Rainbow Foundations Ltd Management Discussions

Economic Review

The global economy experienced moderate growth during the financial year 2024-25. Despite challenges such as geopolitical tension, inflationary pressures, and supply chain disruptions, the real estate sector remained resilient, adapting to shifting market dynamics and consumer behaviors. The Indian Economy showed a steady recovery post pandemic with a focus on infrastructure development, urbanization, and favorable government policies which bolstered the real estate market.

The Indian economy has had a smooth sailing so far in 2025 due to sustained GDP growth and reducing inflationary pressures; the central bank also shifted its stance to support growth. However, global financial volatility and subdued business sentiment may pose some challenges. As GDP growth in Q1 belied expectations, a few agencies decided to raise their F.Y 2024-25 growth forecasts for India, while other continued to lower their projections in view of the global macroeconomics turmoil. Currently, most agencies peg the countrys growth in the range of 5.56.5%.

The real estate sector continues to grow at a scorching pace. With the entering of new global property developers into Indian market during the past few years, India offers a good opportunity in the real estate sector.

While the short-term outlook seems challenging given external supply shocks and geopolitical tension, we do believe the government is doing the right things to ensure a sustainable growth path for the country. The union budget presented this year was very supportive of the long-term growth of the real estate sector in India through its focus on urban infrastructure and the digital economy. The governments sharply expanded capital expenditure target for the year is expected to create job opportunities and higher economic activity.

Real Estate Sector

Indian real estate sector has witnessed high growth in the recent times with rise in demand for office as well as residential spaces. The Private Equity investments in Indias real sector, stood at US$ 4.2 billion in 2023. The Securities and Exchange Board of India lowered the minimum application value for Real Estate Investment Trusts from Rs. 50,000 (US$ 685.28) to Rs. 10,00015,000 (US$ 137.06-205.59) to make the market more accessible to small and retail investors.

Construction is the third largest sector in terms of FDI inflow. FDI in sector (including construction development & activities) stood at US$ 58.5 billion from April 2000- September 2023.

Some of the major investments and developments in this sector are as follows:

(i) In 2023, luxury home sales in India priced at Rs. 4 crore (US$ 481,927) and surged by 75%, doubling their share in total housing sales.

(ii) The Indian real estate sector witnessed strong private equity (PE) investment of US$ 1.92 billion in second quarter of 2023, demonstrating investor confidence in the market. According to the most recent investment report Cushman & Wakefield, this was 63% higher than the previous quarter (first quarter of 2023) and 60% higher than the same time last year.

(iii) Transactions for office spaces in April - June 2023, which totalled 14.8 million square feet, represented the highest quarterly figure recorded since first quarter 2021.

(iv) As of June 5, 2023, 119.7 lakh houses have been sanctioned and 74.75 houses have been completed and delivered to urban poor under the Pradhan Mantri Awas Yojana- Urban (PMAY-U).

Government Initiatives

The union budget presented this year was supportive of the long-term growth of the real estate sector in India through its focus on urban infrastructure and the digital economy. The Governments rising focus on infrastructure capex will create a backdrop of opportunity for the real estate sector. Some of the key measures include Housing for all, Urban Development Plan, Digitalization of Land Records, Withdrawal of Interest Deduction Benefit for Affordable Housing etc.

The introduction of Real Estate Regulatory Authority (RERA) regulations has improved transparency and accountability, boosting confidence among consumers and investors. However, challenges persist, particularly in regulatory compliance and procedural inefficiencies. Delays in approvals and adherence to regulations can prolong project timelines and increase cost, emphasizing the need to navigate regulatory framework efficiently. Stakeholders must stay vigilant and adaptable amidst the changing economic and regulatory environment. Compliance with RERA guidelines remains crucial for maintaining consumer trust and market integrity. Additionally, streamlining regulatory processes and addressing compliance hurdle are essential to mitigate project risks and ensure operational efficiency. By proactively tackling these challenges, the real estate industry can maximize its growth potential and resilience amid economic uncertainties and regulatory complexities

The Central Government continued its focus on boosting availability of affordable homes under the Pradhan Mantri Awas Yojana (PMAY). The establishment of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund proved beneficial in enabling completion of stuck projects by providing last mile funding for such projects. The completion and turnaround of such stuck projects may be a sentiment booster for the industry.

Operational Review

During the year under review, the turnover of the company has increased to Rs.15,612.50 Lakhs as compared to previous year turnover of Rs. 9348.28 Lakhs, the profits has increased to Rs.801.14 Lakhs as compared to previous year Profit of Rs. 319.31 Lakhs, The Earning per Share (EPS) for the year is Rs. 1.61 as compared to Rs. 0.64 in the previous year.

Opportunities

The Indian residential sector has been on a roll in the first half of 2024 with both housing sales and new launches scaling new heights. Housing sales across the top 7 cities in H1 2024 have already reached over 63% of the total sales in entire 2022 despite rise in both interest rates and housing prices. This itself indicates the undeterred demand for housing across the top 7 cities & and looking at the present scenario, it is very likely that similar growth trends may continue in the second half of 2024 as well. Many factors point towards this anticipated growth in the residential segment in the second half as well.

Risk and Threats :

Though the industry is in the early stages of a multi-year up cycle, we continue to keep a watchful eye for any of the following challenges which, if they fructify, will impact this upward trajectory:

° High input cost increase due to geopolitical tensions or otherwise ° Steep increase in interest rates in general and mortgage rates in particular ° Significant economic slowdown in India Segment Wise or Product Wise Performance

The Company is operating in a single segment and has only domestic sales. Therefore the requirement of segment wise reporting is not applicable.

Internal Control Systems and Adequacy:

The Company has an appropriate internal control system for its various functions with the ultimate objective of improving efficiency in its operations, better financial management and Compliance with regulations And applicable laws and providing protection against misuse or losses from unauthorized use or deposition.

An internal control framework to ensure all assets are safeguarded and protected against loss from unauthorized use or disposition, and transactions are authorized, 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

Human Resources

The Company provides a work environment that encourages free expression of opinion, decision making and responsible execution of the task. We are committed to attract, retain and recognize talent. Being entrepreneurial in spirit, we encourage fresh minds and innovative ideas. We believe that our integrated yet decentralized way of working provides our employees with the opportunity to develop leadership capabilities and business acumen. They gain valuable insights by balancing professional knowledge with perspectives learned through industry experience and customer relationships

Business Outlook

Post-pandemic, developers have moved away from the traditional way of doing business and rightly focused on end-user customer demand with a strong focus on innovation and digital transformation. We believe FY 2024- 25 will witness a healthy sales momentum backed by solid structural foundation, sustained demand and relatively affordable mortgage rates. Financially strong and reputed developers with superior execution capabilities stand to benefit disproportionately from the ongoing cyclical upturn.

We expect to further scale our sales momentum in FY 2024-25, given our exciting launch pipeline and robust balance sheet. We look forward to adding a projects to our portfolio in FY 2024-25, which is amongst our top priorities and which will enable us to grow rapidly going ahead.

Cautionary Statement

Statement in the management discussion and analysis describing the companys objectives, estimates, projections and expectation may be forward looking statements within the meaning of applicable laws and regulations. Actual results could differ materially due to economic conditions affecting demand, supply, prices, changes in government policies, tax laws and other incidental factors.