SSPDL Ltd Management Discussions


1. Economic Overview Global Economy:

The global recovery from the COVID-19 pandemic and Russias invasion of Ukraine is slowing amid widening divergences among economic sectors and regions. Supply chains have largely recovered, and shipping costs and suppliers delivery times are back to pre-pandemic levels. But forces that hindered growth in 2022 persist.

Globally, infl ation has been moderating on the back of easing commodity prices. Yet core infl ation remains stubborn due to still strong momentum in prices of services that are usually sticky, with output being relatively labour-intensive and susceptible to wage pressures. As per IMF, global headline infl ation is expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. Policy tightening by central banks in response to infl ation has raised the cost of borrowing, constraining economic activity. The banks in advanced economies have signifi cantly tightened lending standards, curtailing the supply of credit. The impact of higher interest rates extends to public fi nances. The economists worry that the tightening of fi nancial conditions could set off a rapid repricing of assets and a sharp rise in credit spreads leading up to signifi cant fi nancial stresses.

The global growth remains supported by the rebound in services, but sluggish manufacturing and trade activity are operating as drags. Despite the headwinds, global economic activity was resilient in the fi rst quarter of 2023, with that resilience driven mainly by the services sector. The post-pandemic rotation of consumption back toward services is approaching completion in advanced economies, and it accelerated in a number of emerging market and developing economies.

Indian Economic Overview

The Indian economy powered through 2022 despite a shaky geopolitical environment and the threat of a looming recession in large, developed economies. India emerged as the fastest-growing large economy in the world and was one of the few bright spots in an otherwise bleak global economic environment during the year. The World Investment Report 2023 of the United Nations Conference on Trade and Development (UNCTAD) expects India to remain a bright spot in a challenging global environment.

The RBI has hiked the repo rate by 250 bps since May 2022 and the last 25 bps hike in Q1 2023 pushed home loan rates within striking distance of those existing in pre-pandemic 2019. Indias external debt remained broadly stable at US$ 625 billion at the end of March 2023, declining to 18.9 per cent of GDP from 20.0 per cent a year ago, as per the data released by the RBI at the end of June 2023.

Indias robust macroeconomic fundamentals, including a large domestic market and a young, expanding workforce, contribute to its economic strength. The governments sustained focus on policies promoting manufacturing and innovation further enhances its growth potential. As macroeconomic prospects steadily improve, India is dynamically seeking fuller expression of its full potential and a transformative change in its global position.

2. Indian Real Estate Industry Overview

The Indian real estate market is currently undergoing a period of rapid growth. This is due to a number of factors, including strong economic growth, rising incomes and a growing population. As a result, there is a high demand for real estate in India, and this demand is expected to continue to grow in the coming years. It is also the second highest employment generator in the country. In addition to the growth of traditional segments like residential, commercial and retail, and newer segments such as warehousing, logistics, industrial parks, data centers, etc.

3. OPPORTUNITIES, THREATS / RISKS AND CONCERNS: Opportunities

We believe that long term structural potential for the sector to grow is immense. Indian real estate industry has strong structural growth drivers which will keep the longer-term demand trends robust even as the industry undergoes the sectoral cyclicality. These are as under:

Rapid urbanization boosting urban population Nuclearization of families Improving education levels Rising household incomes

As the bank rate start moving down modestly in-line with infl ation, demand will further get a boost as consumers will want to benefi t from low home loan rate scenario.

The offi ces segment exhibiting gradual recovery, resulting in improvement in occupancy levels mainly due to the back-to-offi ce policies,

Threats/Risks/Concerns:

Real estate being a cyclical industry and projects have a long gestation period, gets impacted more by the changes in macroeconomic variables like global and countrys economy, changes in the market dynamics, availability of capital, interest rate, GDP Growth, employment, purchasing power, infl ation, availability of skilled labour, etc., and the same directly impacts the project sales and profi tability of the Company.

Execution delay may result in cost overruns and it can cost dearly in the form of higher than expected input cost and higher than anticipated interest burden. Further, such delays also negatively impact the Companys reputation and returns.

Also, intrinsic challenges that hinder growth of the sector and performance of your Company, factors such as high borrowing costs, lack of funding, liquidity issues and slow (and uneven) development of urban infrastructure.

As the growth of your Companys portfolio is linked to the overall economic growth, primary risk to the business is adverse changes to the economy.

4. SEGMENT WISE PERFORMANCE:

The Company is engaged in construction and development of Commercial, residential properties in metropolitan and Tier II cities.

The projects under taken by the Company on its own and through other partners are under various stages of execution and the details of the status of these projects are mentioned in the Directors Report.

5. OUTLOOK

The prospects for the residential real estate sector are improving and housing demand is increasing. Your company is currently executing housing projects in Hyderabad and Chennai. Considering the past experiences, your Company primarily focusing on the development of property, mid-size houses, etc. and reduced the construction contracts work. However, on fi nding better opportunities it will take up and execute the construction contracts.

Based on the opportunities available in real estate sector, the management being optimistic about the growth in real estate sector, your company will undertake projects suiting the market requirement.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has reasonably sound system of controls in the operational areas. Internal controls are in line with the size of the operations and organizational requirements. Which are adequate to protect the Companys resources. The Audit Committee reviews the adequacy of internal fi nancial control and risk management systems from time to time.

The Company focuses on quality control in its operations and projects. Adhering to quality norms and standards will help minimizing risks and improve the effi ciency of operations.

7. DISCUSSION ON FINANCIAL PERFORMANCE (CONSOLIDATED) WITH RESPECT TO OPERATIONAL PERFORMANCE: Total Revenue: During the year under review is Rs. 5129.17 lakhs, against Rs. 2490.30 lakhs in 2021-22.

Total Expenses: During the year under review is Rs. 5992.26 lakhs, as against Rs. 3008.68 lakhs for 2021-22. Profit/(Loss) Before Tax: During the year under review is Rs. (863.08) lakhs, as against Rs. (518.38) lakhs in 2021-22. Profit/(Loss) After Tax: During the year under review is Rs. (863.08) lakhs, as against Rs. (518.38) lakhs in 2021-22.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT:

The Company continues to maintain cordial relations with its employees, vendors and other agencies. The Company strives to provide congenial atmosphere to the employees to enable them to offer their best in terms of performance. As on 31st March, 2023 your company has 28 employees on its payroll.

9. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND CHANGE IN RETURN ON NET WORTH:

As per the amendment made under Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regulations, details of signifi cant changes (i.e. change of 25% or more as compared to the immediately previous fi nancial year ("FY")) in Key Financial Ratios, with explanations therefor are given below along with details of any change in Return on Net worth (based on the standalone fi nancial statements of the Company):

Sl. No. Key Financial Ratios & Return on Net worth FY ended 31.03.2023 FY ended 31.03.2022 Changes in key ratios % Change in ratios Explanation
(i) Debtors Turnover Ratio 3.22 1.68 1.54 92% Increase in Revenue due to completion
of Project in current year as compared to
Previous Year
(ii) Inventory Turnover Ratio 0.87 0.32 0.55 169% Increase in Project close out along with
hand over of Project in current year as
compared to previous year
(iii) Interest Coverage Ratio -1.28 0.66 -1.93 -295% Movement in ratio due to Decrease
in EBIT and higher repayments of
borrowings
(iv) Current Ratio 0.84 0.95 -0.12 -12% Not Applicable
(v) Debt Equity Ratio - - - -0% Not Applicable
(vi) Operating Profi t Margin (%) -0.11 0.17 -0.29 -165% Reduction in Operating Profi t Ratio is
due to Increase in Loss as compare to
last year.
(vii) Net Profi t Margin (%) or sector-specifi c -0.20 -0.09 -0.11 120% Reduction in Net Profi t Ratio is due to
equivalent ratios, as applicable. increase in loss as compare to last year.

Return on Net worth: During the year under review, net worth is reduced due to increase in net loss.

CAUTIONARY STATEMENT:

Statements in the Management Discussions and Analysis, the Directors Report, describing the Companys objectives, projections, estimates, expectations are "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors/developments that could affect the companys operations include a downward trend in the real estate sector, includes political and economic conditions of the country, in which the Company operates, and the changes in the Government regulations, tax laws, corporate and other laws, interest and other costs and other incidental factors.