Omaxe Ltd Management Discussions.


The expansionary momentum in the global economy that picked up in 2016 was expected to continue in 2018 and 2019 with an expected growth of 3.9% in the Global economy. However, volatile energy and commodity markets in the second half of 2018, escalating trade tensions between the United States and its major trading partners, mainly China, structural stresses in a few emerging economies meant there was a slack in the momentum. This also impacted the downstream business and consumer confidence. The central banks across the world have started to respond to these signals with dovish outlooks on the monetary policy front. Also, the trade tensions have abated to a limited extent, and the energy and commodity markets have found a temporary equilibrium. With the block of emerging economies regaining their growth mojo and these global responses, the world economic growth is expected to pick-up again in 2020.


Indian economy remained one of the fastest growing large economies in the world during the fiscal year 2018-19. Its economic output grew at 6.8% in 2018-19, although the pace slowed down towards the end. The broader economy faced a liquidity crunch that was caused by the spiraling crisis in financial markets from default of a major NBFC. In addition, slowing credit growth and decline in consumer spending momentum, especially rural, hurt the economic activity. Pullback in capital spending by the Government to maintain fiscal discipline and diversion of funds to address farm crisis also played a role. Continued slowdown in exports due to global trade war and expanding trade deficit due to volatile oil prices in the third quarter of the fiscal contributed to the turmoil. However, inflation remained range bound and this helped the Reserve Bank of India (RBI) to announce four cuts in repo rate totaling to 110 basis points, with the latest one in August 2019 to bring it down to 5.4% from 6.5% in August 2018. This, along with the stability offered by a newly elected majority Government at the center, range bound oil prices, stable currency, recovering credit markets, are likely to push the growth to 7% or above in fiscal 2019-20. However, weakness in global economy coupled with muted private investment are the major downward risks to the projections. IMF has projected a growth of 7.3% as against 7.0% projected by the RBI. On the policy front, after entering the elite 100 nations club in 2018 ranking, India jumped 23 positions to secure the 77th rank in World Banks Ease of Doing Business 2019 rankings.


The consolidation phase for the Real Estate sector began in FY2017-18 after the Government implemented many wide-reaching and high impact reforms that would promote formalization, institutional investments and end-user orientation in the sector. Chief among these reforms were:

Real Estate (Regulation and Development) Act (RERA)

Real Estate Investment Trust (REIT) regulations

Infrastructure status and tax subsidy sops to Affordable



Goods and Services Tax (GST)

Insolvency and Bankruptcy Code (IBC)

Benami Transactions (Prohibition) Amendment Act

The Government continued to support the sector by extending and liberalizing the Credit Linked Subsidy scheme for the Middle Income Groups, and also further relaxing the GST rates. The new GST rates applicable for the sector effective from April 1, 2019 will be:

1% without Input Tax Credit (ITC) on under construction properties for homes sold at Rs. 45 lakhs or below as against 8% previously

5% without ITC on under construction properties for homes above Rs. 45 lakhs

12% with ITC for commercial properties.

The developers were also given an option of continuing to pay GST at old rates with ITC for ongoing projects, i.e. building where ‘construction and ‘actual booking started before April 1, 2019 and which have not been completed by March 31, 2019.

The consolidation phase continued even in the fiscal year 2018-19 as progress of implementation of the regulatory overhaul varies across the country and is as yet not comprehensive. In addition to this, the industry was also affected, mainly in the second half of the fiscal, by the crisis of confidence and liquidity in NBFCs and HFIs. This affected the industry as NBFCs are now a bigger source of funds than the Banking sector with a share of 55% (for the first 9 months of FY18) and tapping alternative sources such as private equity or structured debt can increase the cost of funds. The end-user and investor demand were also impacted by the volatility in the overall economic environment from fluctuating energy prices and currency markets, farm sector distress, slowdown in consumer spending etc.

The sector as a whole had a mixed performance with the Residential segment showing pick-up in transaction volumes and new launches in the first half, and then again seeing a decline in the second half of the fiscal. On the other hand, the Commercial segment, mainly office spaces, continued to grow at a healthy clip with absorption levels at peak and rentals seeing a small increase overall. Newer segments such as Serviced Offices and Co-working spaces contributed heavily to this growth. This summary however masks the diversity of performance across various micro markets in each segment.

Given the massive opportunity in the sector, it has seen increasing investor interest, especially after the regulatory changes. As per a Colliers Capital Markets & Investment Services Radar report released on April 2, 2019, the total institutional inflows into the Indian real estate sector exceeded US$ 53 billion since 2008, with nearly 59% of the total invested in the period from 2014 – Q1 2019. The investments are now increasingly tilted towards the Commercial segment as seen in the table referenced from the report.


Segment 2008-2014 2015 – Q1 2019
Residential 14.8 9.1
Offices 5.8 9.1
Retail 0.6 1.9
Industrial & 0 1.2
Mixed Use Assets 6.2 7.4

The real estate sector is expected to touch US$ 180 billion by 2020 from US$ 126 billion in 2015 as per a report titled ‘Traversing through the epic, predicting the curve jointly released by JLL and CREDAI in March 2018. As per the Real Estate Market Outlook 2019 report by CBRE (released in March 2019), 200 million square feet of real estate space will be added in 2019 across all segments including housing, office, retail and logistics taking the overall stock in India to 3.7 trillion square feet by the end of 2019.


The Residential housing segment is the largest pie in the overall Real Estate sector, which has over 12,500 active developers across 60+ cities totaling to a revenue size of Rs. 2.592 lakh crores. Top–100 developers account for 34% of the total revenue. Overall opportunity size in the segment is also huge with the Governments ‘Housing for All by 2022 mission envisaging construction of 1.2 crore urban homes and another 2.95 crore rural homes, mainly in the affordable housing segment. The government is expected to make a US$ 14 billion investment to build 1 crore urban dwellings.

In the period 2018-19, the initial quarters saw a strengthening of the buyer sentiment, which was then affected by the economic slowdown. This is reflected in the data on transactions, new launches and pricing as given below.

% Growth 2018* Q1 2019^
Launches 76% -32%
Sales 6% -5%
Unsold Inventory -11% -10%
Quarters to Sell 10.2 quarters 10 quarters

* Source: India Real Estate report July – December 2018 released by Knight Frank in 2019

^ Source: Realty Decoded Q4 FY19 report released by in April 2019

The key trends visible in the last quarter were as follows:

Predominance of affordable housing in the new launches and sale numbers.

Ready-to-move-in homes dominated sale numbers

~58% of all units launched and 55% of overall sales in Q1 2019 were affordable housing units measuring up to 60 square meter. Nearly half of the unsold inventory comprises of units sized below 60 square meter. Buyers are opting for ready-to-move-in units with 82% of the homes sold during the quarter being ready-to-move-in units.

In FY 2018-19, NRIs poured around US$ 11 billion into the Indian housing industry as per an estimate by 360 Realtors. This trend is expected to pick-up with the Middle

East economies picking up and currency markets getting stabilized. The segment is also seeing emergence of new alternative asset opportunities beyond the housing needs of various income groups. This includes special need segments such as Co-living, Student Housing and Assisted-Living for Seniors. While a broader recovery and strengthening of prices as a whole are a bit further away, the fact that in many markets the prices have stabilized at or below the Affordability Benchmark level of 4.5 (Annual Household Income for the city / Average Unit Price of the Houses) as defined by Knight Frank points to a potential revival in buyer demand.


The growth momentum in commercial real estate continued even in fiscal 2018-19. Information Technology (IT), IT enabled Services, Co-working and Banking & Financial sectors contributed to this upward trend. Gross absorption went up by 17% to 50.2 MnSqFt in 2018 as per the Colliers Quarterly report released on February 12, 2019. Driven by buoyant leasing in Bengaluru and Delhi-NCR market, the absorption touched this peak, the highest level in last eight years. In Q1 of 2019, the gross leasing touched 11 MnSqFt, which was a decline of 10% on a YOY basis (Source: Colliers India Office Market Snapshot Q1 2019 Report – April 2019). However, for the fiscal year 2018-19, the segment exhibited growth in absorption levels. New supply however fell by 20% to 26.3 MnSqFt in 2018 due to delay in completions from slow pace of construction and approvals. This trend continued even in Q1 2019 with new supply addition of only 7.7 MnSqFt, a decline of 17% as compared to Q1 2018. Bengaluru and Pune saw the maximum addition to new supply.

For the year 2019, Colliers expects the absorption levels to decline to 45.7 MnSqFt on account of the peak achieved in 2018. However, with the delayed supply hitting the market in 2019 the addition of new supply is expected to touch a high of 51.3 MnSqFt. While there is expected to be incremental new supply in 2019, many years of net negative new supply would mean availability of quality supply would remain restricted. A combination of incremental demand and restricted supply during the 2018-2021 is expected to strengthen rents by a CAGR of 1.7% till 2021. Peripheral locations in many of the top tier cities are expected to see increased demand due to stressed infrastructure in central business districts and availability of larger contiguous space with quality development at affordable rates in these locations.


Affordable Housing in the residential segment, Office spaces and Co-working spaces in the Commercial segment have emerged as the key segments within the Real Estate industry in the recent past and are likely to remain important growth opportunities for the next year and beyond. One of the relevant asset classes for investors, especially private equity players, will be Retail projects in Tier-II and Tier-III cities. Even in the Residential segment, Tier II and Tier III cities are expected to fare better on account of end user demand, most projects qualifying for affordable housing benefits and savings from GST reduction. Cities such as Chandigarh, Lucknow, Ludhiana, etc. where Omaxe has presence are some of these growth centers.

In addition to these segments, key elements of the demand that need to be kept in mind are ready-to-move-in houses, emergence of peripheral locations in major cities for both residential and commercial segments and small revival of investment demand from NRIs.


While the Reserve Bank of India reduced repo rate by 110 basis points between August 2018 and August 2019, with the latest one in August 2019 to bring it down to 5.4% from 6.5%, the downstream transmission of this rate cut is not happening smoothly and completely. Given the sensitivity of the sectors well-being to interest rates, from cost of funds for developers and buyers perspective, any such issues are likely to affect the prospects of the sector. Continuation of liquidity crunch for the NBFC sector and lack of bank funding will jeopardize viability of individual projects and developers as a whole. Broader economic surprises on the negative side are also likely to impact the nascent trend of revival in the sector by again dampening the demand. Removal of incentives announced by the Government for the sector and any disruptive regulatory impacts have the wherewithal to derail the sectors performance. ]


Omaxe Ltd. is a leading and trusted name in residential, commercial and mixed use properties in 8 states across 27 cities including Delhi NCR, Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, and Rajasthan among others. The Company caters to needs of a varied segment of customers from affordable housing for the Lower Income Group and Middle Income Group to luxury projects for High Net Worth Individuals (HNIs) and NRIs to best-in-class office facilities and construction contracting services to marquee names in the industry. Its offering portfolio is a mix of residential projects, group housing, townships, offices, malls, SCO and other projects. Omaxes diversified presence has enabled to survive and thrive in a difficult market because of its superior grasp of emerging customer needs and top-quality delivery track record. As on March 31, 2019, Omaxe has delivered 116.6 MnSqFt comprising 84.8 MnSqFt in real estate and 31.8 MnSqFt in construction contracting. As of March 31, 2019, the area under development in real estate stands at 60 MnSqFt spanning across 21 projects.

Omaxe has specialized in targeting Tier II and Tier III cities and emerging peripheral locations in the major cities by investing in land parcels before the curve. This has helped the Company sustain reasonable financial and operating performance in a challenging situation. During 2018-19, Omaxe sold 3.55 MnSqFt of space worth Rs. 872 crore. The average realization for the year ended March 31, 2019 was Rs. 2,460 per square feet as compared to Rs. 2,464 per square feet in 2017-18. Major locations that contributed to new bookings in the reported financial year, both in residential and commercial segment, were New Chandigarh, Lucknow and Faridabad.

Residential projects accounted for 2.39 MnSqFt and a realization of Rs. 461 crores from the total sales. Commercial sales stood at 1.16 MnSqFt and Rs. 411 crores realization.


With the industry continuing to be in the recovery mode from the regulatory overhaul and slump in demand, the Company was primarily focused on delivering its existing/ ongoing projects during the year 2018-19. The company delivered 5.86 MnSqFt area and booked 3.55 MnSqFt area during 2018-19. However, there were a small number of new projects launched. New launches were spread across 6 cities, 13 projects and a total development potential of 3.7 million square feet. Residential projects accounted for 60% of the total area under development in the new projects with Commercial accounting for the rest. From the total sale, the share of new launches was 1.33 MnSqFt amounting to Rs. 448 crore.

New Chandigarh had the highest share of new launches with 2.1 MnSqFt of total launch and sale of 0.54 MnSqFt. New Chandigarh was followed by Lucknow, which saw a launch of residential project of an area of 1.31 MnSqFt and sale of 0.59 MnSqFt. Other major residential launch was in Allahabad, with a total saleable area of 0.18 MnSqFt and where 0.14 MnSqFt of area was sold. Other launches included commercial in Faridabad (area sold 0.04 MnSqFt), residential plots in Vrindavan (area sold 0.06 MnSqFt) and commercial in Rohtak (area sold 0.008 MnSqFt).


With the industry performing well only in some micro markets, particularly down South, the overall environment was not supportive for the Company. In addition to this, from 1st April 2018 the Company had to apply the modified retrospective approach under the Ind AS 115, in lieu of the Ind AS 18 and the Ind AS 11 for revenue recognition. This also had an impact on the top line and bottom line vis--vis the previous year as the same was not restated. New Chandigarh, Lucknow and Faridabad were the top three from a sale perspective during 2018-19. Overall realization per square feet in 2018-19 was Rs. 2,460 per square feet.

Particulars FY 2018-19 FY 2017-18
Total income from operations 1200.24 1897.8
EBITDA 161.9 318.8
Profit before tax 78.6 140.7
Profit after tax 48.7 85.2

Total Income from Operations:

The total income of the Company on a consolidated basis during Financial Year 2018-19 stood at Rs.1200.24 crores, down 36.8% as compared to the same period of Financial Year 2017-18. From the differential Rs. 697.6 crores, Rs. 388.2 crores was due to the change in accounting policy as stated above. Hence, on a like-to-like basis the total income from operations declined only by 16.3%.


For FY2018-19, the EBIDTA stood at Rs. 161.86 crores vis--vis Rs. 318.76 crores in the corresponding period of FY2017-18.


The profit before tax for FY2018-19 was Rs. 78.56 crores as compared to Rs. 140.71 crores in 2017-18. PBT margin for 2017-18 was 7.4%, which came down to 6.5% in FY 2018-19 mainly on account of decline in revenue.


Profit after tax for 2018-19 stood at Rs. 48.65 crores as against Rs. 85.18 crores in 2017-18, down by 42.9%.


As the change in accounting standards has been implemented without restating the past financials, the same and some of the ratios in turn are not comparable in the strict sense. However, the movement and any other reason that may have impacted the ratios have been stated for the information of the shareholders.

PARAMETER Fy 2018-19 Fy 2017-18 Change explanation
Debtor Turnover 2.04 2.00 1.97
Inventory Turnover 0.17 0.37 (53.16) Due to implementation of new accounting standard, Ind AS 115, opening inventory increased by Rs. 2191 crore.
Interest coverage ratio 2.18 1.88 15.68
Current ratio 1.25 1.55 (19.39)
Debt Equity Ratio 1.03 0.78 31.66 Due to implementation of new accounting standard, Ind AS 115, opening reserves decreased by Rs. 501 crore (net of taxes)
EBIDTA Margin % 13.49 16.80 (19.71)
Net Profit Margin % 4.05 4.49 (9.69)
Return on Net Worth % 2.47 3.95 (37.40) Due to implementation of new accounting standard, Ind AS 115, opening reserves decreased by Rs. 501 crore (net of taxes)


Success mantra of Omaxe has remained consistent through the years as reflected in the key strategies it has been pursuing over the years with some level of fine tuning in line with the market trends.

Strategic land acquisitions: Omaxe believes in being ahead of the market in identifying potential locations and hence saw the opportunity in Tier-II and Tier-III markets and peripheral locations in big cities, much before other players. It was therefore an early entrant in these markets and was able to acquire land parcels at strategic locations in these places at a relatively lower prices. This has developed into a competitive advantage for the Company as it has been able to offer projects at a comparatively affordable prices or command a premium due to strategic location. The Company continued to pursue this strategy in FY2018-19 and acquired land for future use in important emerging markets. At the same time, it also believes in prudence and disposed-off lands in markets that it did not see a growth in to ensure efficient allocation of capital to strategic assets.

Focus on Customers: ‘Customer First is an integral part of the Omaxe ethos. It is ingrained and emphasized continuously to all the constituents of Omaxes ecosystem to ensure best service and experience to its customers across all interfaces. This includes a robust grievance redressal mechanism in the unfortunate event of any issues faced by customers post-sale. The Company has adhered to all the customer friendly requirements of RERA in letter and spirit, some of the norms were followed even before they were mandated under RERA. This has helped it build an exceptional reputation with the customers for quality and commitment to delivery, and developed into a competitive edge for the Company.

Emphasis on tier II and III cities: Apart from being an early mover, focus on markets untapped by mainstream developers was a competitive strategy to exploit the clear advantage Omaxe had in these markets over the local unorganized players. As a listed entity with a track record for quality and delivery, most of the customers could clearly see the benefit of trusting their life savings in the hands of Omaxe vis--vis a local developer. The North and Central India continue to offer such opportunities and the Company will continue to exploit these in the foreseeable future.

Committed delivery and superior quality: The edifice of Omaxes success has been built on quality and commitment to delivery since its inception. The Company intends to continue this focus and further build on it to ensure success going forward as ‘reputation and ‘trust are the most important factors for the customers. This approach of the Company also extends to various other stakeholders apart from the customers, thus creating an environment aligned with its core values.


An in-house professionally trained Internal Audit team conducts regular audits to ensure compliance with set policies and procedures, and prevent any type of fraud, misappropriations and unauthorized activities. They also update these policies and procedures based on revised regulatory norms and to ensure adequacy in line with changing business environment. This is in addition to adequate systems and controls put in place to ensure accurate and timely reporting of all financial transactions and projects. The Company also ensures compliances to company law, listing and other applicable regulations. External auditors for statutory and internal audits, and oversight of the audit committee of the Board complete the comprehensive system of checks and balances.


Human capital is the biggest asset of Omaxe. The Company invests time and resources to create a conducive work environment to develop a workforce that is motivated and aligned as one Team Omaxe. Omaxe believes that inspired and well-trained employees are key to achieving business and operational goals of the company, whether it is timely and cost effective completion of projects or delivering a superior customer experience. Ensuring open communication channels across the organization, consistently setting new challenges and target milestones, adequate training, and rewarding and celebrating successes are some of the key management practices that have been put in place for achieving the desired people goals. As of 31 March, 2019, the strength of Team Omaxe stood at 1640 full-time employees.

Corporate Social Responsibility: As a responsible Corporate Citizen, Omaxe has always been at the forefront in fulfilling its social commitments through various initiatives. The Company puts its full strength behind these socioeconomic development initiatives and also encourages participation from its employees for the same. At Omaxe, the Company conducts its activities of Corporate Social Responsibility directly and/or through Education Trust, i.e. “Omaxe Foundation”, a Not-for-profit Organization. It concentrates on helping marginalized section of the society, environment sustainability, education and skill development of construction workers and girl child, preventive healthcare, as well as rural development. During FY 2018-19, Omaxe continued its CSR related activities with the National Employment through Apprentice Programme (NETAP). NETAP is on the job training program offered by TeamLease Skill University which operates under PPP model between All India Council for Technical Education (AICTE) (MHRD), Confederation of Indian Industry (CII) & National Skill Development Council (NDSC). It is governed by the NEEM Notification (National Employability Enhancement Mission) published in the gazette by AICTE, as per the AICTE Act of 1987, and its purpose is to facilitate following for young aspirants:

Overcoming the current challenges of the Apprenticeship


Building skills of Unemployed youth through Learning by doing and Learning while earning.

Providing them with access to practical skills.

Building a matching infrastructure which connects the youth with the Corporate skill requirements.


In addition to the ongoing projects, Omaxe also has several projects in the pipeline mainly in the focus areas of Tier II and Tier III cities. Notwithstanding the blip in the reported financial year, the prospects for the Companys projects remain bright and the Companys future upbeat with focus on Delhi & Gurgaon and tier I and existing focus area in FY 20. Its efforts will however be more concentrated on completing existing projects to the utmost satisfaction of its clientele and within time, while meeting the internal benchmarks for quality and profitability. Presently, the balance sheet of the Company remains strong and Omaxe has the wherewithal and flexibility to continue its operations with new launches. However, it is important for the economic environment and overall liquidity situation to improve for the end-user demand to pick-up substantially. If this indeed happens, Omaxe is well poised to deliver growth in the coming years.