INDUSTRIAL OVERVIEW
As stated in the previous reports the general economic activity level has considerably
improved which feeds real estate development activity. Although the pent up demand of the
Covid period has been satiated the momentum towards property purchase has not died down,
thereby improving the sentiment.
FUTURE OUTLOOK
In early part of 2022-23, the improved the buyers confidence, due to buoyant, economic
climate and the growth story of the country, in general, resulted in optimistic sentiment
for future, although the war in Ukraine and the cut back in employment opportunities in
the west, moderated the sentiment. However the outlook for Real Estate development
activity is still positive in spite of increased interest rate hikes and the disturbed
world condition.
ECONOMIC OVERVIEW
The major source for land acquisition has been Companys equity and private debt funds
with the Banks/ NBFCs having completely withdrawn from lending against land. However the
Banks/NBFCs continue to finance construction and working capital.
RESIDENTIAL SEGMENT
In our last report we had stated that we had launched a large project of 290 apartments
named Lancor ‘Infinys in one building with initial feedback, being encouraging. We
had sold 205 apartments as of the date of this report but unfortunately for a prolonged
period the final permit for the construction of the additional 80 apartments between 11th
and 15 floors has not been received thereby denying the company the benefit of sales and
realization of invested funds. The main reason for the delay was the confusing stand on
account of premium FSI payment on a concessional basis.
It looks like a finality will be reached on this matter in the next 10 to 15 days where
upon the company will receive the final permit and proceed with the construction and sale
of the remainder of the apartments valued at nearly Rs.100 crores.
As reported, last years report, the company has launched 5 new projects to move
forward on its sales of apartments at a satisfactory pace and its realization leading to
handsome revenues and incomes.
All these projects have received Real Estate Regulatory clearances (RERA) and building
plan approvals etc., The company has nearly concluded another 4 projects which are now
maturing to the stage of signing agreements with the landowners and submitting plans to
the authorities for clearances. In all these projects the earnings and net retained income
would be handsome while the risks are mitigated due to the limited amount of investment in
a project thereby ring-fencing the company against arbitrary decision either by the
landowners or others to a large extent.
COMMERCIAL SEGMENT
The company continues to look for investment opportunities and has in fact submitted a
proposal for commercially developing a property.
The demand for commercial projects in the city is not very good as compared to the
residential segment.
GOVERNMENT POLICIES
There has been no significant momentum in the last 12 months on this front and the
comments made in the previous report continues to remain valid. Although it was thought
that the concessional premium FSI for metro and railway corridors would be rewarding, it
has now turned out as not so good since the Government has raised the guideline value of
the property, which is the basis on which premium FSI calculations are made thereby
increasing the premium FSI cost and negating the benefit to the developers on this
account. This move to increase the guideline value will certainly slow down the property
businesses in general and make the properties on the metro corridor less attractive for
development.
SALE OF PLOTS
As you are aware the company owns about 34 acres of land in Sriperumbudur of which it
has taken about 9.08 acres in Sriperumbudur for plotted developments and has successfully
obtained all the approvals including registration under RERA act.
The company is in negotiation with a International Automobile Companys Employees
Credit Society to sell 100 of its plots to their employees at a predetermined price to
yield handsome returns and cash flows. Hopefully the sales are completed soon and incomes
are accounted in this financial year. The balance plots which are owned by the company may
also be allotted to the same organization but perhaps at a higher price. The Company also
expects to sell the plots in retail at a higher price which will ensure diversity of
ownership.
REAL ESTATE
The Company announced the establishment of a Senior Citizen enclaves in three of its
projects under the brand name "Harmonia". Considerable efforts and monies had
been spent to launch the brand and it is expected over time to be a catalyst for Senior
Citizen homes sales.
The responses have been moderate and the company will further intensify its presence in
the market and obtain more revenues and profits in future. It is expected that good
response will be forthcoming when the buildings are constructed with all the services are
provided as in the case of Sriperumbudur development.
OPPORTUNTIES AND STRENGTH
Luxury projects in the city areas are clearly an opportunity, the company has
discovered.
Strong brand value
Use of new and innovative products in the making of modern and stylish building
Positive profit contribution in the city projects including its marque project Lancor
‘Infinys
Reasonable land bank
Long serving committed employees
THREAT AND WEAKNESS
Operation restricted only to the state of Tamilnadu
Delayed project launch due to the extraordinary time delay in getting approvals _
increasing construction cost _ challenging land price
High taxes including stamp duty and registration expenses
RISK MANAGEMENT
The company has realized that investing monies in large projects is generally very
risky due to the stoppage from execution by various actions either by the land owners,
Courts and others resulting in blockage of large amount of funds for prolonged period.
The alternate model is to take a number of smaller projects mainly in city, earn good
margins and handsome returns on investments which is why the company has now clearly
shifted to city development model. The company will still do one large project derisking
itself to the barest minimum more in the nature of Lancor ‘Infinys, every 18 months
which gives the company a turnover of approximately Rs.300 crores from such a project or
Rs.600 crores every three years. The interest rates scenario for both company and home
buyers is the continuing cause for concern and hopefully some stability is achieved soon
despite disturbed world condition on the economic front.
MITIGATION MEASURES
The inflation in the economy has been tamed to a large extent which might result in
more stable interest rates and thereby increases the home buyers ability to take higher
loan to buy properties.
The current slowdown in the economy in China has reduced the input costs of several
items namely steel, copper etc., which has contributed to stable input costs.
LIQUIDITY RISK
The company had obtained two improvements in its ratings from D to B+ and from B+ to BB
as a result of reduction in the debts due to sales. Once the company obtains the final
clearances for additional floors for its project ‘Infinys and sale of plots,
liquidity is expected to improve thereby there would be further reduction in the debt will
occur as well as improvement in rating.
As on the date of writing this report the pressure on liquidity is still felt but by
all accounts it appears that over the next two quarters things will ease.
EXECUTION RISK
The companys project "Infinys" met with major execution risks at the early
stage of construction namely flooding of the site when excavation was done for two
basements causing anxious moments for all. The site also had hard rocks at several places
which took weeks to remove.
The project as of today is delayed by over three months but hopefully it will not meet
with any further surprises. The project TCP Altura experienced a very different type of
execution risks caused by the contractor having experienced major cash flow and solvency
problems.
MITIGATION MEASURES
The companys Managers fortunately, in heavy rain, created stanchions, to prevent
further erosion of soil in the context of double basement having been flooded. A number of
pumps were deployed to pump out the water and within a period of a week the site became
safe from erosion and ready to start construction of the basement. The rocks in the site
were chiseled out although this work persisted for over two months and at each stage
delaying construction. However it is gratifying to report the building now is in the
second floor level and barring unforeseen circumstances by end of March the civil
structure work would be fully completed.
FINANCIAL PERFORMANCE
During the financial year 2022-23 the company on a standalone basis registered a total
revenue of Rs. 11551.73 Lakhs as compared to Rs. 10595.95 lakhs in the previous year
resulting in an increase of 9.02%. On the consolidated level the company made revenue of
Rs. 11600.75 Lakhs as against Rs. 10393.34 lakhs in FY 2022.
The performance of the company will definitely change for the better in view of launch
of "Infinys" project, completion of Altura D block and start of the construction
of Lumina H1 H2 & ABC blocks in the context that the pandemic is firmly behind us.
The projected turnover of the company will significantly increase. There is a good
possibility that on a full year basis the company will revert to profit.
Place: Chennai |
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Date : 14th July, 2023 |
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For and on behalf of the Board of Directors of |
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Lancor Holdings Limited |
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RV Shekar |
S. Sridharan |
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Managing Director |
Director |
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DIN: 00259129 |
DIN: 01773791 |
+91-9892691696
