Indian economic overview
The financial year 2023 was effected by the impact of the pandemic
especially in few countries like China, the same had heightened geopolitical tensions led
by war between two countries which resulted in high inflation and the global fight on
inflation spearheaded by all Central Banks. However, in the current financial year, while
we are out of the challenges which we faces in last two years. While most of the other
issues continue to linger on.
Global GDP growth thus far has surprisingly remained in the positive
despite the challenges faced by the global economies though slowing down considerably as
compared to the previous year.
Monetary tightening done by the central banks had somewhat less than
expected impact on the overall economic activity. This resulted in strengthened the view
that the developed economies led by US are more likely to have a soft landing or a no
landing rather than a recession or forced landing. IMFs latest forecast: Growth may
slow from 3.4 in CY22 to 2.8 percent in 2023 before accelerating to 3.0 per cent in 2024.
In line with earlier commodity cycles, most commodity prices which had
shot up in the early part of the previous financial year have eased off noticeably. Prices
for most of the commodities such as metals etc. are likely to be below the average levels
recorded in 2022.
After rising sharply over 2021 and much of 2022, inflation in most of
the world has started slowing down, mostly driven by falling energy and food prices and
fading supply chain pressures.
This is paving the way for a reduction in the pace and intensity of
interest rate hikes by the worlds major central banks, suggested at their recent
meetings. However, while the inflation has been moderating in the face of steep policy
rate hikes initiated by the Central Banks, the pace of moderation remains unsatisfactory
for policy makers and it remains above the comfort level of most inflation targeting
economies. This has made policy makers fear that inflation is becoming sticky prompting
them to keep the interest rates higher for longer resulting in a downward bias to global
growth forecasts. Also, with no end in sight for the Russia Ukraine war, any further
worsening in the geopolitical tensions could once again disrupt global trade and supply
chain leading to another round of high inflation especially in the energy prices.
The financial year 2023 started on a rather gloomy note with the war
and the resultant energy price inflation - often Indias Achilles heel. India has
weathered the storms of the previous year remarkably well and remained an oasis of calm in
troubled global macro conditions. Led by efficient vaccination roll out, India emerged
stronger than some of the other larger economies. To fight the inflationary pressures,
global central banks led by the US Fed have raised benchmark policy rates substantially.
This also forced RBI to raise policy rates by an unprecedented 250 bps
in the financial year 2023 - fastest increase in policy rates in last two decades.
However, given the fiscal prudence adopted by the Indian Government during the early part
of the pandemic period, Indian macro conditions remain conducive of robust growth in spite
of the above normal inflation seen recently which remain manageable to a large degree.
Despite the challenges, Indian economy managed to grow by 7.2% in FY23 (Source: NSO),
showcasing the structural nature of
The Indian economy appears to have moved on after its encounter with
the pandemic, staging a full recovery in FY22 ahead of many growth path in FY23 and
beyond. At the same time three key challenges remain entrenched largely from global macro
side which will pose hindrance to Indias growth potential. First, inflation is likely to
remain at an elevated level even though it may have already peaked. Secondly, aggressive
tightening of monetary policies across the central banks of advanced economies is likely
to cause a global slowdown this year, impacting trade and may also result in capital
outflows and a rising imbalance in the balance of payment account. Third, higher energy
prices is likely to keep the current account deficit at a higher level thus pressuring the
currency. Additionally, on the domestic front - uneven spread of the recovery has meant
that parts of the economy have still not reached their pre-pandemic levels leading to
slower rural recovery.
The governments focus has been on sectors such as infrastructure,
construction, and manufacturing that create jobs for workers across all skills.
Production-Linked Incentive (PLI)
Schemes for various industries rolled out over the past few years have
started to bear fruit. Though still in infancy, these sectors have huge potential to
effectively kick-start the manufacturing engine for the country thus diversifying the
growth drivers for the country. Growth is expected to be measured in FY24 on the back of
strong credit growth, positive capital investment cycle given the demand as well as the
strengthening of the balance sheets of the corporate and banking sectors. Further support
to economic growth will come from the expansion of public digital platforms and
path-breaking measures, increased spending on various transportation infrastructure and
the PLI schemes to boost manufacturing output.
Indian Real Estate Industry Overview
Real estate sector in general and housing sector in particular has
always played a critical role in shaping the global economies.
The multiplier effect of housing sector through direct and indirect as
well as through induced impact is significantly large on both the GDP as well as
employment generation. There are a number of ancillary industries which support the growth
of real estate construction sector, like cement, steel, other non-ferrous metals, tiles,
glass, brick, and certain consumer durables etc.
Further, the industries that provide the inputs to these ancillary
industries also gain momentum. Hence, due to the inter- linkages among all the sectors of
economy, the overall economic impact of a real estate far exceeds the direct impact
especially in employment generation.
India by virtue of its demography and development cycle is at a place
where demand for quality urban housing is immense. This is only going to strengthen with
each passing year as India graduates from being a low income economy to a middle income
economy. As per industry estimates, India would see creation of 100 million new households
who will become home ownership capable by virtue of rise in income levels by the end of
the decade.
Due to the structural nature of demand, Indian real estate industry has
continued to gain momentum during FY23 despite the uncertainties posed by global economic
slowdown as well as steep interest rate hikes. While the market for office spaces staged a
comeback in the post-pandemic period with back to office normalization, the residential
market further gained on the momentum seen in FY22. Despite the 250 bps repo rate hike,
the robust performance of the sector especially in the housing segment signifies the
strength of the underlying demand for property.
Indian Housing Market overview
Indian housing market went from strength to strength surpassing
previous peaks seen during the last year. As per property research firm, Anarock Research,
housing sales in 2022 grew by more than 50%, surpassing the previous peak seen in 2014.
What is encouraging to note that this occurred in a year when there was still some
residual impact of the pandemic in the beginning of the year
The supply side consolidation in the industry continues to reputed
developers as well as financial institutions. The disciplined supply has meant moderately
rising capital values of homes. As per various industry reports, residential prices have
increased by around 5-7% across various geographies. This positive nominal price growth
has kick started the virtuous price demand cycle where, while the nominal increases have
incentivised end user demand to go up but price growth being below the wage growth has
continued to keep the affordability intact. The importance of the brand in real estate
has continued its upward journey. Housing is increasingly becoming a branded consumer
product! A strong housing brand in consumers minds stands for superior product quality,
avenue for life style upgrade, an aspirational address and above all certainty of timely
delivery. The above can only be delivered by branded tier 1 developers, leading to the
demand side consolidation. Branded tier-1 developers with strong execution capability are
expected to leverage this opportunity to gain even more market share by bringing newer
products suitable for the demand dynamics whilst offering quality, and a sustainable
environment as well as social ecosystem.
Opportunities & Threats
Affordable housing today has been well received by buyers, developers
and financiers; making it a very lucrative proposition for all. Housing finance companies
are opening their branches in new geographies and making the home ownership process
simpler through standardization of processes and campaigns. A significant step has been
the decision of Reserve Bank of India to allow real estate developers and housing finance
companies to raise up to $1-billion through external commercial borrowings to promote
affordable housing projects. This has helped the developers to cheap overseas funds and
reduced the overall costs of the projects. In a way, this has been like a catalyst for all
stakeholders operating in the affordable housing segment and further the challenges were
the delay in approvals and warrant a revised schedule of project timelines. However, the
Company does not foresee any big threat, but future is not predictable due to various
reasons such as changes in government policies, funding problem which may impact
profitability & effect the attractiveness of the sector & companies operating
within the sector however the Company has strong intellectual manpower to averse the risk
& threat Internal controls The internal control and risk management system is
structured and applied in accordance with the principles and criteria established in the
corporate governance code of the organisation. It is an integral part of the general
organisational structure of the Company and involves a range of personnel who act in a
coordinated manner while executing their respective responsibilities. The Board of
Directors offers its guidance and strategic supervision to the Executive Directors and
management, monitoring and support committees.
Company Overview
Incorporated in 1982, Poddar Group is one of the Pioneer in affordable
housing real estate companies in the Mumbai Metropolitan Region (MMR). The Company has
leveraged its rich family legacy and business experience to service the housing needs of
mid and lower-income segment of the society and has delivered more than 5000 apartments in
the last ten years
Risk management
Economic risk: Slowdown in the global or national economy due to the
second and third wave of the pandemic could decelerate the Companys growth.
Mitigation: The pandemic has forced people to stay in their homes
during lockdown, leading to the demand for larger homes. The company is optimistic of
being able to leverage this reality and increase the carpet area sold, a growth
opportunity.
Competition risk: Growing competition could cannibalise the Companys
market share
Mitigation: The company has positioned itself in MMRDA (Mumbai
Metropolitan Region Development Authority) marked by absence or lesser availability of
organized players, translating into a bigger share of affordable housing business.
Accessibility risk: Projects beyond centralized locations could hinder
sales as customers prefer centralized location.
Mitigation: The companys projects are situated in centralized suburban
locations in close proximity to railway stations, ensuring easy access to the central
business district.
Cost risk: Significant variations in land acquisition cost, approvals
cost and raw material prices might lead to considerable losses.
Mitigation: The company has a systematic approach to acquire large land
tracts at reasonable rates. It holds properties in the form of MoUs as opposed to
conveyance, reducing Costs. The Company has a well defined material procurement plans and
identified key vendors tie-ups to control raw material costs. Funding risk: The Company
might not be able to economically fund its capex.
Mitigation: The company has a planned approach to strategies its
operations and project development plans through exploring economically beneficial Joint
Ventures to fund its projects and mitigate the cash flow mismatches.
Financial performance
Poddar Housing followed the accrual basis of accounting under the
historical cost convention. Its accounts were prepared on the basis of Ind AS as per
Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules
2014.
Balance Sheet
| Sr. No. Particulars |
31/03/2023 31/03/2022 |
|
Amount Rs. In lakhs |
| 1 Borrowings |
26,648.59 |
33,498.90 |
| 2 Non-current assets |
17,460.48 |
16,630.44 |
| 3 Other Non current liabilities |
584.22 |
714.83 |
Profit & Loss statement
| Sr. No. Particulars |
31/03/2023 31/03/2022 |
Increase / (Decrease) as compared to
previous year |
| Stand-alone |
|
|
Amount Rs. lakhs |
| 1 Total Revenues |
2,706.93 |
6,350.20 |
(3643.27) |
| 2 Expenses |
4,877.84 |
7,017.78 |
(2,139.94) |
| 3 EBITDA |
(2,170.90) |
(721.58) |
1,449.32 |
| 4 Finance Cost |
4,017.70 |
1507.61 |
2.520.09 |
| 5 Depreciation and amortisation |
34.18 |
29.49 |
4..69 |
| 6 Profit (Loss) after tax |
(4,656.51) |
(1,726.03) |
2,930.48 |
Working capital management
| Sr. No. Particulars |
31/03/2023 31/03/2022 |
|
Amount Rs. lakhs |
| 1 Current assets |
56,407.84 |
54749.96 |
| 2 Current ratio |
1.62 |
2.94 |
| 3 Inventories |
51,114.72 |
48224.81 |
| 4 Current liabilities |
34,890.12 |
18592.83 |
| 5 Cash and bank balances |
268.34 |
971.87 |
KEY Ratios :
| Ratio |
Methodology |
Current Year |
Previous Year |
Variation |
% |
Remarks |
| Current Ratio |
Current Assets over Current Liabilities |
1.62 |
2.94 |
1.33 |
45.10 |
Increase in assets is mainly in Work-
in-progress under inventories and increase in liabilities is mainly in due to
classification of debt as current maturities and advances from customers. |
| Debt Equity Ratio |
Debt over Total Shareholders Equity |
5.00 |
2.47 |
(2.54) |
-102.91 |
During the year the Company has drawn
construction finance from STCI Rs. 45 Cr. & Promotors Rs. 17 Cr. |
| Debt Service Coverage Ratio |
EBIT Over Debt |
0.01 |
0.07 |
0.06 |
84.76 |
Inline with increase in debts. |
| Return on Equity Ratio |
PAT Over total average Equity |
(0.31) |
(0.09) |
0.22 |
-245.89 |
Inline with the operational result for the
year. |
| Inventory Turnover Ratio |
Revenue from Operations over Average
Inventory |
0.05 |
0.14 |
0.09 |
61.97 |
Inline with the revenue recognition policy. |
| Trade Receivables Turnover Ratio |
Revenue from Operations over Average Trade
Receivables |
1.80 |
5.85 |
4.06 |
69.31 |
The decrease is mainly due to reduction in
average revenue from operations during the year. |
| Trade Payables Turnover Ratio |
Total Purchase over Average Trade Payables |
1.98 |
3.31 |
1.33 |
40.20 |
There is increase in trade payable while
decrease in purchases during the year. |
| Net Capital Turnover Ratio |
Revenue from Operations over Average Working
Capital |
0.09 |
0.17 |
0.08 |
46.69 |
|
| Net Profit Ratio |
Net Profit over Revenue |
(2.60) |
(0.27) |
2.32 |
-848.41 |
At present the revenue & margin is
contributed only by two projects under POCM (Refer Note 1 below). |
| Return on Capital Employed |
PBIT Over average capital employed |
(0.03) |
(0.01) |
0.02 |
-167.88 |
Decrease is due to operational result for
the year. |
| Return on Investment |
EBIT over Total assets |
(0.03) |
(0.021) |
0.02 |
183.72 |
Inline with operational result for the year. |
Human resources
Poddar Housing believes that its competitive advantage lies within its
people. The Companys people bring to the stage a multi-sectoral experience, technological
experience and domain knowledge. The Companys HR culture is rooted in its ability to
subvert age-old norms in a bid to enhance competitiveness. The Company always takes
decisions which are in alignment with the professional and personal goals of employees,
thereby achieving an ideal work-life balance and enhancing the pride of association. As on
31st March, 2023 the employee strength of the Company stood at 39.
Cautionary statement
This statement made in this section describes the Companys objectives,
projections, expectation and estimations which may be forward looking statements within
the meaning of applicable securities laws and regulations. Forward-looking statements are
based on certain assumptions and expectations of future events. The Company cannot
guarantee that these assumptions and expectations are accurate or will be realised by the
Company. Actual result could differ materially from those expressed in the statement or
implied due to the influence of external factors which are beyond the control of the
Company. The Company assumes no responsibility to publicly amend, modify or revise any
forward-looking statements on the basis of any subsequent developments.
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