Sikozy Realtors Ltd Management Discussions.

INDIAN ECONOMY

After facing several headwinds last year with the start of the pandemic, the Indian economy is expected to gradually recover in the current year. Indias GDP grew by 0.4% in Q3 FY 2020-21 after two consecutive quarters of contraction. As per the second advance estimates of Central Statistics Office (CSO), GDP growth for FY 2020- 21 is expected to contract by 8.0%, after expanding by 4.0% in FY 2019- 20. The countrys fiscal deficit for FY 2020-21 has been pegged at 9.5% of GDP, much beyond the original targeted 3.5% of GDP, resulting from stressed tax and divestment revenues, increased expenditure commitments due to the COVID-19 pandemic and the resultant economic slowdown. The countrys fiscal deficit for FY 2021-22 has been pegged at 6.8% of GDP .

According to the CSO, countrys factory output growth shot up by 7.0% in FY 2020-21 as against a contraction of

0.7% in FY 2019-20. Consumer durables output, an indicator of urban demand, contracted by 15.2% in FY 2020-21, compared with 8.7% contraction in FY 2019-20.

While the second wave of COVID-19 infections has created significant uncertainty over the economic trajectory in the short term, various initiatives by government will ensure a steady growth path in coming years. The government intends to spend more than Rs 2.0 Lakh Crore on various Production Linked Incentive which will boost economic sentiment and private consumption.

FY 2020-21 inflation stood at 6.2%, within the RBIs estimated range and is expected to be ~5.2% for the current year, according to the Asian Development Bank. Also, any upside risk from firm crude prices is more likely to be offset by softening of demand due to a resurgence in coronavirus infections, reduction in duties on petroleum products and the likelihood of a normal monsoon in the current year. The countrys exports of goods and services are expected to improve once the global economies recover from the pandemic. While the long term outlook looks bright for the country, the recurrence of COVID-19 waves could pose a serious risk to global trade activity and slow Indian economic growth.

• The core sector grew by 6.8% in March 2021, helped by last years low base and double-digit growth in steel, cement, electricity and natural gas segments, along with an upside surprise in IIP which rose by 22.4% in March. For FY 2020-21, IIP stood at -8.6% as against -0.8% in FY 2019- 20, reflecting the weakness in the economy. Also, the lockdown and fresh restrictions in several parts of the country to contain the second wave could lead to a delay in recovery.

• The Indian residential sector has been grappling with subdued demand for the past few years and the recent developments (ongoing impact of NBFC crisis and COVID19) have made things even more difficult for the sector.

• COVID-19 has severely hit residential real estate business and the sector has come to a standstill in the short term. While the sector was coming out of the woods after the liquidity crisis initiated by the IL&FS fiasco and subsequent fallouts of various financial institutions, the pandemic outbreak could further impact residential sector

• While the pandemic outbreak could temporarily disrupt the sector, there are certain greenshoots in this adverse situation like the consecutive rate cuts by the RBI, the reduction of GST rates to 1% for affordable housing and 5% for others. One of the most important step taken by Government of Maharashtra is reduction in Stamp duty rate and Registration charges

• Affordable housing continues to remain a significant opportunity for players and key focus area of government, major short supply of housing lies in the economically weak and low-income segments. The governments constant push for affordable housing has shifted the focus from high-end and luxury segments to the affordable segment asthe government has proposed to extend additional tax benefit of INR 1.5 lakh on interest paid on affordable housing loans by one year till March 2021. Also, in order to encourage developers to focus on affordable housing projects, the Government has extended the date of approval for these projects for availing tax holiday on profit earned by developers by one year till March 2021

PERFORMANCE HIGHLIGHTS:

• The Company was able to report the turnover during the financial year and also able to generate profit during the year , this was mainly due to receipt of occupation certificate for its ongoing project located at Karjat.

• During the financial year, company posted a profit of Rs. 0.74 Lacs for the financial year 2020-21 as against profit of Rs. 3.46 Lacs for the previous financial year 2019-20

• The Company is also planning a development of residential project on land parcel situated at Karjat East, we have already initiated discussion for entering into Joint Development Agreement for development of the said project. However due to recessionary trends and the company is yet to take necessary step in this regard.

FUTURE PROSPECTS/OUTLOOK:

A cyclical downturn combined with impact of demonetization, GST and the implementation of the Real Estate (Regulation and Development) Act, 2016 has created uncertainty in the sector. Further owing to GST, IBC &NBFC crisis and the subvention scheme ban it has been tough for the sector to align itself with these new regulations, the measures have been instrumental to bring transparency, accountability and fiscal discipline over the last few years. Further COVID-19 situation prevailing in the country has worsened outlook where economy has come to complete standstill, it is expected that some sort of economic activity especially construction activity will get kickstart only from 3rd quarter onwards

In order to strengthen its topline and bottom line, the Company plans to foray into IT & Chemical business which are allied to Real Estate Sector as the Company has not signed any projects during the year.

THREATS RISKS AND CONCERNS

The real estate market is inherently a cyclical market and is affected by macroeconomics conditions, changes in applicable government schemes, changes in supply and demand for projects, shortage in manpower, availability of consumer financing and illiquidity. The present COVID-19 situation has made the situation worse.

RISK MANAGEMENT

Execution Risk: The Real Estate and construction projects are subject to various execution risks like regulatory hurdles, delay in receipt of approvals, availability of labour and raw material, etc. Any such delay may result in cost overruns and impact the Companys operations unfavorably.

Liquidity Risk: The Real estate business has significant initial outflow with staggered and long-term inflows. Delays in project cycle; inadequate funding resources may have an impact on the liquidity position of the Company.

Regulatory Environment: Our operations are exposed to uncertain political, legal and economic environment, government instability and complex legal systems and laws and regulations in India and abroad. Our ability to manage, evolve and improve our operational, financial and internal controls across the organization and to integrate our widespread operations and derive benefits from our operations is key to our growth strategy and results of operations.

HUMAN RESOURCES

Manpower is biggest strength in any Sector. The Company maintains its focus on its human resources as it believes that a motivated and empowered workforce is the key to sustained competitive advantage. The Company has maintained excellent relations with its employees across all levels of the organization during the period under review. All efforts were made to ensure a high employee satisfaction. Adequate measures were undertaken to enhance the skill sets of the employees.