Simplex Realty Ltd Management Discussions

Amidst an uncertain and challenging global macroeconomic environment, the Indian economy presents a picture of confidence, positivity, and optimism. Recent growth outturns have surprised most forecasts on the upside. After clocking real gross domestic product (GDP) growth of 7.2 per cent in 2022-23, real GDP is expected to grow by

7.3 per cent during 2023-24 according to the latest release by the National Statistical Office (NSO). As per RBI, FY 2025 growth to remain robust at 7% driven by private capex and consumption demand.

With strong domestic demand, India remains the fastest growing major economy and is now the fifth largest economy in the world. In fact, in purchasing power parity (PPP) terms, India is already the third largest economy. The International Monetary Fund (IMF) has projected that Indias contribution to world growth will rise from the current 16 per cent to 18 per cent by 2028. Strong domestic demand remains the main driver of growth, although there has been a significant increase in Indian economys global integration through trade and financial channels. Higher reliance on domestic demand cushioned India from multiple external headwinds. As per RBI Monetary policy, CPI inflation expected to moderate to 4.5% in FY 2025 from 5.4% in FY 2024.

Real estate sector is one of the highest employment generators after agriculture sector in India. It comprises Residential, Office, Retail, Hospitality and Industrial. Real estate sector in India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021. It will contribute 18-20% to countrys GDP by 2030 according to a joint report by NAREDCO and E&Y. The report further states that there is a favorable demand-supply gap which will propel the growth of this sector. Additional 25 million units of affordable housing are required by 2030, highlights the Naredco and EY joint report.

With the rise of the corporate environment, the demand for office space and urban and semi-urban accommodation has increased, assisting the growth of this business. Emergence of nuclear families, rapid urbanization and inflating disposable income of individuals are attributable to the higher demand for residential properties,

expanding e-commerce sector in the country is catalyzing demand for warehousing facilities. According to Savills India, real estate demand for data centers is expected to increase by 15-18 million sq. ft. by 2025. With fractional ownership becoming more widespread, Non-Resident Indians (NRIs) and millennials wanting to invest in residential property will fuel the 2023 real estate market. Infrastructure spending on the roads, metro railway and other amenities have sustained realty growth in India.

The industry has faced a series of challenges like rising construction costs, skyrocketing inflation, successive rate hikes by RBI etc but despite these obstacles, the sector managed to achieve substantial growth in recent. According to a report, Indias real estate market is expected to exhibit a growth of rate (CAGR) of 9.2% during 2023-28.

The Indian real estate sector embarks on a transformative journey in 2024, marked by challenges and unparalleled opportunities. The anticipated surge in luxury home sales and the noteworthy rebound of the commercial real estate sector underscore the promising trajectory ahead. Crucially, government initiatives like Housing for All and regulatory reforms such as RERA contribute to heightened transparency and bolster investor confidence. As industry leaders, the imperative lies in prioritizing strong governance to deliver high- quality products and instill trust among stakeholders. Despite persistent challenges, including high land costs and infrastructure bottlenecks, the sectors proven resilience in innovation bodes well for its future. Overcoming these hurdles is paramount for emerging stronger, more future-oriented, and closely aligned with the evolving needs of the population. Acknowledging real estates substantial multiplier effect, sustained government support remains essential, ensuring a seamless and sustainable growth path for the industry, and solidifying its integral role in the broader Indian economy.

• The Indian real estate sector is still highly unorganized with lots of middle men and, together with increased construction costs - both material and labour which has been putting pressure on the cost of projects and profit margins.

• Non-availability of land within city limits along with rising land and construction costs, making affordable housing projects unviable.
• The lengthy and complex approval process leads to a high gestation period which eventually results in project costs escalation and any amendments in various rules and regulations can adversely impact new launches and increase in the cost of the projects. Retrospective applicability of policy changes may impact the profitability.
• Finance plays an imperative role in the construction industry, liquidity crisis or any adverse move by the banking sector towards the lending policy on the real estate loans may adversely impact the execution of the projects and increase the cost of borrowing.
• Acute shortage of skilled workforce at all levels.
• Increase in supply due to various incentives provided by the Government, leads to increased competition amongst the sellers, which drives down the property prices.

1. ON GOING PROJECT
• The Companys villa project at Nachinolla, Goa is completed and ready for sale, we have 4 villas for sale.
• The Company has inventory (i.e. commercial units) in the project "Simplex KhushAangan" and efforts are being made to sale the same.
• The Company is exploring opportunities for redevelopment projects in and around Mumbai.
2. OUTLOOK

Indias position as one of the fastest-growing economies globally, driven by private consumption and capital formation, makes the real estate sector an attractive investment option. Investors are exploring opportunities across various real estate segments, such as office spaces, logistics, private credit, residential properties, and data centres.

Considered a long-term and secure investment by financial experts, the future of the real estate sector appears promising. A report by Concorde outlines a robust Compound Annual Growth Rate (CAGR) of 9.2% for the real estate sector from 2023 to 2028. The year 2024 is expected to mark the next phase in the evolution of real estate, driven by factors such as continued urbanisation, growth in

the rental market, and steady appreciation in property prices. The year 2024 is expected to mark the next phase in the evolution of real estate, driven by factors such as continued urbanisation, growth in the rental market, and steady appreciation in property prices.

The rising demand for residential properties, along with the growing infrastructural development that provides enhanced connectivity via roads, air, and railways, is primarily driving the India real estate market.

3. RISKS AND CONCERNS

The Companys ability to foresee and manage business risks is crucial in achieving favorable results. While management is positive about the Companys long term outlook, we are subject to few risks and uncertainties as given below:

Market price fluctuation

The performance of your company may be affected by the sales at a price which are driven by prevailing market conditions, the nature and location of the projects.

Price risk of the input material

The primary building materials like steel and cement are subject to price volatility due to general economic conditions, competition, production levels, transportation costs and domestic and import duties and any adverse impact of rise in input cost will have impact on the profitability of the Company.

Development & regulatory risk

Development depends on several factors which include receipt of required approvals, weather conditions, labour availability, material shortages etc. and any of these factor may have an adverse impact on execution.

Economic risk

Any adverse change in any macroeconomic variables like GDP growth, interest rates, inflation, changes in tax, trade, fiscal and monetary policies etc. may adversely impact the Companys business, profitability and financial condition.

Health and safety risks

Real estate Companies constantly face the risk of injury or illness to the Companys or third parties construction workers.

4. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper and adequate system of internal control procedure commensurate with its size and nature of the business so as to ensure that all assets are safeguarded from loss, damage or disposition and ensure that all transactions are authorized, recorded and reported correctly and adequately. All operations parameters are periodically monitored and strengthened. The Company continuously upgrades these systems in line with best accounting practices. The internal control system is further supplemented by a programme of internal audit conducted by an independent firm of Chartered Accountants. The Audit Committee of the Board of Directors reviews the effectiveness of internal controls and suggests improvements for strengthening them whenever required.

5. FINANCIAL AND OPERATING PERFORMANCE

The total income of the Company for the current year is 847.31 Lakhs as against 767.90 Lakhs during the previous year. During the year, there

was a sale of land at Gondia and surplus arised of

424.07 Lakhs has been shown as an exceptional item. The Company has made a net profit of

518.03 Lakhs during the current year as against the net profit of 130.00 Lakhs in the previous year. The EPS for the current year is 17.32 as against

4.35 in the previous year after the exceptional

item.

6. KEY FINANCIAL RATIOS

The Key Financial Ratios for the financial year ended 31st March, 2024 are as under:

Particulars	2023-2024	2022-2023
Debtors Turnover	-	-
Inventory Turnover	0.02	0.02
Interest Coverage Ratio	345.47	58.88
Current Ratio	36.41	13.77
Debt Equity Ratio	-	-
EBIDTA Margin (%)	78.95	24.79
Net Profit /(Loss) Margin (%)	61.14	16.93
Return on Net worth	4.54	1.14

During the financial year 2023-24, there was a sale of land at Gondia, Maharashtra and the surplus arised on same is shown as exceptional item. Current ratio is higher due to decrease in current

liability on account of capital advance received in the previous year and which was shown under current liability. Interest coverage ratio has improved due to lower interest cost and higher EBITDA due to exceptional item during the year. In the financial year 2023-24, EBITDA margin, net profit margin and return on Net worth are higher due to an exceptional item.

7. HUMAN RESOURCES

Employees are the key to achieve the Companys objectives and strategies. The Company provides to the employees a fair equitable work environment and support from their peers with a view to develop their capabilities leaving them with the freedom to act and to take responsibilities for the tasks assigned. The Company strongly believes that its team of capable and committed manpower, which is its core strength, is the key factor behind its achievements, success and future growth.

We are continuously working to create and nurture an organization that is highly motivated, result oriented and adaptable to the changing business environment.

The industrial relations remained cordial during the year.

8. CAUTIONARY STATEMENT

The statements in this report on "Management Discussion and Analysis", describing the Companys objectives, estimations, expectations or projections, outlook etc., may constitute forward looking statements within the meaning of the applicable Rules, Laws and Regulations. Actual results may vary from such expectations, projections etc., whether express or implied. These statements are based on certain assumptions and expectations of future events over which the Company has no direct control.