Poddar Housing & Development Ltd Management Discussions.

Global economic review

The global economy grew slower by 70 bps at around 2.9% in 2019 compared to 2018. Global trade also grew a mere 0.9% in 2019 due to trade tensions and slower economic growth. The pandemic COVID-19 is projected to shrink global growth significantly in the foreseeable future. As a result of the novel corona virus pandemic, the global economy is expected to de-grow significantly in the current financial year.

(Source: World Economic Outlook, April 2020, CNN, Economic Times, trading economics, Statista, CNBC)

Global economic growth over five years (%)

World output Advanced economies Developing and emerging
2015 3.5 2.3 4.3
2016 3.4 1.7 4.6
2017 3.9 2.5 4.8
2018 3.6 2.2 4.5
2019 2.9 1.7 3.7

Indian economic review

Indian economy slowed to 4.2% in 2019-20, compared to 6.1% in 2018-19. In 2019-20, GDP growth slowed, which contributed to an increase in fiscal deficit mainly on account of lower aggregate demand, lower fiscal revenue, lower economic activity and higher fiscal expenditure on account of the measures to address the economic slowdown. India emerged as the fifth-largest world economy in 2019. India jumped 14 places to 63 in the 2020 World Banks Ease of Doing Business ranking. The country climbed 79 positions in five years and was among the top 10 performers for the third year running.

The nominal exchange rate (the Indian rupee or INR vis--vis the US dollar) exhibited sizable two-way movements during October-December 2019. The INR came under intensified and sustained depreciation pressures beginning mid-January, reflecting a generalised weakening of emerging market currencies amidst flights to safety. Accordingly, the baseline assumes an average of H75 per US dollar.

The nominal per capita net national income was estimated to be H134,226 in 2019-20, up 6.1% from H126,521 in 2018-19. Retail inflation climbed to a six-year high of 7.59% in January, breaching the RBIs upper band of 6% while settling at 5.91% in March 2020. Growth in nominal rural wages, both for agricultural and non-agricultural labourers, remained subdued, averaging around 3.4% and 3.3%, respectively during 2019-20 so far (until January 2020), reflecting a continued slowdown in the construction sector. The outbreak of COVID-19 and the subsequent lockdown enforced in the country are expected to moderate demand. Intensification of social distancing is expected to lead to supply side as well as demand side shocks. Supply chain disruptions could hurt domestic production in sectors, which are dependent on imported inputs such as pharmaceuticals, autos, chemicals, power, etc.

Growth of Indias GDP in 2019-20

Q1, 2019-20 Q2, 2019-20 Q3, 2019-20 Q4, 2019-20
Real GDP growth (%) 5.2 4.4 4.1 3.1

(Source: Economic Times, CSO, Economic Survey, IMF, RBI, Franklin Templeton, PIB)

Key government initiatives

National infrastructure pipeline: To achieve a GDP of USD 5 trillion by 2025, the government announced National Infrastructure Policy with an investment plan worth H102 trillion in five years. It laid down the vision of the government in terms of job creation: about 50 million people are expected to leave farming from 2012 to 2030, the transition being underway.

Corporate tax relief: Indian companies were unable to compete globally, with the cost of capital and corporate income tax (CIT) being significantly higher than overseas competitors. In view of this, the government reduced corporate tax rate to 22% from 30%; it announced a new tax rate of 15% for new domestic manufacturing companies, strengthening the Make-in-India initiative. The new effective CIT would be 25.17%, inclusive of a new lower surcharge of 10% and cess of 4%. Indias CIT is now closer to the global average statutory CIT of 23.03%.

Indian real estate sector overview

The Indian real estate sector is one of the major contributors to the countrys gross domestic product (GDP). The real estate sector attracted an investment of USD 6.2 billion in 2019, up 8.7% from 2018 as foreign investors bought many office properties.

The residential construction segment contributes ~80% to the overall real estate development in the country. On this backdrop, the residential real estate sector saw a 23% y-o-y increase in the number of new launches in residential real estate from 1,82,207 units in 2018 to 2,23,325 units in 2019. However, owing to the economic turmoil throughout the year, sales grew by only 1% y-o-y from 2,42,328 units in 2018 to 2,45,861 units in 2019.

House price to income ratio

City name 2010 2019
Mumbai 11.0 7.1
NCR 6.0 5.0
Bengaluru 5.6 3.9
Pune 4.6 2.5
Chennai 5.4 3.9
Hyderabad 5.7 5.0
Kolkata 5.7 2.9
Ahmedabad 4.3 3.1

The office market in the country saw a 56% y-o-y growth from 3.7 million square metre in 2018 to 5.7 million square metre in 2019. The transactions in real estate office market also saw a growth of 27% y-o-y from 4.4 million square metre in 2018 to 5.6 million square metre in 2019.

Further, the Indian commercial real estate sector has also seen growth on the back of an increasing demand of co-working space. The space taken up by co-working players has nearly quadrupled since 2017 to 0.75 million square metre in 2019. Its share in transactions has consistently grown from 5% to 13% of the total area transacted in the office space markets of Mumbai, NCR, Bengaluru, Pune, Hyderabad, Chennai, Ahmedabad and Kolkata between 2017 and 2019.

(Source: Knight Frank, Economic Times)

The mortgage sector and affordable loan pricing for low-income individuals Estimates for aggregate demand for housing (H lakh crores)

Analyst estimate Govt. of India estimate
Units required (mn)
EWS 36 45
LIG 38 50
MIG and above 5 5
Total 79 100
Value of units (H lakh crores)
EWS 27 34
LIG 56 75
MIG and above 40 40
Total 123 149
LTV (%)
EWS 40 40
LIG 50 50
MIG and above 65 65
Credit penetration (%)
EWS 40 40
LIG 80 80
MIG and above 85 85
Aggregate loan demand (H lakh crores)
EWS 4 5
LIG 23 30
MIG and above 22 22
Total 49 58

Low mortgage liabilities: There has predominantly been a lack of funding facility for mortgage finance for self-employed individuals or people in the informal sector, resulting in a penetration rate of only 10% compared to mortgage penetration of advanced economies like China, Japan and USA of 26%, 38% and 50% respectively. This shows the huge headroom of growth available in the near future and this will boost the housing segment, which would, in turn, drive the residential real estate sector in India.

Mortgage payment to annual income ratio

Improved borrower a_ordability: With home buyers receiving tax incentives on home loans for principal and interest payment of home loans, affordability has improved across the country. Tax incentives on home loans for principal and interest repayment and the subsidy under CLSS for economically weaker sections has further boosted the affordability for low-income groups, middle-income groups and first-time buyers. This has in turn, created a ripple effect and boosted the residential real estate market in the country.

Urban housing demand by income category, 2021-22

A_ordable housing challenges and opportunities


yy Lack of suitable large low-cost land parcels within the metropolitan regions yy Lengthy approval process and multiple clearances yy Lack of access to cheap credit for construction finance


yy Investments in residential real estate is expected to be prudent as U or V-shaped recovery by 2021-22, with limited supply, price appreciation and a quick turnaround of projects yy This would act as an excellent opportunity for PE and HNI

The MMR market

Being the most populated Indian city, MMR suffers an immense shortage of real estate space, compounded by the fact that the city is the financial and commercial capital of the country. The prolonged crisis in the NBFC sector and the spread of the COVID-19 pandemic in the last quarter of 2019-20 affected the real estate market in the city. The city saw a mere growth of 7% y-o-y in its number of new launches in the residential segment, from 74,363 units in 2018 to 79,810 units in 2019. Against this backdrop, the sales of residential real estate saw a de-growth of 5% owing to the liquidity crunch and the economic slowdown from 63,893 units in 2018 to 60,943 units in 2019. Following this drop in the sale quantum in the city, average prices declined 2% y-o-y in 2019.

With the Government giving thrust and incentives to affordable housing, the peripheral region of MMR is expected to see a significant demand for affordable housing with ticket sizes below H6 -7 million. The developers in Mumbai continued to launch compact homes to get the ticket size right. In the last 5 years, the average size of apartments in the city has shrunk by 25%. Affordable houses continued to dominate launches in the Mumbai Metropolitan Region (MMR) with 61% of the new launches initiating in the second half of 2019, falling under the sub-H7.5 million category. Thane market recorded the highest growth of new launches during the same time, clocking a 36% y-o-y growth on the back of several mega launches by some of the biggest and reputed developers of Mumbai.

The Kalyan and Badlapur rationale

Badlapur, a city in the Thane district of Maharashtra is almost 70 km from Mumbai and one of the biggest destinations for affordable housing near Mumbai. The city has its own railway station, making it strategically located and just 1 hour away from Mumbai. Badlapur, with an area of ~36 sq kms is one of the prime destinations for affordable housing near Mumbai. With the urban infrastructure of Metro Rail, Delhi-Mumbai Corridor from Badlapur, the location is growing in importance as compared to other MMR locations.

Kalyan is yet another city located in the Thane district of Maharashtra, ~45 kms from Mumbai. The city is about an hours drive from Mumbai and has its own railway junction and is one of the bigger cities near Mumbai with an average area of 137 square kilometres. The city is one of the more affordable housing hotspots near Mumbai.

Demand drivers


Rising population: India is the second-most populous country in the world with a population pegged at 1.36 billion in 2019, driving the real estate sector in the country.

Urbanisation: By 2030, approximately 40% of the global population could reside in urban India from 34% today, catalysing real estate residential demand.

Growing nuclear families: The Census 2011 indicated that the size of about half of Indias households is gradually declining. Nuclear families in rural areas jumped 29% versus 9% in urban households. Nuclearisation is expected to add about 6-7 million households per year, driving the real estate market of the country.


Increasing incomes: The nominal per-capita net national income during 2019-20 estimated at H1,34,226 compared to H1,26,521 during 2018-19, registering a growth of 6.1%, driving consumption.

Government initiatives

RERA: The Real Estate Regulation Act (RERA) was passed by the Indian Parliament in 2016 to protect the interests of home buyers and attract investments in the real estate sector. As on 07th April, 2020, a total of 51,809 real estate projects were registered under RERA, with 50% of the projects located in Maharashtra.

GST rate cuts: GST rates on non-affordable housing projects reduced from 12% to 5% on under-construction properties. Further, the GST for affordable housing projects was revised from 8% to 1% on under-construction properties. This has been driving the real estate sector over the past year.

A_ordable housing: The Government has been undertaking several initiatives over the past few years to boost the affordable housing segment, comprising GST rate cuts, moratorium option during the COVID-19 crisis and relaxed carpet area norms.

PMAY/CLSS: The PMAY benefits/Credit Linked Subsidy Scheme (CLSS) has helped increase the purchasing power of economically weaker sections and lower income groups across the country, driving real estate demand.

Risk management Economic risk

Slowdown in the economy could impact the Companys growth.

Mitigation: The year 2019-20 was marked by a world-wide spread of the COVID-19 virus, leading to a pandemic and giving rise to an economic slowdown like no other. However, the pandemic has brought about a paradigm shift in the work culture in India, wherein ‘work from home is now a reality. The Company is optimistic of being able to leverage this reality.

Labour risk

Unavailability of labour in the construction sector can pose as a huge challenge.

Mitigation: The nation-wide lockdown resulted in contractual labourers, mostly unskilled labour, lose contracts and owing to lack of opportunities and high cost of living in Mumbai, migrating to their home towns. The Company invested in the MIVAN technology, which demands semi-skilled labour over unskilled labour, thus reducing its dependence on unskilled labour. Moreover, the construction sector is generally marked by low labour availability during the monsoons, especially in Mumbai owing to heavy rainfall, which stalls construction projects. Hence, the Company was well-cushioned against this risk.

Competition risk

Increase in competition could affect the Companys market share.

Mitigation: Poddar Housing has strategically positioned itself in certain MMR geographies with developments under PMAY, where there is lower competition from organised players, translating into a bigger market share for the Company.

Accessibility risk

Projects outside centralised locations could act as a hindrance as buyers prefer a more centralised location.

Mitigation: Poddar Housing has strategically located all its projects in proximity to suburban railway stations, ensuring improved accessibility.

Quality risk

Declining constructed quality could affect the Companys profitability.

Mitigation: The Company has been accredited with the ISO 9001:2008 certification, which validates its quality management system.

Cost risk

Increase in the cost of acquiring raw materials could act as a hindrance to the smooth functioning of the business.

Mitigation: Poddar has a decent land bank available at its disposal, which ensures lower project costs.

Debt risk

Overburdening the Balance Sheet with debt can adversely impact the financial stability of the Company.

Mitigation: The Company increased debt over a period of two years to execute its projects. The Company has a significant pipeline of projects which will provide free cash flows in the coming years that could lower the debt level.

Financial performance



2020 2019
Debtors Turnover Ratio 11.17% 7.78% In 2020, Poddar Spraha Diamond has contributed 77% of total revenue against 45% in the previous year. Increase in receivables comprised receivables of projects, which was in line with the revenues from these projects.
(Debtors/ Revenue)
Trade Receivables 535.78 370.10
Revenue from Operations 4,795.22 4,755.57
Inventory Turnover Ratio (Cost of goods sold/ Inventory) 10.72% 10.79% There was no major variation in this ratio.
Inventory 37,809.60 30,428.48
Cost of Goods sold 4,051.47 3,282.71
Interest Coverage Ratio (EBIT/Finance cost) (368.08)% (48.42)% EBIT has decreased during the year mainly on account of new launches during the year.
EBIT (1,911.16) (275.72)
Finance Cost (Gross) 519.22 569.42
Current Ratio 3.06 4.70 Increase in assets was mainly on account of work-in- progress under inventories and increase in liabilities was mainly on account of advances against sale of flats/land/TDR.
(Current Assets/ Current Liabilities)
Current Assets 42,633.54 36,934.41
Current Liabilities 13,942.32 7,852.40
Debt Equity Ratio 1.37 0.97 During the year, the Group drew construction finance from HDFC Ltd of H25 crores and general corporate loan of H20 crores (net of repayment) from Tata Capital Financial Services Limited and H13 crores from Bajaj Housing Finance Limited to meet its operating cash flows.
Debt 26,290.05 20,708.48
Equity 19,204.48 21,250.19
Operating Profit Margin Ratio 16% 31% In the previous year the Company recorded a possession income of H5.75 crores, which was 12% of the revenue; subject to this, there were no major changes in margins.
Operating Profit 743.75 1,472.86
Revenue from Operations 4,795.22 4,755.57
Net Profit Margin Ratio -41% -15% Increase in loss was mainly to launch and marketing expenses of Poddar Wondercity, Badlapur
Net Profit/(Loss) (1,958.85) (724.80)
Revenue from Operations 4,795.22 4,755.57

Consolidated income for the year ended 31st March 2020 increased to H5,193.30 lakhs compared to H5,078.93 lakhs in the previous fiscal. Consolidated profit after tax for the year was H(1,907.77) lakhs compared to H(646.48) lakhs in the previous fiscal.

During the previous financial year, your Company obtained all the requisite approvals and launched two of its most prestigious projects known as Poddar Wondercity at Badlapur and Poddar Riviera at Kalyan. Both these projects are being developed under the Pradhan Mantri Aawas Yojana in Public Private Partnership with State Government of Maharashtra and Central Government of India.

During the financial year 2019-2020, your Company achieved its highest ever pre-sales value of H280 crores and sold 797 units, having a built-up area of ~2.82 lakhs sq ft across its four ongoing projects. The Company successfully implemented the new ERP known as FARVISION to address requirements and build its overall operational efficiency for existing and upcoming projects.

The Company achieved significant construction progress for the Poddar Spraha project at Chembur. This is the first SRA project development by the Company; the Company successfully completed the construction of the rehabilitation tower and applied for the applicable completion certificate. This will help the Company establish itself strongly in the SRA development space.

Internal control systems and their adequacy

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. The control and risk committee and the head of the audit department work under the supervision of the Board-appointed Statutory Auditors.

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 to enhance agility and competitiveness. The Company takes decisions in alignment with the professional and personal goals of employees, achieving an ideal work-life balance and enhancing their pride of association. As on 31st March, 2020 the direct employee strength of the Company stood at 155 .

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.