Rodium Realty Ltd Management Discussions.


According to The World Bank, Global economic growth accelerated in more than half the worlds economies in both 2017 and 2018. The world economy is projected to expand at a steady pace of 3 per cent in 2019 and 2020. Growth rates in many developed economies have risen near to what is widely considered their potential, while unemployment rates have fallen towards historical lows. Among the developing economies, the East and South Asia regions remain on a strong growth trajectory, while many commodity-exporting countries are continuing a gradual recovery.

Global growth In 2019 is expected to slow to 2.6 percent, reflecting weaker-than-expected trade and investment at the start of the year. Growth is projected to gradually rise to 2.8 percent by 2021, predicated on continued benign global financing conditions and a modest recovery in emerging market and developing economies (EMDEs). However, EMDE growth remains constrained by subdued investment. Risks are firmly on the downside, in part reflecting the possibility of a further escalation of trade tensions. It is urgent for EMDEs to reinforce policy buffers and to implement reforms that boost growth prospects.


The Indian Economy started the fiscal year 2018-19 with a healthy 8.2 percent growth in the first quarter on the back of domestic resilience. Growth eased to 7.3 percent in the subsequent quarter due to rising global volatility, largely from financial volatility, normalized monetary policy in advanced economies, externalities from trade disputes, and investment rerouting. Further, the Indian rupee suffered because of the crude price shock, and conditions exacerbated as recovery in some advanced economies caused faster investment outflows.

The Indian economy is likely to sustain the rebound in FY2018-19—growth is projected to be in the 7.2 percent to 7.5 percent range and is estimated to remain upward of 7 percent for the year ahead. These projections could be attributed to the sustained rise in consumption and a gradual revival in investments, especially with a greater focus on infrastructure development. The improving macroeconomic fundamentals have further been supported by the implementation of reform measures, which has helped foster an environment to boost investments and ease banking sector concerns. Together, these augur well for a healthy growth path for the economy. By 2019, It may become the fifth-largest economy and possibly the third-largest in 25 years.

There is no doubt that Indias recent budget has tried to strike a balance between fiscal prudence and growth. However, with risks blooming large, India needs to solidify Its investment position while maintaining fiscal deficit within the target range. The need to remain steadfast on fiscal numbers has risen largely from the need to stimulate growth amid pressure to cut taxes, increased budgetary allocations to social sectors, and enhanced infrastructure spending that could pressure public finance. Therefore, meeting the revenue collection and disinvestment targets would be crucial to ensure the budgeted reduction in the fiscal-deficit-to-GDP ratio. Overall, the government could do well to carefully manage its public finances and shift focus to projects that can foster private investment. The real challenge is likely to arise from making the right policy decisions about the fiscal expenditure mix and incentivizing private players so as to avoid any long-term costs.


Indian real estate market is supported with fundamental macro-economic demand drivers of increasing urbanization; rising household income and young population with overall growing economy pose a robust demand for residential as well as commercial space. This is coupled with monumental reforms in FY 18 real estate market is improving industry status. The Indian real estate market is expected to touch US$180 billion by 2020. The housing sector alone contributes 5-6 percent to the countrys Gross Domestic Product (GDP). According to data released by Department of Industrial Policy and Promotion (DIPP), the construction development sector in India has received Foreign Direct Investment (FDI) equity inflows to the tune of US$ 24.66 billion in the period April 2000-September 2018.

There were some green shoots at the beginning of 2018 for the real estate sector, but they wilted away later in the year as the NBFC crisis led to drying up of an important source of funding for the sector. According to a report by JM Financial, bank funding to developers posted a CAGR of 4.7% over FY14-18, while NBFCs reported a CAGR of 45.3%. NBFC market share in developer financing increased from 24% at end of FY14 to 53% as on March 18. A recurring operating deficit and material increase in leverage implies that a portion of funding was utilized to meet construction costs as well interest outgo for existing debt/current debt. In such a scenario, availability of funding is an essential part of business continuity. Non availability of funds could lead to a substantial business slowdown for developers who were primarily reliant on NBFC financing. Post the liquidity crisis, NBFCs are reluctant to continue to aggressively fund real estate developers as has been happening over the past several years. While established developers with consistent delivery track records still have ample access to Capital through both debt and equity, many developers are facing significant liquidity pressure. If this liquidity environment persists, the pace of consolidation in the sector will further accelerate. This presents ideal conditions for well capitalized developers to expand their business development portfolio.

The Modi Government has been supportive to the real estate sector. Under Union Budget 2018-19, Pradhan Mantri Awas Yojana (PMAY) (Gramin) was allocated Rs 33,000 crore while the urban programme of the scheme was allocated Rs 31,500 crore. In May 2018, construction of additional 150,000 affordable houses was sanctioned. The scheme is expected to push affordable housing and construction in the country and give a boost to the real estate sector.


In 2018, the Commercial Real Estate (CRE) industry saw its ninth straight year of growth as rents and valuations continued their upswing across all asset classes. In 2019, this growth will likely continue at a slower pace as interest rates rise and job creation begins to decline.

According to a report by Knight Frank, office space supply has lagged demand since CY2013 as developers chose to concentrate mostly on the residential real estate segment. Even private equity investors were more Inclined to acquire stabilized assets and a majority of their investments were routed towards acquisition of already matured assets. The ensuing supply crunch caused vacancy levels to plummet to 11.6% by CY2017 and rental levels to rise across cities. This slide in office space development was arrested in early 2018 and gained momentum during the remainder of the year as supply increased by 13% YoY to (36.9 million sq. ft.), the highest YoY increase in this decade.

Financial institutions are also looking to play a larger role in the operation of their office property investments. Large private equity and pension funds such as Blackstone and the Canada Pension Plan Investment Board(CPPIB) are now actively applying their global expertise in the operational aspects of their Indian office property investments.

Across the top eight cities, co-working space providers have taken up around approximately 0.37mn sq m (4.0 mn sq. ft) of office space during H1 2019 which represents a 42% growth over H1 2018 and accounts for approximately 15% of the total space transacted during this period.


The residential market was going through a bearish phase in 2017 due to impact of policy disruptions such as demonetization, Real Estate (Regulation and Development) Act (RERA) and implementation of the Goods and Service Tax (GST). These initiatives resulted in a decline in residential sales and launches across cities. With the impact of these policy initiatives subsiding in 2018, new launches and sales Inched upwards with a y-o-y increase of about 15% in new supply and 13% in sales. While the recovery was at site, towards the end of 2018, a liquidity crisis in NBFCs - a leading source of funding for residential developers resulted in fund crunch for the developer community. However, the government/RBI have been proactive In ring-fencing the NBFC liquidity crisis and at the same time, the GST council has slashed GST rates on housing units to spur demand.

Over the last five years, retail inflation has been softening owing to strict measures adopted by both the RBI and the government, which has led to household disposable income increasing over the same period with a CAGR of about 5%. On the other hand, residential prices have remained almost stable/declined in certain cities over these years. This is resulting in a period where the affordability of the household is strong, and when this is seen in conjunction with the regulatory reforms for the residential sector, it presents a clear case of recovery in the coming year.

The consistent rate cuts by the RBI and reduction of GST rates to 1% for affordable housing and 5% to others have helped keep end-user sentiments stable In a landscape clouded by the ongoing NonBanking Financial Company(NBFC) issues and resulting funding crises for developers.


The Union Budget for 2019-20 was announced by Ms. Nirmala Sitharaman, Minister for Finance and Corporate Affairs, Government of India, in Parliament on July 05, 2019. India is all set to become US $ 3 trillion economy by the end of FY20. The budget focuses on reducing red tape, making best use of technology, building social Infrastructure, digital India, pollution free India, make in India, job creation in Micro, Small and Medium Enterprises (MSMEs) and investing heavily in infrastructure.

Total expenditure for 2019-20 is budgeted at Rs. 2,786,349 crore (US$ 417.95 billion), an increase of 14.09 per cent from 2018-19 (budget estimates).


• Additional tax benefit of Rs 1.5 lakhs for affordable home buyers:

In terms of the taxes, the government has increased the tax deduction benefit against interest on home loans for affordable housing, with a value of up to Rs. 45 lakhs. Interest deduction up to Rs. 3.5 lakhs for affordable housing, as against Rs. 2 lakhs earlier, is available for loans taken till March 31, 2020. This is expected to drive sales and bring fence- sitters back into the market, within this financial year.

• Resolving NBFCs woes will help solve funding crisis in real estate:

Several measures were announced for the revival of non-banking financial companies (NBFCs) from the ongoing debt crisis and liquidity crunch. The government announced a one-time, six-month credit guarantee for the purchase of pooled assets, of highly rated NBFCs up to Rs 1 lakh crore.. The government has also allowed the Fils and FPIs to invest in debt papers of NBFCs. This will give a boost to the much-needed liquidity of NBFCs.

• More focus on affordable housing to achieve "Housing for All by 2022":

The government aims to achieve its target of Housing for All by 2022, through the Pradhan Mantri Awas Yojana (PMAY). It has sanctioned over 81 lakh houses under the PMAY-Urban scheme and an additional 1.95 crore houses have been proposed to be provided under the PMAY-Rural and also providing an exemption of Rs 1.5 lakhs in income tax, on home loans under affordable housing in this budget.

• Reducing corporate tax:

There was an expectation from all sectors that the government should reduce the corporate tax. Heeding to this demand, the government has allowed companies having a turnover up to Rs 400 crores, to pay a lower tax of 25%.

• Boost to infrastructure development

The government has said that it is committed to boosting infrastructure across the country. In the Union Budget 2019-20, the Finance Minister spoke about improving road; suburban railways and Metro connectivity; creating an expansive water management system; investing Rs 100 lakh crores in infrastructure over the next 5 years.

• Notional tax on unsold inventory to be charged after two years

At present developers are liable to pay tax on notional rental for unsold inventory one year after completion of the project. Finance Bill proposes to exempt developers from notional rent based tax for a period of two years.

In March 2019, GST council approved lower GST rates for real estate developers subject to certain terms and conditions. Developers will be allowed an option to opt for 12% GST (with input tax credit) or 5% effective GST rate (without ITC)/1% (affordable housing projects). Builders opting for 5% GST rate will have to reverse Input credits as per prescribed formulas. Commercial projects will continue to attract 12% GST with input tax credit. TDR/FSI and long term lease (30 years or more) will attract GST If residential units are sold post receipt of completion certificate. This taxation (in line with GST rates for ongoing) will reduce the arbitrage between ongoing and completed Inventory.


Your Company had started its operation in the year 2006 and is one of the fastest growing real estate Company in the city with a well- diversified presence in both commercial and residential real estate development with focus on city-centric developments well spread-out across Mumbai Metropolitan Region (MMR) and has projects across the price spectrum, from mid-income, premium to the super luxury spaces. Geographically, the Companys strategic focus is in the key markets of Mumbai Metropolitan Region (MMR). In addition, all our projects benefit from neighboring infrastructure developments like the Mumbai Metros, Indian Railways, Expressways, etc.

Your Company believes in the philosophy of innovation, sustainability and excellence to the real estate industry. Your Companys business model is to undertake real estate development projects on property development basis and project management basis. Property development includes activities starting from conceptualization stage to completion stage.

Project Management includes understanding the needs of the customer, project planning and feasibility, project assessment studies, geological and soil investigation, architectural/ engineering/ interior designs, construction management, build to suit solutions, etc. Your Company has a well trained and experienced inhouse design and architectural team.

Your Companys ultra-luxurious residential project XCzar in Juhu is well-located to gain the first mover advantage post the shift in the central business district from the south of the city primarily Nariman Point to the secondary business district like Andheri. Another major location project of your Company is Xpoint - Kandivali (West) where your Company has redeveloped 4412 sq. mtrs. mixed-use commercial-cum-residential building. Alongside the Company remains focused on other micro-markets like Bhiwandi and Ghatkopar.

Your Companys strategy is to turnaround its projects in near to medium term which enables it to get higher ROEs. With the growing demands and expectations from customers in each micro market, the Company ensures that all needs are appropriately addressed to satisfy them. This has helped your Company to generate higher revenue on lower volumes. Key features of our business model are as follows:

l.Land Acquisition for future Growth: Your Company is focused on growing its current project portfolio with conducive market conditions and the implementation of Real Estate (Regulation and Development) Act (RERA), it sees opportunities for acquisition of stressed assets, redevelopment projects and asset light models through joint- development, JVs and development management routes with land owners, acquisitions through Government Tenders, outright purchase from private corporates.

2. Reduction In time of New Product Development Cycle- The New Product Development (NPD) process impacts the entire value chain of the residential business - starting from Land acquisition to Launch. A large part of value creation for the customer starts during the NPD process while the subsequent processes build on that value.

Your Company has set a benchmark in completing the project "Xpoint* within 28 (Twenty-Eight) months from the date of obtaining of first Commencement Certificate which Is 8(Elght) months before the actual targeted completion date.

3. Corporate Sales - The Company does sales through reputed channel partners, wealth managers, institutions and participation in property exhibitions to attract corporate, HNI and retail customers.

4. Customer Centricity- The Customer Relations(CR) function in your Company endeavors to service its customers from the date of booking to post-handover facilitation. The Company also have upgraded its website to make it more user friendly and effective for generating leads. Significant steps were taken to improve customer experience in their interaction as well as responsiveness in enabling site visits.

5. Digital Marketing - in todays internet savvy world, the need to adopt digital marketing practices has become imperative. Increased usage of internet and social media platforms by customers in their decision making process across products, with real estate being no different. Well prepared and promoted online campaigns are more likely to lead to the viewer visiting the property site in person. Keeping up with these trends, Rodium has also increased Its digital presence in a big way and digitization of property listings has helped in increasing footfalls and conversion rates at our projects.

6. Prudent Cash Flow Management - During the initial years of real estate development, the Company avoided getting into highly speculative commercial developments and focused on developing residential projects. Additionally, the company maintained discipline in acquisitions and growth by utilizing the surplus cash flows from current projects prudently.

Companys Competitive Strengths:

Your Company continues to capitalize on the market opportunities by leveraging its key strengths

• Experienced Promoters and Management.

• Strong in-house Design and Architectural capabilities.

• Good relationships with contractors and financers.

• Strong and stable management team with proven ability.

• Adequate liquidity.

Completed Projects:

Your Company has successfully completed its residential project “XCzar" situated at Juhu Scheme, Vile Parle (West), Mumbai. XCzar offers premium residential apartments based on the concept of green building. XCzar is a ten storied structure with stilt and podium, car lifts, passenger lifts, elegant entrance lobby and waiting area and provides the latest state of the art facilities, amenities and accessories.

Your Company has completed commercial projects "Xtrium" at Chakala, Andheri (East), Mumbai and "XCube" at Off. Link Road, Andheri (West), Mumbai. Both the projects are completely sold out.

Your Companys residential cum commercial, redevelopment project "X"Point" situated at Kandivali, Mumbai has also received Occupancy Certificate on 31st May, 2019. The development work at the site is completed. The project was running ahead of its schedule with super structure getting completed. The Company has completed the construction of the project well before its scheduled date of 31st December, 2020.

Ongoing Projects:

Your Company has also commenced activities in the residential project "Xenus" situated at Matunga Central, Mumbai, with two minutes walk from Matunga Station. The project has already received IOD and is RERA Registered. The vacating of old structure and demolition is completed. The Company has made application for Completion Certificate and your Company is confident to complete the construction and handover the possession before 31st December, 2021.

The Company is in the process of acquiring the plot of land situated in Village- Temghar, Taluka - Bhivandi, District — Thane which is part of the Mumbai Metropolitan Region and is continuously making efforts for expansion and exploring new areas in and out of Mumbai in Metropolitan Region.

Your Company has presence predominantly In the city of Mumbai and is considering real estate development of affordable housing project in and around Mumbai.

In the present economic scenario, the Company has been able to hold its head high due to its pre-eminent strengths In quality construction, project execution capabilities, transparent and honest dealings, aggressive marketing strategy and above all a strong customer-centric approach.


Your Company believes that there are lots of opportunities in the Real Estate Sector in the face of the increased demand for Grade A commercial/office spaces & high quality residential developments. The superior locations & speed-to-market, serve as a great advantage In the current environment.

Following are the key drivers:

The Real Estate (Regulation and Development Act) - RERA. Overall the provisions of the Act introduce enough safeguards for the consumers and at the same time protect the Interests of players with strong corporate governance and cash flow management practices.

Real Estate Investment Trust (REIT), relaxation in cap of investment of REITs assets in underconstruction projects from 10 per cent to 20 per cent.

Housing for All by 2022, which will enhance the demand of real estate and its allied sectors and generate employment on large scale. Under this mission 30 Million houses will be built in India by 2022.

The revised FDI regulations for real estate with relaxation in terms of minimum FDI capital and area of investment would ensure that the industry will get sufficient capital flow to help developers in execution.

Interest rate reduction on home loans and developers funding by financial institutions to improve affordability for home buyers.

Smart City Project aiming to develop the infrastructure facilities will help in increasing demand for real estate and allied sectors.

Credit linked Subsidy Scheme (CLSS) has been a demand-side intervention to expand institutional credit flow to the housing needs of the people residing in urban regions.

The Securities and Exchange Board of India (SEBI) has given Its approval for the Real Estate Investment Trust (REIT) platform which will help in allowing all kinds of investors to invest in the Indian real estate market. The growing flow of PDI into Indian real estate is encouraging increased transparency. Developers, in order to attract funding, have revamped their accounting and management systems to meet due diligence standards.


In the course of its business the Company is exposed to stiff competition from other established developers in the market. In addition. It Is exposed to certain market related risks, such as increase in interest rates and foreign currency rates, customer risks, changes in the government policies and unanticipated delays in project approvals. However, with the competitive advantages, as aforementioned, the Company is well posed to mitigate all such risks.

Regulatory Hurdles:

Unfavorable changes in government policies and the regulatory environment continue to remain a considerable risk and concern and can adversely impact the performance of the sector.

There are substantial procedural delays with regards to land acquisitions, land use, project launches and construction approvals.


NBFC funding to developers posted a 35% CAGR over FY16-18 as companies faced operating cash deficits. In the current liquidity environment NBFCs are reluctant to continue to aggressively fund real estate developers as has been happening over the past several years. While established developers with consistent delivery track records still have ample access to capital through both debt and equity, many developers are facing significant liquidity pressure.

Economic Risks

Indias GDP growth decelerated marginally during the year. Though the construction sector showed some improvement, there are still downside risks. Lending rates for business and home loans continue to be high. These can have a direct impact on the performance of the real estate sector and, hence, of the Company.

Political Risks:

Changes in government policies, social and civil unrest and political developments In or affecting India could affect the Companys business interests. Specific laws and policies affecting real estate, foreign investments and other matters affecting investments in the Companys securities could also change.

Liquidity Risks:

The real estate industry has its own challenges and dynamics. The time required to liquidate a real estate property can vary depending on the quality and location of the property.

Policy and Regulatory Risks

The real estate industry is often affected by changes in government policies and regulations. There are considerable procedural delays with respect to approvals related to acquisition and use of land. Unfavourable changes in the government policies and the regulatory environment may adversely impact the performance of the Company. Restriction by the High Court on new construction in MMR is one such instance. The Company attempts to mitigate these risks through its approach towards acquisition of land based on thorough due diligence and its transparent processes in developing the projects. Besides, its focus on environment friendly and sustainable practices also help in mitigating risks associated with environmental regulations.


After a year of disruptions, the Indian economy is consolidating the gains from recent reforms. Never in the history of Indian real estate have so many significant events taken place within such a short period of time.

Implementation of Real Estate (Regulation and Development) Act (RERA) and the Goods and Services Tax Act (GST) have not only ensured greater transparency and protection for home buyers, but have also rewarded more efficient and organized players in the industry by reducing the cost arbitrage benefits of the unorganized sector.

Our sales performance has strengthened significantly in FY19. We expect to further scale our sales momentum in FY20, given our exciting launch pipeline which has been significantly enhanced by new project additions.

Given the liquidity situation in the sector, which has become even more apparent in light of the NBFC crisis, the visibility on business development is the strongest we have ever witnessed and we hope to have numerous positive portfolio enhancement announcements in FY20.


The Company has a proper and adequate system of internal controls commensurate with the size of the Company and the nature of its business to ensure that all the assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded and reported correctly and adequately.

The system has been designed to ensure that financial and other records are reliable for preparing financial information and for maintaining accountability of assets. All financial and audit control systems are also reviewed by the Audit Committee of the Board of Directors of the Company.


Your Company has followed all relevant Accounting Standards while preparing the financial statements.

The Financial Statements have been prepared on historical cost basis considering the applicable provisions of Companies Act 2013 except the certain material items that have been measured at fair value as required by relevant Ind AS. Nevertheless, historical cost is generally based at the fair value of the consideration given in exchange for goods and services.



Profitable growth can be achieved, sustained and accelerated only in an organisation which focuses on empowering and engaging its employees in the best possible way.

The Companys focus is on unlocking the people potential and further developing their functional, operational and behavioral competencies. The belief "great people create great organization has been at the core of the Companys approach to Its people.

The Companys businesses are managed by a team of competent and passionate leaders, capable of enhancing your Companys standing in the competitive market.

The Company has a structured recruitment process. The focus is on recruiting people who have the right mindset for working at Rodium, supported by structured training programs and internal growth opportunities. The Companys employee strength at group level, as on March 31, 2019 was 20 employees.


Effective 1st April, 2018, the Company has applied IND AS 115 "Revenue from contracts with customers" which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised. IND AS 115 replaces IND AS 18 Revenue and IND AS 11 Construction Contracts. The Company has adopted IND AS 115 using the cumulative effect method and the comparative information in the statement of profit and loss Is not restated - i.e., the comparative information continues to be reported under IND AS 18. The impact of the adoption of the standard on the financial statements of the Company is insignificant.

Table 1: Standalone Profit & Loss Statement Rs. in Lakhs)


Particulars 2018-2019 2017-2018
Operative Income 3962.72 2957.94
Other Income 137.82 189.30
Total Revenue (Including Other Income) 4100.54 3147.23
Project & Operating Expenses 3091.36 2396.52
Employee Benefit Expenses 101.83 103.58
Finance Cost 171.62 179.88
Depreciation and amortization expenses 12.08 11.94
Other Expenses 378.93 384.04
Total Expenditure 3755.83 3075.97
PBDIT 528.42 263.08
PBDT 356.79 83.20
PBIT 516.33 251.14
PBT 344.71 71.26
Tax 123.68 40.31
Profit After Tax (PAT) 221.03 30.95
Non- Controlling Nil Nil
PAT (after NCI) 221.03 30.95
Other Comprehensive Income (OCI) (Net of Tax) 1.44 0.66
Diluted EPS 6.81 0.95
Operating Margin (in%) 12.89 8.36
Return on Capital Employed % (EBIT/Capital Employed) 12.17 5.98
No. of Months Receivables (Receivables/Sales*12) 8.44 7.21
Current Ratio (Current Assets/Current Liabilities) 1.30 1.44
Borrowings: Equity Ratio (Total Liabilities/Equity) 9.48 9.36
Production N.A. N.A.

Consolidated Financial Highlights

• Consolidated total revenue increased from Rs. 3143.39 lakhs In FY 2017-18 to Rs. 4096.70 lakhs in FY 2018-19.

• Operating profits (PBIT) were Rs. 512.19 lakhs in FY 2018-19, compared to Rs. 246.68 lakhs in FY 2017-18.

• Consolidated profit before taxes(PBT) was Rs.340.57 Lakhs in FY 2018-19 as compared to Rs. 66.79 lakhs in FY 2017-18.

• Consolidated profit after tax (PAT) was Rs.216.88 Lakhs in FY 2018-19 as compared to Rs. 26.48 Lakhs in FY 2017-18.


Certain statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results might differ substantially or materially from those expressed or implied due to various factors affecting Companys operations, which include a down trend in industry, significant changes in political and economic environment In India and abroad, tax laws, import duties, litigation and labour relations.


The Company shall be registering its forthcoming projects at an appropriate time in the applicable jurisdictions / States under the Real Estate (Regulation and Development) Act, 2016 (RERA) and Rules thereunder. Till such time, the forthcoming projects, none of the images, material, projections, details, descriptions and other information that are mentioned in the Annual Report for the FY 2018-19, should be deemed to be or constitute advertisements, solicitations, marketing, offer for sale, invitation to offer, or invitation to acquire within the purview of the RERA. The Company uses carpet areas as per RERA in its customer communication. However, the data In saleable area terms has been presented in the Annual Report for the FY 2018-19 to enable continuity of information to investors and shall not be construed to be of any relevance to home buyers / customers.