Prajay Engineers Syndicate Ltd Management Discussions

Annexure-4

1. INDUSTRY STRUCTURE AND DEVELOPMENTS:

Over view of the Real Estate Industry

The global economy has faced a complex scenario characterized by persistent inflation, geopolitical tensions, tightening monetary policies, and repercussions of the pandemic - each leading to a decline in growth.

As per he World Economic Output (WEO) update, global growth slowed to 3.0% in Calendar Year 2023 from 3.5% in Calendar Year 2022. Despite challenges such as supply chain disruptions and elevated inflation, major economies received support from fiscal stimulus, monetary policies, trade agreements, international aid, green initiatives, and technological investments. The slow growth rate persists amidst a cost-of-living crisis triggered by disruptions in energy and food markets due to Russia-Ukraine conflict and the Middle East Tensions, coupled with global monetary tightening to address inflationary pressures and reduced fiscal support. The stage is set for a softer-than-expected economic slowdown, combined with a modest uptick in economic activity.

Despite the global headwinds, the Indian economy continues to strengthen and remain resilient. For FY2024-25, as per data released by the National Statistical Office (NSO), real Gross Domestic Product (GDP) is expected to grow in a moderation to 6.8%-7% as per various estimates due to high interest rates, growth. While still healthy, lower fiscal impulse would temper demand and the net tax impact would normalize. Also, the uneven economic growth of some trading partners and escalation of geopolitical uncertainties can drag down exports.

Owing to an upturn in the private capex cycle, improved business sentiments, healthy balance sheets of corporates and banks, prospects of fixed investment remain bright. The governments continued thrust on capital expenditure is expect to catalyse the same. The World Bank expects India to grow by 6.6% in FY2024-25 after an estimated growth of 7.5% in the previous financial year. A sustained economic growth will lead India to become an upper middle-income economy in years to come. However, headwinds from geopolitical tensions, volatility in international financial markets and geoeconomic fragmentation, pose risks to the positive outlook of Indian economy.

Although the short-term outlook appears challenging due to rising interest rates, external supply shocks, and geopolitical tensions, we believe the government is taking appropriate measures to ensure a sustainable growth trajectory for the country. The union budget presented this year strongly supports the long-term growth of Indias real estate sector through its extended focus on urban infrastructure. The government proposals have significantly expanded capital expenditure target for the year and that is expected to generate job opportunities and stimulate higher economic activity.

Shortage of Manpower & Technology

The real estate sector is the countrys second-largest employment provider and it relies significantly on manual labor. The pandemic has severely impacted this sector due to labor shortages, thereby disrupting project completion schedules and plans. As a result, theres a pressing need for the adoption of alternative construction methods that are more technology oriented and automated while being less dependent on manual labor.

Hyderabads real estate market presents a mosaic of potential opportunities intertwined with notable challenges and risks that demand prudent consideration. The evolving regulatory landscape in Hyderabad holds substantial sway over real estate prospects. Changes in land-use regulations, zoning laws, or shifts in property tax structures wield significant influence, directly impacting investment avenues. Hyderabads real estate landscape is intrinsically tied to governmental policies and initiatives. Measures introduced to encourage or deter real estate investment, urban development projects, and incentives for specific sectors or regions play a crucial role in shaping the market scenario. These alterations can either bolster or hinder investment feasibility and returns and have a bearing on the real estate sector.

Like any other market, Hyderabads real estate market, is susceptible to fluctuations and oscillations that often stem from multifaceted factors, including economic conditions, demand-supply imbalances, and global economic trends. Market volatility may consequently impact property valuations, affecting both the potential returns on investment and the timeline for realizing profits, as well as execution timelines and completion plans.

The citys economic prosperity and stability significantly contribute to property values. Any adverse economic conditions or political turbulence within Hyderabad can intricately intertwine with real estate dynamics, influencing market sentiments and property valuations.

The market dynamics can be significantly influenced and altered by the evolving preferences of homebuyers and investors. Trends favoring sustainable and eco-friendly spaces, lifestyle-oriented amenities, and shifts in urban living preferences might present both challenges and lucrative prospects. Navigating these multifaceted aspects of Hyderabads real estate market is essential for real estate players. Understanding the interplay of these factors aids in making informed decisions, mitigating risks, and capitalizing on the promising opportunities presented by the dynamic market.

Hospitality industry

The hospitality sector significantly contributes to Indias GDP, generating millions of jobs and stimulating ancillary sectors like transportation and retail. This growth drives urban and rural development through substantial infrastructure investments

The hospitality industry in India is expected to grow in 2024, with a market size of around $24.61 billion and a compound annual growth rate (CAGR) of 4.73% from 2024-2029.

The hotel and tourism industries are on the cusp of a significant transformation. Reports by ICRA, investment information and credit rating agency, suggest that the hospitality industry in India will experience double-digit revenue growth in fiscal year 2024. ICRA estimates the pan-India premium hotel occupancy at decadal highs of ~70-72% in FY2024 and FY2025. This growth will be driven by domestic leisure travel, business travel, demand from corporate events, and an increase in foreign tourist arrivals. 2024 marks a shift from conventional accommodations to experiential stays. Travellers seek immersive experiences, and hotels are responding by curating unique offerings—be it cultural immersions, local culinary experiences, or wellness-focused retreats— reating memories beyond just a place to stay.

With more work days spent outside of the office, the duration of both leisure and business trips could increase. Hospitality offerings suited to meet these specific demands, such as aparthotels and hybrid hospitality with flexibility of stay, larger rooms, and amenities that make you feel at home, are poised to gain greater popularity amongst travellers.

2. OPPORTUNITIES, THREATS & CHALLENGES:

A. Opportunities:

Demand for residential properties has surged due to increased urbanization and rising household income, growing economy, regulatory reforms, policy support, rapid urbanizations, relaxation in the FDI norms for real estate sector and consequential growth in investments growth in population, rise in the number of nuclear families, easy availability of finance, repatriation of NRIs and HNIs, rise in disposable income etc., are the advantages/opportunities for real estate sector.

Your companys well accepted brand, customer centric approach, well designed projects in strategic locations makes it a preferred choice and for the customers and favorably benefit the company.

Your companys business development strategy is being aligned towards less capital intensive projects, sharing and development management models. Additionally, your company is trying to focus on sourcing land with large capital requirements in our target geographies under the residential co-investment platform with the company acting as the development manager for these projects. Your company shall continue to improve its project execution capabilities through continuously improving internal processes and internal capability building. Optimizing return on capital and developing crisis and risk management capabilities shall continue to remain the companys focus area.

B. Threats & Challenges:

The real estate sector has been facing a number of issues. Regulatory environment, substantial procedural delays with regard to land acquisition, land use, project launches and construction approvals, rising cost of construction, policy changes and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operating within the sector. Higher rates of statutory fees and other taxes inflate the cost of construction, making affordable housing projects financially unviable for the private sector developers. Shortage of manpower, unsold stock, scarcity of urban land and clear titles are other threats /challenges.

3. SEGMENT WISE-PRODUCT WISE PERFORMANCE:

A detailed status of projects being implemented by the company is given below:

Prajay Water Front city situated at Murharpally Village, Shamirpet:

Spread across 72 acres of premium property overlooking 100-acre lake. Phase I of the project comprising of independent houses, villas and apartments is completed and handed over to the residents. Currently the Phase II of the project comprising of 450 independent houses constructed under the PMAY scheme to promote housing in the affordable segment, is nearing completion.

Prajay Virgin County (SPV project) situated at Baghmankhal Village, Maheshwaram Mandal, R.R. District:

A mixed venture of villas and apartments at Maheshwaram Mandal, near RGIA, spread across 75 acres of land. Phase I of the project comprising of 233 villas is completed and handed over to the residents. Presently the company has taken up the construction of Prajay Virgin County Apartments with 3 Wings, 36 Blocks consisting 1400 Flats under Phase II of the project.

Phase II of Prajay Virgin County is spread across 35 acres of land with a vision to construct luxury villas. A few minutes drive from ORR exit no 14 near to Srisailam Highway. Being in close proximity to Rajiv Gandhi International airport, 1200 Ac FAB City & E-City, Hardware park, Tata Teleservices, Tata Advanced Systems, GMR Aerospace, TCS HCL, IT SEZ Adibatla and TCS it is a great location for prospective home buyers working around the area. The project is located minutes away to the Outer Ring Road making it an ideal location for people working in Financial District, Gachibowli etc.

Prajay Megapolis (SPV Project) situated at Hafeezpet Village, Serilingampally Mandal, R.R. District -

Phase I of the project consists of 1113 flats comprising of 9 towers, with 3 basements parking, ground + 18 uppers floors spread across 8 acres of land is fully completed and handed over to the residents along with a clubhouse of nearly 1 Lakh sft. The phase II of the project consists of G+18 high rise apartments Project across 8 acres, with 13 Towers and 1400 Flats consisting 2.5, 3 and 4 Bhk in the heart of the city close to Hitech City.

Prajay Windsor Park situated at Pocharam, Ghatkesar Mandal, R.R. District-

Prajay Windsor Park is spread over a large well defined land parcel of 11 acres with 834 apartments with 12 Lac sqft the project is primarily focused on sports. with premium clubhouse & huge central park It is ideally located in close proximity to the emerging IT corridor, close to the 6-Lane Hyderabad-Warangal highway, 1 km distance from ORR exit no 9 and the upcoming Metro only 2 kms. away. Windosr park shares the neighbourhood with IT/Software companies like the 450 Ac Infosys SEZ campus, Raheja Mindspace, Capgemini, ADP and Genpact which is surrounded by Institutions AIIMS, NfC, CPRI, NgRI, CCMB and DRDO. Educational institutes like Vidhyanikethan international school, Rotterdam International school, Rockwoods intl school and many Engineering colleges. 70 mins drive from Hyd International airport.

Prajay Princeton Towers situated at L.B. Nagar, Saroornagar Mandal, R.R. District

A multi storied retail/commercial complex situated in the heart of the city L.B. Nagar, well connected to metro & road. The entire building was constructed on a plot area of 7200 sq.yds with 3 basements, ground and 13 upper floors. Retail space from Ground to 5 floors, Office spaces on the 6th floor, followed by hotel rooms and convention centre from the 7^th floor up. The Hotel also includes a rooftop restaurant and bar along with a infinity swimming pool on the terrace. Currently the retail space, office space and convention centre are fully completed and in operation. The interiors for the hotel rooms and restaurant etc. are under completion

4. RISKS AND CONCERNS:

Your company is exposed to a number of risks such as economic, regulatory, taxation and environments risks as well as sectoral investment outlook. Some risks that may arise in the normal course of business that could impact its ability to address the future development comprise credit risk, liquidity risk, counterparty risk, regulatory risk, commodity inflation risk and market risk.

Market Risk: Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and other price risk, such as equity price risk and commodity/ real estate risk. Financial instruments affected by market risk include loans and borrowings and refundable deposits.

Credit Risk: Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including refundable joint development deposits, security deposits, loans to employees and other financial instruments.

Liquidity Risk: The Companys objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans.

The company aims to understand measure and monitor the various risks to which it is exposed and to ensure that it adheres, as far as reasonably and practically possible, to the policies and procedures established by it to mitigate these risks.

Market price fluctuation: The performance of your Company may be affected by the sales realizations from the its projects. These prices are driven by prevailing market conditions, the nature and location of the projects, and other factors such as brand and reputation and the design of the projects. Your Company d tries to ensure steady cash flow even during adverse pricing scenario.

Industrial cyclicality: The real estate market is inherently a cyclical market and is affected by macro-economic conditions, changes in applicable governmental schemes, changes in supply and demand for projects, availability of consumer financing and liquidity. Your company is attempting to hedge these risks by adopting models comprising joint ventures, residential platforms. However, any further significant down turn in the industry and the overall investment climate may adversely affect the business.

Statutory approvals: This sector is heavily regulated by the central, state and local governments. Real estate developers are required to comply with a number of laws and regulations. Delays in approvals cause delay in project completion timelines, leading to capital blockage and high interest burden to the developers.

5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has adequate internal control systems and procedures designed to effectively control its operations. The internal control systems are designed to ensure that the financial and other records are reliable for the preparation of financial statements and for maintaining assets. The Company has well designed Standard Operating Procedures considering the essential components of internal control as stated in the Guidance Note on Audit of Internal Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. Internal Auditor conduct audit covering a wide range of operational matters and ensure compliance with specified standards. Planned periodic reviews are carried out by Internal Audit. The findings of Internal Audit are reviewed by the top management and by the Audit Committee of the Board of Directors. Based on the deliberations with Statutory Auditors to ascertain their views on the financial statements including the Financial Reporting System and Compliance to Accounting Policies and Procedures, the Audit Committee was satisfied with the adequacy and effectiveness of the Internal Controls and Systems followed by the company.

6. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Revenue / loss from Operations: The companys revenues fell from 2982.78 Lakhs during the previous year to Rs.2496.00 Lakhs during the current year

EBIDTA: EBIDTA stood at negative Rs.2478.80 Lakhs during the year as against Rs.70.46 Lakhs during the previous year with a decrease of Rs.2409.74 Lakhs compared to previous financial year.

Profits & ratios:

The company has incurred a loss of Rs.3152.07 Lakhs during the financial year as against a loss of Rs.756.98 Lakhs for the corresponding previous year. The basic earnings per share stood at Rs.(4.50) for the current financial year as against Rs.(1.08) for the previous financial year.

Shareholders funds:

There is no change in the capital structure of the company during the year under review and the net worth of the company stands at a comfortable position of Rs.52779.68 Lakhs.

Loan Funds:

The company continues to get the support from its bankers and financial institutions. The loans availed by the company stood at Rs.3239.15 Lakhs at the end of the financial year.

RATIOS:

Debtors Turnover Ratio

Debtors turnover ratio for the financial year 2022-23 has improved marginally to 0.22 as against 0.20 for the financial 2022-23. There is a pressure on collections continues to be there.

Inventory Turnover Ratio

Inventory turnover ratio for the financial year 2022-23 is 0.08 as against 0.07 for the financial year 2022-23.

There is marginal change in this ratio.

Debt Service Coverage Ratio

Debt Service coverage ratio for the financial year 2023-24 is (8080) as against 0.09 for the financial year 202223. There is a reduction in this ratio.

Current Ratio

Current ratio for the financial year 2023-24 stood at 1.84 as against 1.93 for the financial year 2022-23. The ratio has fallen.

Debt Equity Ratio

Debt equity ratio for the financial year 2023-24 is 0.22 as against 0.15 for the financial year 2022-23.

Net Profit Margin (%)

Net profit margin percentage for the financial year 2023-24 is (126.28) as against (25.38) for the financial year 2022-23. The net profit of the company has decreased considerably.

Return on Networth

Return on Networth for the financial year 2023-24 is (45.07) as against (10.82) for the financial year 2022-23. The overall financial performance of the company is decreased.

7. MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

Your company believes that the quality of employees is the key to its success and is committed to provide necessary human resource development and training opportunities to equip employees with additional skills to enable them to adapt to contemporary technological advancements.

Employee relations during the year continued to be cordial and the Prajay group is committed to maintain good employee relations through effective communication, meetings and negotiations.

8. OUTLOOK:

Post implementation 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 monetizing their land parcels on outright basis or entering into joint development or development management agreements, your Company believes that RERA shall result in a consolidation in the sector.

Overall, the Real Estate sector is showing growth as compared to last year. Consequently, the Indian real estate sector will emerge stronger, healthier and capable of long periods of sustained growth, provided adequate policy/regulatory support. their land parcels on outright basis or entering into joint development or development management agreements, your

CAUTIONARY STATEMENT:

The above management discussion and analysis contains certain forward looking statements within the meaning of applicable security laws and regulations. These pertain to the companys future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals time cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulations etc.

	By order of the Board of Directors
	of Prajay Engineers Syndicate Limited
	Sd/-
Place: Hyderabad	Dantapalli Vijaysen Reddy
Date :04.09.2024	Chairman & Managing Director
	(DIN: 00291185)