Real Growth Commercial Enterprises Ltd Management Discussions.


The financial year 2017-18 has been a year marked with both excitement and challenges for the global as well as the Indian economy. Some of the events that took place during the course of this year could very well turn out to be the defining moments for the world economy at large. GDP growth for the year is expected to be 0.30% higher at 7.4% than that in the previous year. Capital Investments still remain stagnant with an overhang of spare capacity in many industries and corporate balance sheets still remain stretched hindering their ability to invest on any future uptick in demand. Merchandise exports continued to contract, partly as a result of the lower commodity prices as well as due to the weak global demand.

On the fiscal front, the position is expected to be much better with the Government expected to meet its fiscal deficit target at 3.5% of GDP and the current account deficit narrowing down further to about 3.5% of GDP. Inflation, though inching up in the last few months, also stayed below RBI’s target of 5%, leading to an accommodative monetary policy for most part of the year, trading in a range of 67-70 USD for most part of the year before seeing a sharp appreciation during the close of the financial year.

It was also encouraging to see the Government move ahead on clearing the legislative hurdles for the implementation of the Goods and Service Tax (GST), touted as the biggest tax reform for the country. GST is poised to provide a fillip to India’s economic growth as it will create a single national market and enhance the efficiency of inter-state movement of goods and services apart from moving a large part of the informal sector within formal set up of the economy.

On the Global front, the exit of UK from European Union and Outcome of US Election led to a lot of uncertainty and spurt in volatility across markets. The outcome of US election led to a lot of capital flight away from the emerging markets, including India.

According to The World Economic Outlook (WEO) update around 120 economies accounting for 3 quarters of world GDP, saw a pickup in growth in year on year terms in 2017, the broadest synchronized global growth upsurge since 2010. Global output is estimated to have grown by 3.7 percent in 2017. The International Monetary Fund has raised its growth forecasts for 2017-18, expecting the global economy to continue to recover on the back of buoyant trade and investment.


Segment wise/ Product wise Performance


New Launches in NCR have been on a constant decline since its peak in 2010 and fell further in F.Y. 2017-18. Piling up inventory, lack of Consumer confidence due to litigations and infrastructure delays and policy initiatives such as RERA and GST are some of the major factors that have adversely affected market dynamics and have taken the steam out of new proj ect launches in the region. However, despite the fact that overall market was affected, Company was able to generate revenue of Rs. 1.38 crore from its commercial real estate division by selling out its unsold inventory and generated good amount of profit.


The Indian Real Estate sector is on the cusp of major transformation. India’s fragmented property sector is witnessing a major change as far reaching reforms like the Introduction of GST and the Real Estate (Regulation and Development) Act, 2016 drive consolidation. With growing transparency and improving policies, the Country’s real estate sector in expected to become more institutionalized and we expect 2018 to be a year of Consolidation and Recovery for the property sector. A weak property market and increasing customer preference for stronger developers has created an unprecedented business development opportunity for developers with strong customer franchises and development capabilities. We believe that our Company is well placed to capitalize on these opportunities in the business development space.


2017-18 saw an improvement in global steel consumption, which grew 4.7% to 1.59 billion tonnes in the year, after a subdued growth of 1% in 2016. A low base-effect of 2016, along with improved steel consumption in China and investment-led recovery in advanced economies were the key factors driving this momentum. The government’s stimulus measures and momentum in construction activities fueled steel demand in China. Consumption in Europe (other than EU) too gathered pace in the year and grew 2.5% with other countries like US with 6.4%, Brazil 5.3% Iran 4.5% follow the growth trajectory of rising global steel demand.

Global crude steel production grew by 5.3% or 63 million tonnes in 2017 to 1,691.2 million tonnes, as most economies registered good growth in steel production. Annual production grew between 4% and 6% for major economies of China, India, European Union and USA, among others. Turkey, South America and Brazil witnessed the highest growth in steel production at 13.1%, 8.7% and 9.9%, respectively.

China trimmed its capacities by eliminating Basic Oxygen Steelmaking (BOF) - Electric Arc Furnace (EAF) of 55 million tonnes in 2017. The world’s largest steel producing country also closed 140 million tonnes of inefficient induction furnace capacity. These initiatives uplifted market sentiments and bolstered pricing power and profitability of most steel producers in the World. Overall, steel exports from China fell by 30% to 75 million tonnes in the year.

Global steel prices remained buoyant in 2017 due to: a) falling exports from China as it continues to reduce excess capacities; b) firm iron ore prices; and c) improving demand from China following the upswing in the infrastructure and construction sectors. The global capacity utilisation ratio stood at 69.5% in December 2017 — up 1.8 percentage points, compared to December 2016 level.

In the preceding couple of months, trade actions across economies aggravated to arrest imports, threatening the possibility of trade diversion.

India’s finished steel consumption grew at a CAGR of 5.69 per cent during FY08-FY18 to reach 90.68 MT. India’s crude steel and finished steel production increased to 102.34 MT and 104.98 MT in 2017-18, respectively. In 2017-18, the country’s finished steel exports increased 17 per cent year-on-year to 9.62 million tonnes (MT), as compared to 8.24 MT in 2016-17.

India is expected to overtake Japan to become the worlds second largest steel producer soon, and has envisaged achieving 300 MT of annual steel production capacity by 2030.

Steel consumption is expected to grow 5.7 per cent year-on-year to 92.1 MT in 2018.

India is expected to become the second largest steel producer in the world by 2018, based on increased capacity addition in anticipation of upcoming demand, and the new steel policy, that has been approved by the Union Cabinet in May 2017, is expected to boost Indias steel production. Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.

The Company saw a decline in its steel trading division by 30% in total revenue earned from Steel Trading. However the company is hopeful to do better in future.


Some of the other recent government initiatives in this sector are as follows:

• Government of India’s focus on infrastructure and restarting road projects is aiding the boost in demand for steel. Also, further likely acceleration in rural economy and infrastructure is expected to lead to growth in demand for steel.

• The Union Cabinet, Government of India has approved the National Steel Policy (NSP) 2017, as it seeks to create a globally competitive steel industry in India. NSP 2017 targets 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030.

• The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs 200 crore (US$ 30 million).


(a) Real Estate

Strength Weakness
*Well recognized and established track record of more than a decade in executing real estate projects across Delhi & NCR *High interest outgo on account of the size of debt on the balance sheet * Long term projects with longer payback
* Diversity of presence across segments, markets and revenue streams periods

* The company hasn’t forayed into related

* Large land bank in Delhi NCR with well executed plans businesses. It has either improvised its existing product line or introduced a much
* Sharp focus on project execution, and strategy to deleverage the balance sheet similar product in the construction segment.
* Excellent talent pool managed by competent and driven leadership
* Consumer trust and goodwill

* Huge potential in the housing market


* Regulatory overhaul is likely to cause short

especially with demand for affordable housing, which may get infrastructure status allowing the sector to access cheaper and long-term capital to medium term disruption in the sector * Overall real estate sector is not given industry status and the status is unlikely to change in the near future
* REIT norms revision leading to wider acceptance of REITs, and an additional source * Increasing cost and non-availability of labor could impact project execution
of capital especially for commercial segment * Boost in demand for commercial spaces on account of economic revival * Increase in the cost of borrowing could worsen the impact of interest outgo on the balance sheet
* Dovish monetary policy stance leading to lower interest rates can lead to higher sales, especially in the residential segment
* Newer micro-markets
* Formalization of sector through regulatory overhaul (Benami Property Bill, RERA, etc.) and fight against black money will work in favor of established players

(b) Steel

A diversified product portfolio and considerably wide geographical reach, domestically, have helped the Company to significantly de-risk its business and meet the risks with suitable precaution. The Company is focused on enhancing value added products. Improvement in safety performance is of utmost priority, for which the Company has constantly been initiating measures to avert accidents.


The Company has put in place adequate internal financial controls over financial reporting. These are reviewed periodically and made part of work instructions or processes in the Company. The Company continuously tries to automate these controls to increase its reliability.

The Company has identified inherent reporting risks for each major element in financial statements and put in place controls to mitigate the same. These risks and the mitigation controls are revisited periodically in the light of changes in business, IT Systems, regulations and internal policies. Corporate Accounts function is involved in designing large process changes as well as validating changes to IT systems that have a bearing on the books of account.

The Company periodically conducts physical verification of inventory, fixed assets and cash on hand and matches them with the books of accounts. Explanations are sought for any variance noticed from the respective functional heads.

The Company in preparing its financial statements makes judgement and estimates based on sound policies. The basis of such judgements and estimates are also approved by the Audit Committee of the Company in consultation with the Statutory Auditors of the Company. The management periodically compares the actual spends against the estimates and makes necessary adjustments to the same based on changes noticed.

The Company gets its account audited every quarter by its Statutory Auditors as per requirement of the SEBI (LODR) Regulations, 2015 as amended from time to time.


Companys Human Resource Management focus continues to be in making available a talent pool, for meeting challenges in the competitive market place, which is increasingly becoming tougher. Development plans have been drawn up for key managers to shoulder higher responsibilities as well as to increase their job effectiveness. Your Company always encourages young personnel with their ideas and views. Management is easily accessible to the employees and their problems are attended to promptly. The employer - employee relations remained cordial at all the plants of the Company and peaceful throughout the year.


Finance Cost, during the year under review stood at 613.76 lacs, as compared to 602.88 lacs during the last financial year. The increase in finance cost is attributable to increased availment of cash credit and buyers’ credit facilities from the banks.


Statements in the Management Discussion and Analysis, describing the Company’s objectives, outlook and expectation, may constitute "Forward Looking Statements" within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied expectations, projections etc. Several factors make a significant difference to the Company’s

operations, including climatic conditions, economic scenario affecting demand and supply, Government regulations, taxation, natural calamity and other such factors over which the Company does not have any direct control.

By Order of the Board

For Real Growth Commercial Enterprises Limited

Sd/- Sd/-
Rajesh Goyal Deepak Gupta
Director Whole Time Director
DIN - 01339614 DIN - 01890274
Date - 05.09.2018
Place - New Delhi