Lancor Holdings Ltd Management Discussions

1)INDUSTRIAL OVERVIEW:

The general industrial outlook with regard to demand for property and its purchase has not significantly altered although since the beginning of this year some dark clouds were looming with regard to the outlook for the general economy caused by USA tariff regime.

2) FUTURE OUTLOOK:

The war in Ukraine about which India was almost insulated has now spread its tentacles through the current USA dispensation with India through the imposition of tariffs on our exports to USA. The demand by the USA administration to open our market for dairy and agriculture is being resisted by India which is another important step in the levy of the special tariff regime by USA.

Operation Sindoor which was preceded by a brutal attack on Hindus at Kashmir Valley resulted in overwhelming success as far as India is concerned in the matter of eliminating terrorist bases and their Head Quarters. Indian armed forces decisively destroyed Pakistans air defense resources, which resulted in loss of several fighter aircrafts for Pakistan. However this operation itself has become the basis for affecting the friendly and growing relationship between India and USA, which is extremely unfortunate.

The war on Iran fortunately had very marginal impact on India or on oil supply situation.

The Israel and Palestine war in Gaza never seems to end with a very big humanitarian crisis which again had not impacted our country.

3) ECONOMIC OVERVIEW:

As stated in our previous report the only source for capital augmentation in the medium and long term basis is raising equity or debt from the market or accepting funds from Private debt funds as Banks/ NBFCs have been prohibited to lend for land acquisition.Your Company has already raised one round of equity from the capital market It believes once the verdict on the Companys commercial property "Menon Eternity" is favourably disposed off, the company may approach the capital market for further augmentation of appropriate capital. The company continues to get support from Private debt funds in the form of Debenture Subscription to NCDs though the cost of funds are high.

4) RESIDENTIAL SEGMENT - CITY PROJECTS:

We are happy to inform you that we had completed your Companys Marque project Lancor "Infinys" to its full potential and handed over the same to the customers during the year under review. All the loans taken from Sundaram Alternate Funds for this project has been duly repaid.

The Company has during the year completed the construction and delivered various city projects namely "Rathirupa", "Hiranmayi""Homeleigh" and "Sahana" in Chennai with a set of satisfied customers.

The completion of all these projects have once again demonstrated good traction for the companys luxury developments within the criterion 20 kms radius from the Companys Head Quarters, in the luxury segment. Constant search is underway to get more new projects of these types, which increases retained earnings and brand visibility.

During the year, your company has concluded negotiations for two large city projects one of it has already been in-principle approved for development by the authorities while the second one is at the stage of conclusion of land acquisition. A third project where negotiations has been completed and documentations are underway will also be concluded shortly. These projects as a group are likely to add about Rs.400 crores to the turnover of the company once the construction starts.

The company after having settled the Arbitration proceedings is now in full control of the Sriperumbudur property not having to share any percentage on the topline sales with the erstwhile landowners. This has freed the company in determining what should be built on the property, how it should be marketed and priced.

Primarily the Company has aspirations to convert this destination as a Senior Citizen friendly area now that Chennai has become a very important destination for Senior Citizens. The buyers have their origin in any one of the four southern states in view of strong common base with regard to food, culture, appearance etc.,

Although the weather for about 2 to 3 months is hot, the change in weather pattern particularly over the last 2 or 3 years is such that even during peak summer it rains on many days thereby reducing the peak temperature.

Our Sriperumbudur project being part of the hinterland of Chennai is not as humid as coastal Chennai and by about late afternoon a certain breeze sets in which reduces the temperature and makes the place particularly for seniors tolerant. Adding to this, planting of large number of trees and large flowering plants by the company has brought about balance between nature and urban development. So far the Company has built one apartment complex known as"Townsville" with about 128 apartments and additionally has constructed villas in three different formats namely luxury villas with a budget of Rs. 1.50 crores and above, Senior Harmonia villas at a price point of Rs. 75 lakhs and Senior Duplex villas at a price of Rs.90 lakhs. Most of these villas have been developed with lawns, gardens, sloping roofs which gives a very pictorials view of the entire project and with wide roads, footpaths, decorated medians, excellent lighting standards etc., giving the impression of a small American city suburbs which attracts many buyers who travel frequently to the USA to be with their children in almost similar surroundings as they experience here. However, the development of villas alone has reduced the earning for the Company out the investment in the land more particularly after large value settlement was made with the erstwhile landowners. This has left with the company with no other alternative but to intensely use the land by constructing apartments to its fullest extent in the high-rise apartment format.

Hence the company proposes to develop the remaining nearly 11 lakhs sqft of land into high-rise apartments of 14/15 floors without any additional outlay for payment of premium FSI Charges. Under this formula of development, the company can add about 2.50/2.75 million sq.ft of constructed area having a sales revenue of approximately Rs.2000 crores and earn a reasonable return on the investment at around 25/30 % margin. The company has a bandwidth put up this level of construction and market the same and if all goes well, the complete construction would be achieved within a period of 5 to 6 years. The company is launching the first phase of this development with building of 110 apartments and is awaiting RERA clearance. Further stages of construction has been identified and applied for and before the end of this year the next two stages of construction would also be taken up after obtaining all the approvals.

As stated earlier, the next two stages of construction will be 14 floors in height with common amenities being placed in the 15^th floor of the building.

After the foregoing phases are marketed and inference is drawn from the market about its success or otherwise the balance area would be taken up for development so that the risk reward ratio is appropriately balanced.

The companys property in Sriperumbudur is currently located extremely advantageously and it is one of the location having obtained the tag of an excellent residential development close to both the highways - National Highway 44 from Chennai to Bangalore on the Southern Side and the Expressway to Bangalore on the Northern Side. On the eastern side of our property the state Government is currently implementing 8 lanes road to connect Thiruvallur, which is a very important micro market, connecting Sriperumbudur, Oragadam and beyond. This is a laterally connected road between western districts and the southern distrcits in the of periphery of Chennai is a 40 kms straight road from Thiruvallur to GST Road via Oragadam and Sriperumbudur and in its path are both the highways to Bangalore with many residential and industrial developments.

The proposed airport is a mere 20 kms away from the companys property in Sriperumbudur and is joined by the expressway to Bangalore.

We understand that widening of the Thiruvallur road and Bangalore highway will be completed in all respects by end of this year, which would give a great fillip for further industrialization of the Western Tamilnadu, southern Bangalore and all the towns that fall in between. The company is placing big bets on its holdings in Sriperumbudur particularly in the development of apartments as stated in the foregoing.

The company has also got another 25 acres of land which is adjacent to the land on which the apartments are coming up, some of it is already plotted and sold but there could be a change in its use depending upon how the apartment schemes perform in the market.

There are a further 15 acres of land which are located adjoining to the companys land which the Company would like to purchase over the next 1 to 2 years time.

COMMERCIAL PROPERTIES

The company is all the time looking for commercial properties and it has not ventured into any, in view of the high investments required, although quite profitable.

GOVERNMENT POLICIES:

The Tamil Nadu Apartment Ownership Act, 2022 has been notified including its Rules,. 2024 and the company has started taking advantage of this notification and it is in the process of implementing the same in three large housing developments falling under this act.

SALE OF PLOTS:

The company has sold 2,90,595sft of land in a project named "Temple Town" in Sriperumbudur and has now taken up of additional 1,07,000 sft of plots named as "Villa Bay" plots of which some 30% have already been sold.