martin burn ltd share price Management discussions


a. Macro Economic Overview

T he global economy is expected to face several challenges in 2023, including rising inflation, supply chain disruptions, and geopolitical tensions. The COVID-19 pandemic has disrupted global trade and created supply chain bottlenecks, leading to a shortage of critical goods and services. The inflationary pressures caused by supply chain disruptions and rising energy costs have also led to concerns about price stability and overall economic growth. Geopolitical tensions, particularly between major economies, could further exacerbate these challenges and lead to trade restrictions and sanctions. Additionally, the pace of global economic growth remains uncertain, and the potential for future pandemics or other global crises cannot be ruled out. Addressing these challenges will require a coordinated effort between governments, businesses, and international organizations to ensure a stable and sustainable global economic environment.

T he Indian economy is expected to face several challenges in 2023, including inflation, rising interest rates, and a slow pace of economic growth. The impact of the COVID-19 pandemic, coupled with supply chain disruptions, has led to a rise in prices across sectors, impacting the purchasing power of consumers. Additionally, the RBI has raised interest rates to curb inflation, which could impact borrowing costs and slow down investments. The slow pace of economic growth, coupled with a high unemployment rate, could also dampen consumer confidence and negatively impact the overall economy. Addressing these challenges will require a coordinated effort between policymakers, businesses, and consumers to drive sustainable growth and ensure a stable economic environment.

b. Sector Overview

T he Indian real estate industry has undergone significant changes over the past three years, driven by factors such as regulatory reforms, changing consumer preferences, and technological advancements. The implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) has led to greater transparency and accountability in the sector, promoting investor confidence and safeguarding the interests of homebuyers. The adoption of technology, such as virtual reality and artificial intelligence, has transformed the home-buying experience, making it more accessible and convenient for consumers. Additionally, the pandemic has led to an increase in demand for larger homes and the adoption of work-from-home policies, leading to a shift in consumer preferences towards properties with more space and amenities.

Ho wever, the industry has also faced several challenges over the past three years, including a liquidity crunch, rising construction costs, and the impact of the pandemic. The slowdown in the economy and the liquidity crisis faced by non-banking financial companies (NBFCs) has impacted the availability of financing for real estate projects, leading to delays in construction and a slowdown in new project launches. The rise in construction costs, driven by factors such as the shortage of skilled labor and the increasing cost of raw materials, has also impacted the profitability of developers. The COVID-19 pandemic has further impacted the industry, leading to a decline in sales and a slowdown in construction activity due to restrictions on movement and supply chain disruptions. Despite these challenges, the industry has shown resilience, with developers adopting innovative strategies to manage costs and deliver projects that meet the evolving needs of consumers.


a. Segment Overview

T he Indian residential market has been grappling with challenges on multiple fronts. According to the property research firm Knight Frank, the total sales volume in the top eight cities increased by a modest 1% in CY2019 to 245,681 units as the sector continued to be impacted by the prolonged crisis in the NBFC sector. While certain measures such as the consecutive rate cuts by RBI, the reduction of GST rates by 1% for affordable housing, they have had little impact on the sales of the sector. The impact of the pandemic induced lockdown on the real estate market can be gauged by the fact that sales and launches have capitulated by 84% and 90% YoY in Q2 2020 across the top eight markets. T he fall in prices and the reduction in average unit sizes of new launches across cities are more in-line with the contemporary home-buyers needs. However, the precipitous decline in the GDP growth rate and the fall in consumption expenditure that has affected every industry, is also debilitating for the real estate sector which has not seen any meaningful improvement in sales for the past few years now. With the COVID 19 crisis, ensuing income uncertainty and poor consumer sentiments, demand would be further severely hit in 2020. On the positive side, the Reserve Bank of Indias (RBI) mandate in October 2019 to link all retail loans including home loans to an external benchmark such as the RBIs REPO rate has brought down home loans to near 15-year lows of 7%.

b. Kolkata

O f the total residential sales in H1 2020 , a whopping 69% were witnessed in the < INR 5 million bracket while the remainder were for > INR 5 million bracket. After a sequential YoY decline in new sales since H1 2016, Kolkata had recorded a 9% annual uptrend in H2 2019 on the back of steady demand for homes with a price tag of upto INR 5.0 million. However, this buoyancy was short-lived as despite a good sales momentum being maintained in the initial months of 2020, the Covid-19 pandemic forced closure of construction sites and impacted buyer sentiment negatively. Consequently, residential sales in H1 2020 registered a YoY degrowth of 36%

c. COVID19 Impact on Residential Real Estate

T he novel COVID-19 has had a disruptive impact on the smooth functioning of the real-estate markets across the world. At its core, it is a public health crisis that has manifested itself into a financial crisis. It also speaks greatly into the interconnectedness and intertwined nature of the global economy. Its effects will take a few months to ricochet through the market. However grim the scenario may seem, it presents an unprecedented opportunity for institutions to help focus on priorities with a clear-eyed goal of creating an enduring business. i. I ndustry Consolidation: Historically, the residential real-estate market in India has been a rather crowded marketplace. The local nature of the business attracted a lot of _y-by-the-night developers who essentially eroded the credibility of the business overtime. The introduction of the Real Estate Regulation and Development Act (2016) brought in place a long over due structural and regulatory oversight to the industry.

It presented a window of opportunity as the smaller players could no longer marshal the resources to function under the new regime and as customers saw greater value in forming relationships with established players. The coronavirus will lead the lending institutions to further tighten their purse strings as they become wary of exposure to the wholesale credit market and as customers prefer ready-to-move-in developments.

The confluence of the above factors will expedite the thesis of consolidation with only the well-capitalized and institutional developers with fortress-like balance sheet coming out of the crises unscathed. ii. P rice Contraction: Across the top 7 cities of India, developers are sitting on an unsold inventory of over 600,000 units . Amidst restricted supply and gradually improving demand, the channel inventory saw a steady-state decline of ~5% over the last few years. Owing to the ensuing credit pressure exacerbated by lack of new money supply and softening sales, we view that developers would cut the pricing across-the-board by 10-15% to clear their existing backlog, manage their cash flows and ultimately improve their liquidity position. It is imperative in scenarios such as these to protect ones cash position and identify ways to extend the runway. This could mean right-sizing go-to-market strategy, addressing headcount issues vis-?-vis your pricing to protect the margins. iii. D elayed Timelines:

The pandemic has set in motion a great period of uncertainty for the near future. The shelter-in-place guidelines put in place by the Government of India has seen the necessary cessation of the general commerce nationwide. This has led to a large-scale exodus of migrant workers – the lifeblood of the sector – from the construction sites to the hinterlands of India. The disruption caused to the traditional supply chain as a result of this stay-at-home order has deprived the projects of critical raw materials or finished products. As a direct consequence of these, the construction activity has come to a grinding halt. This would lead to a protracted project completion timeline of anywhere between 3-6 months depending on when the economy returns to normalcy. iv Consumer Behavioral Changes: Everyone from corporations and small-and-medium sized businesses to employees and workers have been caught fiat footed and displaced from the normal chain of revenue generation.

This has led everyone especially end-users and customers take a clean-sheet view of their spending habits. The fear of such ‘black swan events would lead consumers to place greater scrutiny on their day-to-day expenditure and reduce their propensity to risk. This would have a direct impact on their ability to partake in any activity where they deem a risk to their capital. As a real-estate developer, this means customers preference shift over the near-term to majority completed or ready-to-move-in developments. As a result, this would lead to demand-side ramications for under-construction developments. This shift also implies that the developers must have the financial capability to deploy a certain base-level of capital into their projects with the firepower to fund it through completion should the pre-sales remain depressed. While the depth and breadth of the economic impact on the real-estate sector remain uncertain, behavioral changes in a post-coronavirus environment seem imminent. v Depressed Consumer Credit: The coronavirus has inicted the most pain to front-line workers and at-risk consumers. They continue to work in the face of these obstacles while being exposed to the virus themselves. The fear of unemployment looms large over many of these workers who often live without any emergency fund. Any further disruption to their employment status will severely affect their ability to meet their monthly obligations including any rent or mortgage payments. Banks/Lending Institutions/NBFCs have no playbook to turn to to deal with these situations and as a result will be extremely conservative and risk-averse in underwriting any new mortgage disbursals to retail consumers for the fear of rise in delinquencies. The confluence of the above reasons mean that consumer credit is expected to remain depressed in the near to short-term. vi. Limited Supply: The operating environment has been impacted by the rapid spread of COVID-19 which has caused a sharp contraction in global economic output. As new information about the potential economic effects of the coronavirus drip-feed into the system, businesses have to make decisive readjustments to their levers amidst changing circumstances. The real-estate sector cannot be immune to this economic dislocation. A lot of the planned capital expenditures will have to be put on the backburner unless there is a very strong business case to deliberately accelerate otherwise. The number of new launches in the top 7 cities of India in 2020 is expected to decline by 25-30% to ~ 180,000 units. In times such as these, it is incumbent upon organizations to continue to buttress their balance sheets and remain a careful steward of its portfolio while waiting for an opportune time to deploy large-scale capital.

3. OPPORTUNITIES a. E conomic Dislocation: The current economic environment presents the sort of circumstances that can provide attractive buying opportunities on a relative risk-adjusted basis. With interest rates at near-zero levels and compressing yields on sovereign bonds, investors are scouting the globe for investment opportunities to put their money to work. It remains a particularly alluring asset class for those who view that alpha is more attainable in the private markets to match their respective long liabilities. In this downturn, a strategic allocation to alternative assets can help improve the overall risk/return profile and achieve long-term liquidity objectives. The current scenario a_ords a rare opening to achieve above average market returns in real-estate by mobilizing to buy mispriced assets in emerging markets. b I . ndia Opportunity: India remains a compelling investment destination for institutional investors from across the globe. They are attracted by its bottomless market opportunity a_orded by its 1.3bn population size, favorable demographics with an average age of 29 and an educated and expanding middle-class who are aspirational. The governments recent push to consistently debottleneck and push through regulatory reforms such as an Insolvency and Bankruptcy Code (‘IBC), a nationwide Goods and Service Tax (‘GST) has imparted confidence to investors that their capital is protected. India is in the early stages of a very long-term growth cycle and lot of the pro-growth oriented policies put in place by the administration have set it up to achieve that. Short-term market gyrations present an attractive opportunity to investors to take a forward-learning stance and accelerate the pace of investments to facilitate demand. c Dar. winian Shakeout: The number of developers in the top nine Indian cities fell by nearly 50% between 2011-12 and 2017-18 . The coronavirus is only expected to accelerate the shakeout with changing customer preferences and industry demand. In what is expected to be a stricter operating environment going forward, the unorganized players have recognized the need to either explore joint-development agreements or exit the sector completely citing lack of execution and financial capabilities. Organizations with a track record of delivery, strong customer franchise and best-in-class practices will continue to attract the kind of patient, long-term and institutional capital necessary for the successful delivery of projects in this ‘new normal.


a. Regulatory Hurdles

Unfavorable changes 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 bottleneck may impact profitability and affect the attractiveness of the sector and companies operating within the sector.

b. Shortage and Manpower & Technology

D espite being the second largest employer in the country, the construction sector as a whole faces a shortage of quality manpower. Further the sector is heavily dependent on manual labor which increases the timelines for construction companies and results in deferred supply. There is a need to promote new mass housing construction technologies such as prefabricated, pre-engineered buildings (PEBs), modular homes and tunnel formwork technologies. Active R&D in modern technology space must be promoted.

c. Funding

T he lending to real estate developers by NBFCs and HFCs fell by almost half to about INR 27,000 crores in FY19, triggered by the IL&FS crisis, according to JLL. This NBFC crisis has further deteriorated the liquidity situation for smaller developers who had to resort to alternative funding in absence of long term loans from banks. While established developers with lean balance sheets continue to have funding access, many developers are expected to face significant liquidity pressure in the near-term.


M artin Burn Ltd (MBL) is a real estate development firm formed in 1946. It pursues development of residential and commercial space in Kolkata. MBL aims to deliver superior value to all stakeholders through extraordinary and imaginative spaces created out of deep customer focus and insight. MBL has always embraced the notion that collaboration is the essence of excellence. To that end, we have worked with high-quality consultants i.e. architects, structural engineers, MEP consultants, electrical etc. By bringing together the best-in-class team, we are able to deliver products suited to the needs of our customers. Your Company continue to capitalize on the market opportunities by leveraging its key strengths:

a. Brand Reputation: MBL has developed some of the most iconic and landmark developments of the city like Victoria Memorial, Esplanade Mansion, Shahid Minar etc. The Company enjoys a strong brand association and anity with the local populace which allows it to command higher premium realisations over its peers

b. Transparency: We take our Ethics and Code of Conduct very seriously. We believe that investing resources to create a systematic and a professional approach would best serve the needs of our various stakeholders in the long-term. That is reflected not only in our finished product, but also in our day-to-day activities and business practices. We have a zero-tolerance policy against unfair and malpractices and expect our Employees to abide by the same in their dealings with third-party service providers

c. Execution: MBL has always been known to deliver high-quality projects on time. To achieve that, it believes in engaging best-in-class consultants, advisors and contractors. Its employees are also aligned with the companys mission of producing best product in line with the needs of the market


a. Financial Performance

During the year under review, your Companys total revenue stood at Rs. 7.33 crores as compared to Rs. 3.96 crores for the previous year on account of significant disruptions caused due to COVID-19; profit before tax stood at Rs. 2.30 crores as compared to Rs. 0.62 crores for the previous year.


Y our Company believes that it can only be as good as the people it hires. Hence it has taken a very careful and deliberate approach to hiring across all the levels in your Company. We do not want to hire the most or run a treadmill to be on a leadership board – we want to hire the best. It is an approach that has worked well for us. At the same time, we realize that it is not a one-way street. We must work hard to retain our employees through competitive compensation, conducive working environment and an opportunity to be seen and heard. Your Company will continue to keep setting the bar high for it is the single most element in building a lasting business.


a. Market Price Fluctuation

T he performance of MBL may be affected by the sales realisations of its projects. These prices are driven by prevailing market conditions, the nature and location of the projects, and other factors such as brand and reputations and the design of the projects. Your Company follows a prudent business model and tried to ensure steady cash flow even during adverse pricing scenario.

b. Sales Volume

T he 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. Your Company sells its projects in phases from the time it launches the project, based on the type and scale of the project and depending on market conditions.

c. Execution

Ex ecution 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. As your Company imports various materials, at times execution is also dependent upon timely shipment and clearance of the material

d. Industry Cyclicality

T he residential real estate market is inherently a cyclical market and is affected by macroeconomic conditions, changes in applicable governmental schemes, changes in supply and demand for projects, availability of consumer/project financing and illiquidity. Your Company has attempted to hedge against the inherent risks through a business model comprising joint ventures, joint development agreements. However any future significant downturn in the industry and the overall investment climate may adversely impact business.


Post implantation of The Real Estate (Regulation and Development) Act, 2016 (RERA), developers are focusing firmly on selling their existing ready inventory and finishing their near completion projects rather than launching new projects. With several smaller realty developers interested in either liquidating their existing positions or entering into JV/JDA, your Company believes that this is an opportune time to take advantage of this market dislocation.

a. Focus on affordable and mid-market residential segment in Kolkata

Y our Company will continue to focus on the affordable housing and mid-market residential segment in the region of Kolkata. Real Estate is largely a locally driven and run business and your Company is confident that it can leverage on its past experience, unique local consumer know-how to deliver the best product in the market

b. Strengthen relationships with key service providers and develop multiple vendors.

I n order to continue delivering landmark offerings to our customer, your Company shall further strengthen its relationship with key service providers, i.e. architects, designer and contractors. Your Company is also working on strategy to develop more and more vendors who can deliver product and services in line with Companys philosophy and product offerings.

c. Internal Control Systems

Y our Company has also focused on upgrading the IT infrastructure – both in terms of hardware and software.

Your Company is presently reviewing various CRM/ERP tools to ensure effectiveness of the controls in all the critical functional areas of the Company.


Stat ements in the management discussion and analysis report describing the Companys objectives, rejections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the companys operations include economic conditions affecting price conditions in the domestic market in with the Company operates or changes in government regulations, tax laws and other statutes or other incidental factors.