Shri Krishna Devcon Ltd Management Discussions

Part of the Directors Report Economic outlook

The global economy demonstrated resilience in 2024 despite challenges posed by evolving geopolitical dynamics. The International Monetary Fund, has projected growth of 3.2 per cent and 3.3 per cent for 2024 and 2025, respectively. While the overall outlook remains stable, regional variations in growth trajectories are evident. Inflation rates globally have converged, pointing to a decline in global inflation rates. Global headline inflation is projected to fall from an annual average of 6.7 per cent in 2023 to 5.7 per cent in 2024 and further to 4.2 per cent in 2025, with advanced economies nearing their inflation targets sooner than emerging and developing economies. Sudden eruptions in financial market volatility could tighten financial conditions and weigh on investment and growth. (source: Annual Report 2024-25-GoI, MoF)

Further disruptions to the disinflation process could potentially be triggered by new spikes in commodity prices amid persistent geopolitical tensions. Against this backdrop, India continues to demonstrate a resilient economic performance, reaffirming its position as the fastest-growing major economy, driven by strong macroeconomic fundamentals and a promising outlook. As per the first advance estimates released by the National Statistical Office, Ministry of Statistics & Programme Implementation, the real GDP growth for 2024 25 is estimated to be 6.4 per cent. The real GVA growth is also estimated to be 6.4 per cent. Among the sub-sectors in the economy, construction, utility services such as electricity, gas, water supply & other utility services, finance, real estate & professional services, public administration, defence & other services are estimated to catalyse the growth. (source: Annual Report 2024-25-GoI, MoF)

US equity markets have largely rebounded, erasing losses from the April 2 tariff fallout and reaching new heights. Other global equity markets have also rallied, swayed by tariff-related announcements and releases of macroeconomic data that turned out to be better than expected. Notably, the US dollar has depreciated further, defying expectations that tariffs and larger fiscal deficits would cause the currency to appreciate. Implied paths for policy rates have flattened for advanced economies, while continued dollar weakness has provided some monetary policy space for emerging market and developing economies. Yield curves have steepened in the context of fiscal concerns, although the steepening thus far is not unusual by historical standards despite very high debt and deficit levels in many countries. With these forces in place, the global economy has continued to hold steady, but the composition of activity points to distortions from tariffs, rather than underlying robustness. (source: World Economic Outlook-IMF Jul-2025)

Global growth in the first quarter of 2025 was 0.3 percentage point above that predicted in the April. International trade and investment drove activity, while private consumption was more subdued across major jurisdictions. Real GDP decreased in the United States, at an annualized rate of 0.5 percent, marking the first quarterly contraction in three years. Consumer spending rose only by 0.5 percent, but this came after remarkably fast growth of 4.0 percent in the fourth quarter of 2024. Imports and business investment surged·especially in information processing equipment. Taken together, these patterns were consistent with aggressive front loading by US firms and households ahead of expected higher prices induced by tariffs. In the euro area, GDP accelerated to 2.5 percent, driven by investment and net exports, even as private consumption lost steam. Ireland largely led the spurt, with growth shrinking to 1.4 percent when Ireland is excluded. Chinas real GDP growth, at an annualized rate of 6.0 percent, exceeded expectations. This was mainly driven by exports, propped up by a depreciating renminbi closely tracking the dollar and with declining sales to the United States more than offset by strong sales to the rest of the world and to a smaller extent, by consumption, supported by fiscal measures. Japans economy contracted by an annualized 0.2 percent, as soft private consumption and weak net exports weighed on growth while strong private investment helped cushion the decline. Global trade grew robustly in the first quarter, but high-frequency indicators point to an unwinding of frontloading in the second quarter. (source: World Economic Outlook-IMF Jul-2025)

From ranking 11th in 2009 to fourth by end-2025 in GDP terms, Indias growth has not just been numerical, but structural, driven by domestic demand, a young and tech-adaptive workforce, and the governments policy prudence. Entering the new fiscal, Indias economic outlook is buoyed by three key engines: a resilient consumer base, a broadening investment landscape, and a digitally skilled, dynamic workforce. Urban spending is rising, private capital expenditures are showing green shoots, and Indias tech-adaptive talent is driving innovation and showcasing its global capabilities. Indias GDP growth numbers for the last quarter of fiscal 2024 to 2025 came as a welcome surprise, with the economy growing at a brisk 7.4% year on year. Growth for the full fiscal year came in at 6.5%, driven by strong private consumption expenditure and investments, indicating domestic demand might be more resilient than expected, supported by easing inflation and favorable conditions in rural economies. As India carves out a new growth road map·one built on a foundation of high investment returns, robust consumer demand, and an increasingly AI-skilled workforce·it will be enhanced by the countrys maturing trade diplomacy. Recent strategic trade negotiations, notably with the United Kingdom in May and the ongoing talks with the United States, and the highly anticipated deal with the European Union by the end of the year, will likely act as powerful multipliers, reinforcing each of these three engines of growth and giving sharper direction to Indias economic momentum over the coming decade. (source: World Economic Outlook-IMF Jul-2025)

Backed by improving economic fundamentals and a strong policy push to boost consumption spending (through tax exemptions and easing monetary policy), we now expect India to grow between 6.4% and 6.7% in fiscal year 2025 to 2026, in our baseline scenario. Easing inflation is expected to further bolster consumer confidence and purchasing power, fueling a surge in spending across sectors. With oil prices expected to remain range-bound, it will likely keep overall inflation low and support an improvement in the current account balance, given oils significant share in the import bill. We expect strong domestic demand in the first half of the next year, driven by a significant uptick in private spending, followed by strong private investments as businesses factor in uncertainties. Growth next year will be even stronger, and the momentum over the next two years is set to lift GDP beyond its pre- COVID trend. The pandemic-induced gap will not just be closed, it will be decisively surpassed. (source: World Economic Outlook-IMF Jul-2025)

Indias growth projections in the current fiscal year will likely be tied to broader global trends, including rising geopolitical uncertainties and a delayed synchronous recovery in the West than previously anticipated. Disruptions to global trade and supply chains due to intensifying geopolitical uncertainties will also affect demand for exports. Domestically, India will have to focus on raising per capita income to ensure a broad-based and consumption-led growth, with a sharper emphasis on employment generation and upskilling. As technology continues to reshape the job market and redefine skill demands, it will be imperative for the government to ensure broader access to AI and digital skills across the workforce of all categories. Only then can the drivers outlined above deliver the momentum needed to propel Indias growth in the future. (source: World Economic Outlook-IMF Jul-2025)

The real estate sector is one of the most globally recognized sectors. It comprises four sub-sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semiurban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It was also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term.

The Indian real estate market is projected to experience a substantial increase, potentially reaching a value of US$ 5-7 trillion by the year 2047, with the possibility of surpassing US$ 10 trillion.

Construction is one of the largest sectors in terms of FDI inflow. FDI in the sector (including construction development & activities) stood at Rs. 3,94,340 crore (US$ 45.75 billion) from April 2000- March 2025.

In the first quarter of CY25 (January-March), Indias residential real estate market experienced a notable slowdown, with total housing sales across the top seven cities declining by 28% year-on-year to approximately 93,280 units, down from over 1.30 lakh units in Q1 2024.

Housing sales across the top seven Indian cities saw a slight dip of 4% in 2024, with around 4.59 lakh units sold compared to 4.76 lakh in 2023, as per ANAROCK data.

Housing demand surged 77% from FY19 to FY25 with 5.44 lakh homes registered across major cities, showing strong buyer interest despite rising prices.

Indias office sector had a record-breaking 2024, clocking 89 million sq. ft. of gross leasing across the top 8 cities · the highest ever. This marks a 19% jump over 2023, surpassing the previous peak by 14 million sq. ft.

For the first time, gross leasing in Indias top 7 markets surpassed the 60 million sq ft mark, reaching an impressive total of 62.98 million sq ft, marking a substantial 26.4% increase compared to the previous year. Notably, the December quarter emerged as the busiest quarter on record, with gross leasing hitting 20.94 million sq ft. (source: Real Estate Industry Report-IBEF.org May, 2025)

The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies.

The Union Budget 2025-26 allocated Rs. 1 lakh crore (US$ 11.66 billion) to the Urban Challenge Fund, aiming to transform cities into growth hubs through redevelopment and infrastructure projects.

Government launches Rs. 15,000 crore (US$ 1.75 billion) funds to revive stalled affordable and midincome housing projects in Swamih Fund II

In the Union Budget 2024-25, under PM Awas Yojana Urban 2.0, housing needs for one crore urban poor and middle-class families will be met with a Rs. 10 lakh crore (US$ 120.16 billion) investment, including Rs. 2.2 lakh crore (US$ 26.44 billion) in central assistance over the next 5 years.

In the 2024-25 Interim Budget, Union Minister of Finance, Ms. Nirmala Sitharaman announced a boost for Indias affordable housing sector by adding two crores more houses to the flagship scheme PMAY-U.

On standalone as well as on consolidated basis: Total income increased by 5.86% to Rs. 2743.49 Lakhs in FY 2024-25 vs Rs. 2591.61 Lakhs in FY 2023-24, Profit Before Tax increased by 1.14% to Rs. 651.72 Lakhs in FY 2024-25 vs Rs. 644.38 Lakhs in FY 2023-24 and Profit After Tax as well as Total Comprehensive Income increased by 10.65% to Rs. 492.30 Lakhs in FY 2024-25 vs Rs. 444.92 Lakhs in FY 2023-24.

The Companys operations span covers all aspects of real estate development from the identification and acquisition of land to the planning, execution and marketing of its projects. The Company is developing projects mainly in Indore (Madhya Pradesh) and Mumbai (Maharashtra). During the year, the Company has the following projects some of which are at completed and some are at various stage of progress;

Rising urban population, growing middle class, and favorable demographics are driving sustained demand for residential, commercial and retail spaces.

Schemes such as PMAY (Pradhan Mantri Awas Yojana), Smart Cities Mission, RERA framework, and infrastructure push (metro, expressways, airports, industrial corridors) are boosting demand and transparency.

Increased focus on affordable and mid-segment housing continues to be a growth driver, supported by subsidies and lower interest rates.

Adoption of PropTech, digital platforms, smart homes, and green construction practices enhances efficiency and consumer experience.

Policy liberalisation and Real Estate Investment Trusts (REITs) are improving liquidity, attracting institutional and foreign capital into the sector.

GDP contraction, inflationary pressures, and reduced discretionary income can directly impact sales velocity and pricing. Approvals, land acquisition challenges, and policy changes may result in project delays and cost overruns. Rising borrowing costs can affect both end-user affordability and developers financing cost.

Geopolitical tensions, supply chain disruptions, and global financial volatility may reduce investor sentiment and inflows.

High competition in both residential and commercial segments may pressure margins and pricing flexibility.

Time and cost overruns due to delays in approvals, labour/material shortages, or unforeseen site issues.

Dependence on external borrowings; tight credit policies and NBFC/HFC sector challenges can restrict cash flows.

Constantly evolving laws under RERA, environmental norms, and GST can impact operations if not adhered to meticulously.

Fluctuations in demand-supply balance leading to unsold inventory or reduced absorption rates. Concerns

Rising input costs (cement, steel, energy, labour) impact profitability and affordability.

Large unsold stock in certain markets may affect new launches and overall sector liquidity.

Legacy issues of stalled or delayed projects in the sector continue to dent customer confidence.

Pressure to adopt sustainable and eco-friendly practices in line with ESG expectations, adding to costs.

Over-reliance on government incentives and concessions makes the sector vulnerable to policy reversals.

The Company has evaluated its Operating segments in accordance with Ind AS 108 and has concluded that it is engaged in a single operating segment viz. real estate business.

The Company has a comprehensive Internal Financial Control system commensurate with the size, scale and complexity of its operations. Your Company lays great importance on internal control systems across the organization. The Company has adequate system of internal control which helps the management to review the effectiveness of financial and operating control as well as to ensure that all the assets are safeguarded and more productive. The system encompasses the major processes to ensure reliability of financial reporting, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources. We have a qualified and independent Audit Committee which comprises of our Board of Directors. The Audit Committee reviews the adequacy and efficiency of internal controls and recommends any improvements or corrections.

These internal controls ensure efficiency in operations, compliance with internal policies of the Company, applicable laws and regulations, protection of resources and the accurate reporting of financial transactions.

In the preparation of the financial statements for the year ended March 31, 2025, the applicable Indian Accounting Standards (Ind AS) have been followed. Pursuant to the notification dated February 16, 2015 issued by the Ministry of Corporate Affairs, the Company has adopted the Indian Accounting Standards ("Ind AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 with effect from April 1, 2017.

The Company comprises a small team of professionals & managers, who are result oriented, committed and loyal. The number of permanent employees on the rolls of company as on 31.03.2025 was 9. The Company is in real estate sector and for the development of projects we engage the services of consultants, contractors and sub-contractors who work on our projects, employ a significant Labour force which includes skilled, unskilled and semi-skilled workers. We like to thank all our employees for their dedication, and their families for their unfailing support. Your hard work has carried the company through its difficult time. We would also like to thank our customers for their ongoing trust, as well as our contractors, sub-contractors for their tremendous support.

Certain statements contained in this Managements Discussion and Analysis and Directors Report may be "forward-looking statements". These include statements about Managements expectations, beliefs, intentions or strategies for the future. All forward-looking statements reflect Managements current views with respect to future events, and are subject to numerous risks, uncertainties and assumptions that have been made. Actual results could differ materially from those expressed or implied, depending upon global and Indian demand-supply conditions, changes in Government regulations, tax regimes and economic developments within India and overseas.