Satra Properties (India) Ltd Management Discussions.

Industry Structure and Development

The Indian real estate market is anticipated to reach a market size of $180 billion by the year 2020, according to the joint report of CREDAI and JLL. Housing sector shall contribute to about 11% of the total growth within this and some of the key drivers expected to aid this target are the changes in regulatory reforms, transparency in the market with redefined laws along with emergence of demand for nuclear and affordable homes. Maharashtra was amongst the first few states to adopt Real Estate (Regulation and Development) Act, 2016 (RERA) in a timely phase-wise programme by May 2017. Thus with the introduction of RERA the confidence amongst the property buyers has increased and resulted into good conversion of sales irrespective of the oversupply in the market, in the preceding financial year/s. RERA has become a consumer friendly regulation rather than acting as a tough strict law. The utmost noticeable modification as a result of implementation of RERA has been the transformation of the family owned businesses to that of professionally managed entities. Supplementing to emergence of new reforms, the rollout of Goods and Service Tax (GST) in July 2017 was a revolutionary achievement regardless of the preliminary glitches. The introduction of GST has added to eradicate multiple levels of taxation such as excise duty, service tax, VAT and has aimed to create a single point of taxation leading to efficient and effective source of revenue for the government by advancing tax buoyancy. Complementing the changing reforms by adding transparency to the Indian real estate market, Securities and Exchange Board of India (SEBI) has provided its consent for introduction of Real Estate Investment Trust (REITs) by permitting varied investors to capitalize investments in the real estate sector in India which shall generate an opportunity valuing to $19.65 billion. In the finale, with the overview of above reforms your Company similarly to that of others shall aim to complete the pending projects and take up new assignments on a project development management model on a fee basis and alternatively by entering into joint development models with organized market players possessing significant and sufficient upfront capital in addition to redeveloping housing societies and contracting/building homes for various authorities under various Yojnas floated by the Government of India.

Opportunities

The present financial and economic atmosphere is enormously challenging, nonetheless your Company believes that with the introduction of affordable housing, concept of Smart City and various Awas Yojnas by the Prime Minister in the preceding financial year/s, there are many opportunities for building homes within the lower segment in the Indian real estate market inter alia by constructing studio flats and 1BHK apartments, etc. Furthermore, in the year 2017-2018, the industry witnessed implementation of new reforms such as Real Estate (Regulation and Development) Act, 2016 [RERA] and Goods and Service Tax [GST], has led to upsurge in confidence among the buyers by given the transparency and clear picture on approvals, possession timelines, interest on default, etc. Thus your Companys strategic project locations and through the management adopting new reforms, technologies and by focusing on new standalone redevelopment projects at superior locations, the management contemplates growth and better prospects/ demand for real estate in the near future. Similarly, since the demand for affordable housing fragment is the key-driving factor of real estate business in Mumbai, the Company eyes on various opportunities with other developers in the model of joint-development and/or as project management consultants.

Risks and Threats

Taking into the account the overall slowdown and disruption in the Indian economy and particularly in the Indian Real Estate market in the last 1.5 years, your Company also underwent the heat and is facing challenges like many real estate players, particularly arising through the negative sentiments from the buyerswithregardstoextraburdenofGSTonunderconstruction apartments, over-regulated atmosphere and delays in getting approvals due to dumping ground matter. Likewise is the case with financial institutions and banks towards the anticipation of their risks involved in developer repaying the loan and increase in the number of litigations of projects has caused slowdown in this sector. Consequently, your Company through a blend of caution, proper due diligence and estimation of varied prospects, maintains primary and key focus on speedy execution of projects in hand, aims at reducing the debt and keeping cost under control.

Segment Wise or Product Wise Performance

The Company is operating in a single segment i.e. Real Estate Development and trading in properties and Transferable Development Rights and has only domestic sales. Therefore there is only one reportable segment in accordance with the Indian Accounting Standard (Ind As) 108 on "Operating Segments".

Future Plans and Outlook

Throughout the financial year 2017-2018, the consumer demand continued to be sluggish and thus from this time forward, the outlook of the Company is to primarily sell the inventory available in hand and complete the projects undertaken in previous years rather than commissioning new luxury launches. Furthermore, the Company also continues to explore the opportunities of redeveloping small plots/housing societies along with building compact homes in the sector of low cost housing and affordable housing in and around Mumbai, thereby reducing the upfront investment in land cost in the first instance and grabbing the available incentives floated across by the Government for the real estate industry. To add value to the Companys portfolio, undoubtedly the goal still remains to reduce debt in the Company by switching existing loans to lesser interest rates and availing low cost finance for new developments.

Internal Control System and Their 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.

Discussion on Financial Performance with Respect to Operation Performance:

Indian Accounting Standards (Ind AS) – IFRS Converged Standards

Satra Properties (India) Limited and its subsidiaries have adopted Ind AS with effect from 1 April, 2016 pursuant to

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Ministry of Corporate Affairs notification dated 16 February, 2015 notifying the Companies (Indian Accounting Standard) Rules, 2015. In 2017-18, Company has substantially completed the assessment of the impact of the change to Ind AS on reported reserves and surplus and on the reported profit for the relevant periods. Company has also completed the modification of accounting and reporting systems to facilitate the changes.

1. Income:

Revenue is recognized when significant cost has been incurred on the project as compared to total estimated cost of project. During the year, your Company has booked negative total income of Rs. 4,963 lacs due to reversal of sales of major units in one of the project in comparison of Rs. 11,335 lacs in the year 2016-17. On consolidated basis, the total income increased by 2.69% from Rs. 12,879 lacs in the year 2016-17 to

Rs. 13,226 lacs in the year 2017-18. The said increase is due to sale of project in one of the subsidiaries of the Company.

2. Expenses:

Cost of material consumed for the project includes land cost, TDR, construction cost, finance cost and other incidental cost directly associated to a project. When revenue is not recognized for the undivided shares of land, it is transferred to work-in-progress. During the year, the Company has booked negative cost of construction of Rs. 4,297 lacs due to reversal of sales of major units in one of the project in comparison to

Rs. 7,699 lacs in the year 2016-17. On consolidated basis, the construction cost increased by 164.59% from Rs. 7,241 lacs in the year 2016-17 to Rs. 19,160 lacs in the year 2017-18. Financial cost not attributable to specific projects are charged to statement of profit and loss after capitalizing some portion to inventories as per the Accounting Standards. During the year, there was increase in finance cost by 12.54% from

Rs. 2,447 lacs in the year 2016-17 to Rs. 2,754 lacs in the year 2017-18. On consolidation basis, the finance cost has increased by 29.77% from Rs. 3,483 lacs in the year 2016-17 to Rs. 4,520 lacs in the year 2017-18. Your Companys employees cost was at Rs. 155 lacs for the year as against Rs. 139 lacs in the previous year. On consolidated basis, the employee cost was at Rs. 431 lacs for the year as against Rs. 328 lacs in the previous year. Other expenses of the Company were at Rs. 332 lacs for the current year as against Rs. 92 lacs in the previous year and on consolidated basis, the other expenses were at

Rs. 1,699 lacs for the current year as against Rs. 1,062 lacs in the previous year.

3. Profit and margin growth:

The Company registered net loss before tax of Rs. 3,919 lacs in year 2017-18 as against net profit before tax of

Rs. 951 lacs in the previous year. The said decrease is due to cancellation of major units in one of the project of Company. Net loss after tax is Rs. 4,883 lacs in year 2017-18 as against Net profit after tax of Rs. 648 lacs in the previous year on standalone basis. Net loss after tax is

Rs. 14,182 lacs in year 2017-18 as against net profit after tax of Rs. 1,095 lacs on consolidation basis.

The management is taking effective steps to improve overall performance of the Group by concentrating on executing the on-going and new projects at fast pace and reduction of debt to minimize the burden of financial cost.

4. Shareholders funds:

Shareholders funds represent equity share capital and other equity. The shareholders funds decreased from Rs. 9,547 lacs to Rs. 4,466 lacs for the year 2017-18. Shareholders funds comprises of Rs. 3,567 lacs equity share capital and other equity of Rs. 899 lacs for the year 2017-18.

5. Current liabilities and non-current liabilities:

Current liabilities include financial liabilities, other current liabilities, provision and current tax liabilities. Non-current liabilities include financial liabilities and long-term provisions. During the year, current liabilities marginally increased by 6.20% from Rs. 34,746 lacs to

Rs. 36,899 lacs.

6. Current assets and non-current assets:

Current assets comprises of inventories, financial assets and other current assets. Non-current assets include property, plant and equipment, capital work-in-progress, financial assets, deferred tax asset and other non-current assets. Inventories represent construction work-in-progress and stock of materials, the said cost is transferred to cost of construction at the time of recognizing revenues. During the year trade receivables have decreased by 60.70% from Rs. 11,054 lacs to

Rs. 4,344 lacs. The short-term loans and advances have decreased by 46.48% from Rs. 5,082 lacs to Rs. 2,720 lacs in the current year due to loan received back from subsidiary companies.

Human Resources Development

A focused and healthy employee is crucial for any productive organization. The culture and reputation as a leader in business has enabled your Company to attract and retain some of the best talents in the industry. Your Company is empanelled with high profile professionals and continues to inspire them to stay focused and updated with new reforms and technology everyday. The Company strongly believes thats its intrinsic strength lies in the quality of its dedicated employees and thus has maintained harmonious employee relations. The Company has an employee strength of 31 Nos.

Cautionary Statement

The statements in this Report, particularly which relate to management discussion and analysis describing the Companys objectives, plans, projections, estimates, expectations or prediction, may constitute "forward looking statements" within the meaning of applicable securities laws and regulations. These statements being based on certain assumptions and expectations of future events, actual results may differ substantially or materially from those expressed or implied in the statement depending on the circumstances, which are beyond the control of the Company like economic conditions, change in government regulations and tax regime etc. The Company assumes no responsibility to publically amend, modify or revise in respect of forward looking statements on the basis of subsequent developments, information or events.