of the fastest growing real estate developers in India. The Company is among the highest credit-rated among all real estate players in the country, indicating its respect as a sectoral benchmark. In the five years ending 2018-19, the Company increased revenues 71.00% and profit after tax 88.00%. The Company selected to focus on the development of residential real estate properties in Pune, Mumbai and Bengaluru. In Pune, the Company enjoyed undisputed leadership; in Mumbai, the Company reported the fastest growth in the society redevelopment niche. The Companys success was marked by low debt, rising revenues and increased collections at a time when the rest of the sector was cash-strapped and leveraged.

Bengaluru: According to Knight Frank, the quantum of new launches of residential units in 2018 grew at an attractive 22% y-o-y compared to 2017, to amount to 27,382 units. The quantum of sales saw a growth of 27% to amount to 43,776 units in 2018 compared to 2017. Owing to better marketing efforts, the unsold inventory for 2018 saw a decline of 15%.

KPDL deepened its Bengaluru focus for the following reasons: the citys residential demand is dominated by immigrant salaried employees and a stable end-user market; the Companys presence in this market provides geographical diversification. The Company has ~1.0 million square feet of ongoing/planned projects at prime locations with deliveries of 1 million square feet expected in the first half of 2019-20.

Mumbai: The quantum of new residential launches in 2018 accounted for robust growth of 22% y-o-y to 74,363 units. The quantum of sales saw a growth of 3% to 63,893 units in 2018 compared to 2017.

KPDL strengthened its Mumbai focus for the following reasons: being landlocked, redevelopment remained a preferred mode of development; KPDLs Mumbai entry coupled with changes in the Development Control Rules, 2013 (DCR, Section 79 A) made it a level-playing field for all developers; the Company was attractively placed to capitalize on the synergies provided by the Pune business, margins expansion opportunity, reduced working capital cycle, low capital commitment with payment of the corpus fund and rental to the tenants linked to approvals, focus on redevelopment projects instead of Slum Rehabilitation Authority projects.

KPDL emerged as one of the largest listed real estate companies in Mumbais society redevelopment space in a short time. The Company signed 14 redevelopment projects until the close of 2018-19 with a total saleable area of ~1.4 million square feet spread across premium locations in the citys western suburbs.

Pune: The quantum of new launches of residential units in 2018 accounted for a robust growth of 157% y-o-y compared to 2017 in spite of sales declining 1% to 33,521 units in 2018. KPDL retained its position as the unquestioned residential real estate leader in Pune, marked by trust and respect.

The Companys strengths

Deepening market presence: KPDL addresses demand from residential real estate across Pune, Mumbai and Bengaluru, three of the largest / fastest growing markets for residential real estate in India.

Land bank: The Company possesses a land bank of 18.9 million square feet owing to which it is able to foray into new pockets of existing cities and deepen its presence. Aided by the ever-increasing demand growth in Bengaluru and Mumbai, the Company is expecting to generate 25% of sales from both cities by 2020 in addition retaining market leadership in Pune.

Organizational capabilities: KPDL enjoys robust processes catalyzed by talented professionals. The Companys high performance culture focuses on leadership, innovation, entrepreneurship and synergies.

Brand recall: KPDL enjoys a positive brand recall based on trust and product differentiation.

Asset-lightness: KPDL enjoys low debt and selective investments by financial partners in specific real estate projects, enhancing returns.

Dynamic business model: The Company entered joint ventures (JVs) which helped to increase scale and discipline. Further, development agreements (DAs), management agreements (DMAs) and private equity participation across projects enabled the Company to diversify its project portfolio within available capital, mitigating a concentration risk and widening its geographic footprint.

Execution control

Owing to KPDLs continuous focus on efficient execution, which was in line with the Companys philosophy and track record of delivering quality homes within promised timelines, it could deliver 2108 units for possession in 2018-19 as compared to 2167 in 2017-18.

P&L snapshot

P&L Snapshot (Rs. crores) FY19^ FY19^ FY18 YoY
Revenue Recognition Method Reported CCM POCM POCM POCM
Revenue from operations 869.3 1,194.7 1,402.7 -14.8%
Cost of materials consumed 454.3 725.2 966.2 -24.9%
Employee benefits expense 53.8 53.8 38.0 41.7%
Depreciation 14.9 14.9 15.4 -2.7%
Other expenses 114.1 114.1 96.0 18.9%
Total expenses 637.1 908.1 1,115.5 -18.6%
EBITDA 247.1 301.6 302.5 -0.3%
EBITDA margin (%) 28.4% 25.2% 21.6% 3.7%
Finance cost 92.0 92.0 98.7 -6.8%
Other income 11.1 11.1 14.3 -22.8%
Profit before tax 151.2 205.8 202.8 1.5%
Total tax expenses 51.8 72.9 49.2 48.0%
Net profit after tax (pre-MI) 99.4 132.9 153.6 -13.5%
PAT margin (pre-MI) 11.4% 11.1% 10.9% 0.2%
Non-controlling interests 24.01 10.59 32.10 -67.0%
Net Profit (post-MI) 75.4 122.3 121.5 0.7%
PAT margin (%) 8.7% 10.2% 8.7% 1.6%
EPS 9.92 16.11 16.03

*Adjusted for the strategic divestment of Wakad land of Rs.182 crores

^The Company adopted IND AS 115 (Completion Contract Method – CCM) effective from 1st April 2018 and opted for the modified retrospective method; On account of the application of IND AS 115 for the year ended March 31, 2019, Revenue, EBITDA, PAT were lower by Rs.325 crores, Rs.54.5 crores, Rs.47 crores respectively and EBITDA as per CCM method was 28.4%. In order to facilitate a like-to-like comparison, the figures shown above are based on the previously applicable Percentage of Completion Method (POCM).

Consolidated debt profile

Consolidated Debt Profile (Rs. crores) 31 March 2019 31 March 2018 (Audited)
CCM POCM^ POCM
Net worth 840 1,100 984
Gross debt 807 807 689
Less: Debentures* (OCD, CCD, Zero Coupon NCDs)/Preference Shares 224 224 289
Debt 583 583 400
Less: Cash & cash equivalents & Current Investments 67 67 117
Net debt 517 517 283
Net debt-to-equity ratio 0.62 0.47 0.29

*Includes zero coupon NCD issued to KKR in Life Republic Township.

^Company estimates

Internal control systems and their adequacy

The Company has implemented a series of checks and controls since its inception to ensure the assets and interests are well protected and all financial data is accurate and reliable. The system is periodically reviewed to ensure the audit systems, policies, procedures and financial controls are adequate and efficient. The Audit Committee of the Board of Directors and senior management reviews the audit findings on a regular basis to ensure compliance, control and risk mitigation. The financial reporting is also evaluated from time to time to measure its effectiveness and accuracy.

Human resources

KPDL believes that its intrinsic strength lies in its dedicated employees. The Company provided competitive compensation, amiable work environment and acknowledged employee outperformance through reward and recognition. The Company created a workplace where every person can achieve his or her true potential. The Company encouraged individuals to extend beyond the scope of their work and undertake voluntary projects that enabled them to contribute innovative ideas. As on 31 March 2019 the employee strength of the Company was 738.

Risk management

Economic risk: Economic volatility could affect profitability.

Mitigation: A robust Balance Sheet ensures that the Company possesses adequate cushion against fluctuations. Though 2018-19 was a challenging year for the real estate sector where the Company was positioned to emerge as a leading player owing to the strategic selection of projects based on market and location demand. The Company strives to deliver at the right place, at the right price with the right positioning of its projects.

Industry risk: Slowdown in the downstream sector could impact ofitake of the Company.

Mitigation: With the real estate sector steady, the demand for homes is set to grow. Growing per capita income coupled with increasing private consumption bodes well for the industry.

Finance risk: Inadequate funding could impact operations.

Mitigation: KPDLs robust capital management and judicious capital allocation helped mitigate liquidity risk. KPDL was accredited with A+/Positive rating by CRISIL, one of the highest among Indian residential real estate players.

People risk: There is an urgent requirement of qualified and talented manpower to look after day-to-day operations.

Mitigation: The Companys employee strength stood at 738 on 31 March 2019 while its retention rate stood 1.6% for FY18-19.

Competition risk: Intense competition from peers could affect the Companys market share. Mitigation: The Company leverages its superior customer-focused brand to generate superior realizations marked by better payment terms and/or greater sales velocity.

Cautionary statement

The statements made in this section describe the Companys objectives, projections, expectation and estimations, which may be ‘forward looking statements within the meaning of applicable securities laws and regulations. Forward–looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized by the Company. Actual result could differ materially from those expressed in the statement or implied due to the influence of external factors which are beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments.