MANAGEMENT DISCUSSION & ANALYSIS REPORT Global Economy During the year under review, emerging and developing economies are in the process of a recovery. However, weak external demand and domestic bottlenecks continue to restrain investment in some of the major emerging economies. Inflation risks in emerging and developing economies appear contained, reflecting negative output gaps and the recent softening of international crude and food prices the world faces several economic and political challenges. A few large emerging economies, including China and India, managed to backstop the deceleration they experienced in the past two years and veered upwards moderately. These factors point to increasing global growth. Inflation will remain tame worldwide, but the employment situation will continue to be challenging. Indian Economy The Indian economy had its own sets of challenges during the year. It dealt with issues like high inflation, tightening monetary policy, weakening industrial growth and investments, lack of direction in government policies, debrciating rupee and high crude oil prices. This led to a slowdown in the overall growth of the economy. However, India is expected to gain back its growth momentum in the medium term owing to higher savings and easing inflationary brssures which would lead to capital formation and fresh investments. Real Estate In 2011, the Company has entered into real estate sector. As we all are aware that real estate is one of the three primary needs of mankind with food and clothing being the other two. The demand for Real Estate though unquestionable is driven by many factors including affordability, cyclicality, market sentiment, availability of loans etc. The supply side is influenced by regulatory policies, liquidity, and availability of skilled and unskilled resources. Owing to the impact of the challenging macro economic factors, this financial year 2013-14 was quite challenging for the sector. It faced difficulties in terms of funding, rising costs, labor shortages and regulatory issues, hampering project execution. The real estate scenario in India has undergone a sea change in the last two years. The affordable housing segment has seen renewed interest from buyers, however, factors like sky-high property prices, rising inflation, tight monetary policies and increasing costs has pulled down the overall growth. The last two years have witnessed a cascade of issues and challenges in the realty domain. Finance minister Arun Jaitley while brsenting the 2014-15 Budget made some encouraging proposals that will give the much needed lift to the real estate sector. 1. Foreign Direct Investment in Real Estate Projects In order to encourage foreign investment, particularly for the development of Smart Cities, the government will liberalise FDI norms for real estate projects. The requirement of minimum built up area and capital conditions for FDI is being reduced from 50,000 square metres to 20,000 square metres and from USD 10 million to USD 5 million respectively. This will draw more foreign capital and provide liquidity to the real estate sector. 2. Affordable Housing The allocation of Rs. 4,000 crore for NHB will increase the flow of cheaper credit for affordable housing for the urban poor. With slum development being made a part of CSR activities, the government seems to have taken steps in the right direction. 3. Smart Cities The finance minister has allocated Rs. 7,060 crore for developing 100 new smart cities in the country. The move will boost investor sentiment in the real estate segment in the proposed areas of these cities and neighbouring towns. With a large number of offices and IT/ITeS segment growth apart from residential growth coming from Tier II and Tier III centres, smart cities can bring opportunities for real estate developers, investors, end users and also the home loan sector. 4. Introduction of REITs To give a major boost to commercial realty, the finance minister announced tax sops for Real Estate Investment Trusts (REITs). Necessary incentives have been provided for REITS, which will have to pass through for the purpose of taxation. A pass-through entity does not have to pay corporate tax. REITs can be listed on stock exchanges like shares of any company and allow retail and institutional investors to buy or sell these securities. 5. Increase in deduction limit on interest payment for housing loans As part of tax management and tax structuring, the finance minister has increased the home loan rebate on self-occupied property from Rs. 1,50,000 to Rs. 2,00,000. Income tax deduction limits under 80C on repayment of principal amount on housing loan has also been increased from Rs. 1 lakh to Rs. 1.5 lakh, which will lead to improved sentiment in the housing market. The Finance minister also proposed major initiatives in the areas of urbanisation, transportation and other infrastructure development that will give a tremendous boost to the real estate sector in the days to come. Some of these are: a. Allocation of Rs. 100 crore for Metro Projects in Ahmedabad and Lucknow b. Allocation to Urban Renewal (infra development) increased from Rs. 5,000 crore to Rs. 50,000 crore c. Investment of Rs. 37,880 crore in NHAI for constructing national and state highways of which 8500 km are to be completed this year d. Exbrssways to be set up along new industrial corridors - Rs. 500 crore for project brparation e. Setting up new airports, inland navigation system, SEZs etc. through Public Private Participation Outlook on opportunities, threats, risks and concerns Driven by long term vision for real estate, we have always been optimistic on the promising future outlook of this industry. The global economy is recovering and is reflecting in improved performance of some companies in the IT and export oriented industries. It is expected that in the coming time, the loopholes will be addressed by policymakers, home finance sector which in turn would boost the real estate sector. The affordable category has the potential to grow further if these issues are resolved. Your Company is selling its real estate and it is the intention of your Company to use the funds so generated to explore opportunities in growth areas and industries and try to keep a focus on the real estate sector. While the management of Your Company will continue to leverage the opportunities, it also foresees the challenges, like the availability of skilled resources and retention of highly talented workforce, frequent amendments in regulations, Inflationary brssures which would increase raw material/labor cost, lack of supporting infrastructure such as roads, highways, electricity, etc. that can hamper the growth of real estate as it thrives on availability of good infrastructure. Financial and Operational Review The Company's revenue from operations for the year decreased to Rs. 6.49 crore for the financial year 2013-14, as compared to Rs. 14.18 crore in the brvious year. The Company continued its focus on core business activity in the infrastructure sector. The key revenue streams for the Company include sale/transfer of lease hold plots/ lands. The Company's net profit for the year was higher at Rs. 3.21 crore as compared to Rs. 1.35 crore in the brvious year. Earnings per share was Rs. 8.24 as compared to Rs. 3.47 in the brvious year. Resources and Liquidity The Company's net worth as on 31st March, 2014 was negative due to accumulated loss carried from brvious years. The Company continues to maintain its conservative financial profile and funds its requirements largely through internal cash generation. Human Resources / industrial relations The Human Resources (HR) function is instrumental in creating and developing human capital in alignment with the Company Objectives. Your Company currently has to build its human resources based on the finaliza-tion of the opportunities it will focus on in the near future. Industrial relations are been cordial as your Company does not have any work force with the cessation of production activities and dismantling of its old plant and machinery. The challenge will be to build a team of all employees, managers and workmen with the value of teamwork and belongingness. All the employees of the Company will be expected to work as one cohesive team devoted to a common goal of the Company. Internal control systems The Company has adequate internal control systems for each and every business processes. The internal control system is supplemented by an extensive internal audit, which is conducted by independent firm of Chartered Accountants i.e. Messer's KSMN & Co., Chartered Accountants, Delhi in our case. Internal audits are undertaken on a continuous basis. These internal controls ensure efficiency in operations, compliance with internal policies of the Company, applicable laws and regulations, protection of resources and accurate reporting of financial transactions. The Management and Audit Committee regularly review reports of the internal auditors, and corrective action initiated to strengthen the controls and enhance the effectiveness of the existing systems. Cautionary Statement Statements in the Management's Discussion and analysis report describing the Company's estimates, expectations or brdictions may be 'forward-looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that would make a difference to the Company's operations include demand-supply conditions, change in Government regulations, tax regimes, economic developments within the country and other factors such as litigation etc |