Oswal Green Tech Ltd Management Discussions

Global Economic Overview

The journey over the past few years has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, the Russia- Ukraine war that triggered a global energy and food crisis, and a considerable surge in inflation, followed by a globally synchronized monetary policy tightening. The global GDP is estimated to have grown at 3.2% in FY 2023, lower than 3.5% in FY 2022, led by fears of a hard recession. Yet, despite many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops. Economic growth has been stronger than expected in the second half of 2023 in several major emerging markets and developing economies.

Unmet revenue expectations have ushered in a new wave of pragmatism where maintaining a healthy profit margin has become pivotal for corporations due to the uncertain macro outlook. In extreme cases, organizations resorted to cost-cutting measures, such as reducing headcount and cutting discretionary spending. The global real estate sectors outlook for the financial year 2023-24 reflects a mix of opportunities and challenges influenced by economic, demographic, and technological trends. Continued urbanization, especially in emerging markets, drives demand for residential and commercial properties. Post-pandemic economic recovery boosts investor confidence and increases real estate transactions.

Indian Economy Overview

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. The policies and reforms implemented by the Indian government play a crucial role in shaping the economy. Measures related to taxation, investment regulations, labour laws, infrastructure development, and ease of doing business can impact business sentiment, investment flows, and economic growth.

Controlling inflation is an important aspect of managing the Indian economy. The Reserve Bank of India (RBI), the countrys central bank, formulates monetary policies to manage inflation and promote economic stability. Interest rates, liquidity measures, and credit availability are key tools used by the RBI to manage inflation and support growth. Indias economy recovered quickly from the pandemic and further growth is expected to be supported by solid domestic demand and increase in capital investments. Since 2014 several structural reforms has propelled India to become the fastest-growing economy among G20 nations. Despite the pandemic, Indias economy witnessed robust growth, estimated at 7.3% in 2023-24 following 9.1% (FY22) and 7.2% (FY23) growth in previous years.

Maintaining fiscal discipline and managing public debt are essential for economic stability. Sound fiscal policies, effective budgetary management, and revenue generation efforts play a critical role in ensuring macroeconomic stability and long-term growth prospects.

Industry Review

Real estate sector is one of the most recognized sectors globally. The growth of the corporate environment compliments the growth of the real estate sector. The Indian real estate sector performed exceptionally well during the financial year 2023-24, marked by significant growth in both residential and commercial segments. The residential property market witnessed record sales, with the value of home sales reaching Rs3.47 lakh crore (US$ 42 billion), a 48% increase year-on-year and the Sales volume rose by 36%, with 379,095 units sold across major cities. The Reserve Bank of Indias decision to pause interest rate hikes in April 2023 helped stabilize the market, enhancing consumer confidence. Government initiatives and policy support, including affordable housing projects and infrastructure development, bolstered the sectors performance. With the economy showing strong growth projections and potential interest rate cuts, the outlook for the real estate sector remains positive. The market is expected to continue expanding, with higher contributions to GDP and increasing demand across both residential and commercial segments.

In summary, the financial year 2023-24 was a landmark year for the Indian real estate sector, characterized by record-high sales, substantial investment inflows, and robust growth in both residential and commercial real estate markets. The sectors positive trajectory is expected to continue, driven by strong economic fundamentals and supportive government policies.

Opportunities

Continued government support for affordable housing and infrastructure development presents significant growth opportunities. Strong GDP growth projections and potential interest rate cuts are expected to further boost demand in the real estate sector. Increasing urbanization and favourable demographic trends provide a steady demand for residential and commercial properties.

Challenges

While the management of your Company is confident of creating and exploiting the opportunities, it finds the following challenges:

• Unanticipated delays in project approvals;

• Regulatory hurdles;

• Availability of accomplished and trained labour force;

• Monetary tightening and funding issues;

• Increased cost of manpower;

• Rising cost of construction lead by increase in commodity prices.

Performance overview

The Company is primarily engaged in the business of real estate development and construction activities.

Project Centra Greens-Ludhiana

The Companys promoted residential complex project at Ludhiana had successfully sold 396 flats out of 538 flats till the financial year ended March 31, 2024, which can be attributed to a combination of effective sales strategies, market demand and customer satisfaction. Moving forward, the focus will be on maintaining this momentum and continuing to provide exceptional value to both existing and potential homeowners.

Also, during the financial year 2023-24, a dispute arose between the Company and the developer of the Centra Greens Township on account of the developers inability to repay the outstanding dues and interest thereon to the Company and subsequently, the developer has offered their share of unsold inventory of 109 flats in the Centra Greens township which comprises of 229770 sq. ft. area in the township along with the management and control of the entire township. Also, in order to settle the ongoing dispute, the Company has invoked the arbitration clause as stated in the agreement executed between the Company and the Developer and the Company has decided not to charge any further interest pending the arbitration proceedings.

Real estate project at Barnala, Punjab

During the financial year 2021-22, the Company commenced another real estate project at Barnala, Punjab wherein the Company proposes to develop land admeasuring 57 acres (approx.) into a residential/ commercial project which may inter alia include the development of a colony by carving out the plots of different sizes and dimensions on the Land so as to allot, transfer and sell the same as such or by constructing thereon villas/independent floors, commercial shops, SCOs, multistoried buildings etc.

The said real estate project of the Company was successfully completed in the third quarter of the financial year 2023-24 and has transitioned into its operational phase. Currently, the project is generating revenue from the sale of plots, marking a significant milestone for the company.

Other Income:

During the year, the Company has also received income from interest on Inter-Corporate deposits (ICDs) and investments in mutual funds.

The financial performance highlights for the year ended March 31,2024, are as follows -

The net income from operations achieved during the year is Rs. 5,560.09 lakh as compared to Rs. 2,049.88 lakh in previous year. The net profit after tax is Rs. 637.19 lakh as compared to Rs. 3,787.83 lakh in the previous year.

Discussion on financial performance with respect to operational performance:

During the financial year 2023-24, the companys financial performance showed a notable decline, with profit after tax dropping to Rs. 637.19 lakhs from Rs. 3,787.83 lakhs the previous year. This significant decrease highlights operational challenges that impacted overall profitability. Key factors included increased operational costs due to rising interest rates and inflation, which eroded margins. Market conditions also played a role, with subdued demand in certain segments affecting sales volumes. Despite efforts to optimize expenses, the financial strain underscores the need for strategic adjustments to enhance operational efficiency and stabilize future profits.

Risks & Concerns

The Company is exposed to specific risks that are particular to its businesses and the environment within which it operates, including inter alia, market risk, competition risk, human resource risk, execution risk and significant downturn in the economic cycle. The company has a comprehensive risk management framework to identify, assess, and mitigate potential risks. Regular monitoring and review of risk factors ensure timely interventions and strategic adjustments to safeguard our interests.

Human resource

Human resource is considered as key to the future growth strategy of the Company and looks upon to focus its efforts to further align human resource policies, processes and initiatives to meet its business needs. The Company has been very proactive to support all its workforce at all the levels in best possible manner. The Company has a continuous process to monitor individual performance. The Company continued to have cordial and harmonious relations with its employees. Training programs, performance incentives, and a conducive work environment are integral to our HR strategy, aimed at fostering a motivated and skilled workforce.

Internal Control Systems and their adequacy

The Company has implemented an internal control framework to ensure all assets are safeguarded and protected against loss from unauthorised use or disposition and transactions are authorised, recorded and reported correctly. The framework includes internal controls over financial reporting, which ensures the integrity of financial statements of the Company and reduces the possibility of frauds.

The Audit Committee of the Board reviwes the design of key processes from the point of view of adequacy of controls. The internal controls are tested for effectiveness, accorss all our projects and functions by the finance department, which is further reviewed by the management of the company from time to time, for corrective action.

Outlook

The outlook for the real estate sector remains optimistic, with anticipated growth in both residential and commercial segments. The company aims to leverage market opportunities through strategic project launches, enhanced customer service, and sustainable development practices. Continued focus on financial discipline and operational excellence will be key to maintaining growth momentum and delivering value to our stakeholders.

Key financial ratios

A comparative table showing a synopsis of the financial year 2023-24 vs. 2022-23 of Key Financial Ratios is provided below:

Risk Management

The Board and its risk management committee take responsibility for the total process of risk management in the organization. The Company follows well-established and detailed risk assessment and minimization procedures, which are periodically reviewed by the Board.

The Company takes a very structured approach to the identification and quantification of each risk and has a comprehensive board-approved risk management policy. The scope of the Audit Committee includes review of the Companys financial and risk management policies. The Audit Committee reviews the Audit reports covering operational, financial and other business risk areas.

Disclosure of accounting treatment

The standalone financial statements for the year ended March 31, 2024 have been prepared and presented on a going concern basis under the historical cost convention (except for certain financial instruments which are measured at fair values), on the accrual basis of accounting and comply with the Indian Accounting Standards prescribed by Section 133 of the Companies Act, 2013 (‘the Act) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued there after, other pronouncements of the Institute of Chartered Accountants of India, guidelines issued by Securities and exchange board of India (SEBI) and the relevant provisions of the Companies Act, 2013 (to the extent notified)/Companies Act, 1956.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or are vision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Cautionary Statement

The statements in the Management Discussion and Analysis Report, which may be considered ‘forward-looking statements, within the meaning of applicable laws and regulations, have been based upon the current expectations and projection about future events. The actual results could differ from those expressed or implied. Important factors that could influence the Companys operations include global geopolitical shifts, economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and other factors such as industrial relations. The management cannot, however, guarantee that these forward-looking statements will be realised or achieved.