MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRIAL OVERVIEW: The Indian real estate sector has witnessed high growth in recent times with the rise in demand for office as well as residential spaces. According to data released by Department of Industrial Policy and Promotion (DIPP), the construction development sector in India has received foreign direct investment (FDI) equity inflows to the tune of US$ 24,012.87 million in the period April 2000-December 2014. The government has taken several initiatives to encourage the development in the sector, the key ones being: • Relaxation in the norms to allow foreign direct investment (FDI) in the construction development sector. This move is expected to boost affordable housing projects and smart cities across the country. • Clearance of model real estate bill by the Union Cabinet. • The Securities and Exchange Board of India (SEBI) has notified final regulations that will govern real estate investment trusts (REITs) and infrastructure investment trusts (InvITs). This move will enable easier access to funds for developers and create a new investment avenue for institutions and high net worth individuals, and eventually ordinary investors. Tax efficiency can be critical to the success of REITs. While the basic framework for one-level taxation has been laid down by the Finance (No. 2) Act, 2014 and supplemented by the Finance Bill, 2015, certain challenges persist in structuring a REIT. Real estate contributed about 6.3% to India's gross domestic product (GDP) in 2013. The market size of the sector is expected to increase at a compound annual growth rate (CAGR) of 11.2% during FY 2008-2020 to touch US$ 180 billion by 2020. INDUSTRY STRUCTURE: Water plus cement plus aggregates. The formula seems mighty simple, but in reality concrete manufacturing is a far more complex process. The development of formulae for concrete requires very advanced scientific skills. The quality of cement and aggregates, the dosage and proportions are just some of the variables that influence the properties of concrete. As India builds its infrastructure, the Ready Mix Concrete industry is steadily gaining pace as the most viable option to speed up construction. The construction has industry benefited from Ready mix Concrete right from its inception during the late 40's. This technology has since grown in a big way in Europe and USA, consuming more than 60% of the cement produced. In the coming years, Readymix Concrete industry in India is likely to consume more than 5% of the cement produced from the current levels of around 3%. The raw materials used for Readymix Concrete viz. cement, sand, coarse / fine aggregates and water are mixed at a centrally located computer controlled batching plant that monitors weigh-batching, water-cement ratio, dosage of admixture, moisture content, etc. with brcision to produce the Readymix Concrete. The plant is capable of programming 99 different types of mixes for producing different grades of concrete both automatically and manually. Readymix Concrete is then transported to the site in transit mixers, in plastic condition, without affecting the composition and without any further treatment. Transit mixers are trucks fitted with rotating drums for carrying Readymix Concrete. While there are several advantages of Readymix over Sitemix, quality and time required is among the most prominent. Besides, labour and space requirements on site for the latter add to the cost. A typical 1500 sq ft of area will take around 6-8 hours for concreting if site mix is used which if compared to Ready mix, will take only 2-3 hours. Ready mix is also environment friendly and any grade of concrete is available at a given point of time. Materials used for making RMC conform to the requirements of IS 456:2000 or relevant code. In terms of clause 9.2 or IS 456: 2000, the RMC manufacturer has to guarantee the quality of concrete as he shall be responsible to carry out the mix design that is approved by the purchaser. A wide range of computer-controlled concrete batching plants, transit mixers for transporting the RMC to the construction sites, pumps and concrete placing are manufactured in India. This business needs further investment to the tune of several crores. OPPORTUNITIES: The construction industry in India is surely on a high growth path, though at times showing a cyclical trend. Improvement of operational efficiency through better resource allocation & utilization and technological up- gradation & innovation would be crucial for strengthening the profitability while sustaining relative advantage with respect to the existing and potential competitors. With the increase in cost of construction, the management calculate enhancement of its Turnover of Ready Mix Concrete. RISKS: Your Company has robust Business Risk Management (BRM) practices to identify, evaluate business risks and opportunities. The business risks and opportunities so identified are integrated into the business plan and a detailed action plan to mitigate the identified business risks is thereafter drawn up and its implementation monitored. The key business risks identified by the Company and its mitigation plans are as under: · Competition Risks: The Industry is becoming intensely competitive with the foray of new entrants and some of the existing players adopting inorganic growth strategies. To mitigate this risk, the Company is leveraging its newly created capacities to increase market share, enhance brand equity and visibility, enlarge product portfolio and service offerings. It would also leverage on its infrastructure, commercial and institutional sales team to offer better value to large customers. · Financial Risk: Execution of projects abroad perforce necessitates parking of funds in foreign banks for operational purposes. Such parking is amenable to foreign exchange rate fluctuations. In order to hedge this risk, foreign exchange movements are constantly monitored and conversion of funds from one currency to another is done on the basis of cross currency movements with excess funds being repatriated to India in accordance with the applicable laws. The Company?s employees and projects have been and are exposed to risks and threats to life, liberty, and property while operating in risky geographical areas. · People Risks: With the industry growing at a fast pace and demand for xperienced and trained manpower outstripping supply, the ability to retain existing talent and attract new professional talent assumes crucial importance. The Company however takes pride in executing brstigious works in the nation building task. The Company has taken measures with the help of the Government to provide adequate security, facilities, and also insurance coverage in such places. The Company has a formal Enterprise Risk Management framework in place which will be reviewed periodically. THREAT: • Competition from the existing and emerging local and International players continues to pose challenges to the Ready Mix Concrete in domestic markets. • The Ready Mix Concrete has to reckon with aggressive bidding strategies from the new entrants. CURRENT GLOBAL SCENARIO AND FUTURE OUTLOOK: The Ready mix concrete business in India is in its infancy but it has had a steady growth in the last two decades. For example, 70% of cement produced in a developed country like Japan is used by Ready Mix Concrete business there. In Europe and USA it is about 60% [1]. Here in India Ready Mix Concrete business used around just 2 % in the beginning of the 90's and brsently the commercial RMC is at 9-10 % of total cement production with another 10% estimated to come from project based captive RMC plants totally taking the mechanized RMC production to 20 % of the cement production in India and there is still a lot to catch up in terms of growth and conversion of Site Mix Concrete (SMC) to Ready Mixed Concrete. India is home to one of the largest and fastest growing cement industry in the world. The Indian cement industry is expanding on a rapid phase on the back of increased infrastructure activities, housing requirement and economic growth on account of huge growth in the household income among urban as well as rural middle class. The Indian cement industry is the second largest in the world with an installed capacity of 366 million tonnes and the production for the year 2014-15 was around 309 million tones with a per capita consumption of 190 Kg sand. Presently, the commercial RMC alone consumes around 8-9 % of the total cement production producing approximately 30-32 million cubic metre of commercial ready-mixed concrete annually. Captive RMC plants which are set up at project sites in metros and cities have been estimated to produce around another 35 million cubic meter of Ready Mixed Concrete annually taking the total production of mechanized concrete (production of concrete from RMC batching plants) in India to about 65-67 million cubic metre annually. In the developed countries, the cement consumption through RMC route is about 70-75 % (USA) and 6570 % (Europe and Japan)[3]. As a testimony to the growth of RMC industry in India, as per best of the knowledge, currently there are more than 900 commercial RMC plants brsent and operating in about 95 to 100 cities and towns across India including metros, tier 1 and tier 2 cities and in total there are more than 2600 Ready Mixed Ready Mix Concrete batching plants in operation in many metros, cities, and various project locations across the country. An added advantage of RMC is that the quantity of OPC usage can be reduced in Ready Mixed Concrete by replacing a good portion of cement by supplementary cementing materials like Ground granulated blast furnace slag (GGBS), Flyash, Microsilica which are industrial by products and would have otherwise been solid waste products and caused serious environmental issues. In the brsent scenario, cost of cement has been increased abruptly, which leads to increase of cost of concrete. To overcome the inflation, supplementary cementing materials are used in conjunction with OPC so that the durability, sustainability and cost effectiveness can be achieved with the usage of mineral admixtures. Need for Sustainability As worldwide awareness and concern over increased carbon emissions and its direct impact over global climate change increases, there is intense brssure on all the industries to reduce their emissions. The backbone of the construction industry is concrete, which is widely regarded as a high energy material with a current consumption of 1 cubic metre per person per year. SEGMENT WISE PERFORMANCE: The Company is operating only in one sector i.e. Infrastructure Project Activity including providing Ready Mix Concrete and RCC Pipes therefore the segment reporting and performance standard is not applicable to the Company. PROJECT DESCRIPTION: In order to- X Keep up with the competition X Expanding the business empire X Meet the challenging requirements of ever-growing construction industry the company diversified to manufacture of READY MIXED CONCRETE (RMC) in the year 2008 with a vision to be a brmier manufacturer of READY MIXED CONCRETE in Gujarat. Fully automated Five RMC plants are now, in operation in the districts of Ahmedabad, Gandhinagar, Vadodara, Kheda and Patan of Gujarat State. QUALITY CONTROL: Ready Mixed Concrete is used for structural elements in all types constructions. Adherence to the quality norms confirming to I.S. Standards is prime requirement for manufacture of RMC. The Management and the Employees of Navkar Builders Ltd. are committed to operate every aspect of the Construction adhering to the standards that offers quality service to all clients by adopting implementing effecting Quality Management System & Procedures and mplementing effecting Quality Management System & Procedures Consistency in quality is achieved by checking the raw materials in conformity with relevant I.S. Code, Carrying out full - fledged tests and trial mixes in well furnished laboratories with latest testing equipments. FINANCIAL PERFORMANCE: The Company has commenced Ready Mix Concrete Project and at the verge of achieving better financial performance. The Company has successfully implemented various operational excellence programs designed with the help of external consultants so as to optimize on cost and delivery commitments. The Company's cash flow position as at the year end continues to remain strong. Increased liquidity has strengthened the Company's confidence for launching new growth initiatives for the existing and emerging businesses of construction Company's diversified activities Laying of 4G Cable Networking under Reliance Telecom. Recent sites are located in Ahmedabad, Baorda & Kutchchh City - We have equipped ourselves with all the resources required to venture into the new field. Manpower - X We have recruited best talent available in the market for executing this new project viz. Project Management, Project Execution, Finance, HR, Legal, IT. X For Site we have hired skilled labors to carry out the HDD activities Money - We are financially self sustained however capable of raising funds easily due to our reputation and contacts with the Banks like Union Bank, HDFC, ICICI, Axis, etc. Method - We have developed the best SOPs so that the project taken is completed well within time / before time without compromising quality of work. Material - We brserve an extensive database for local vendors and others so that no work delays due to material unavailability Mangement - We are a professionally managed company wherein we follow the best solutions to our business aspects in the most strategic way. VISION To be one of the brmier infrastructure company in india by 2018 executing various vertical of construction activities with the help of its inhouse rawmaterial production. MISSION • Adherence to Safety & Quality Norms • Sustainable & Continual Growth • Teamwork And Healthy Competition • Concern towards The Stakeholders • Deliver Best Service. • Strong Willingness to Learn. • Adherence To Values & Ethics INTERNAL CONTROL SYSTEM: The Company's employees and projects have been and are exposed to risks and threats to life, liberty, and property while operating in risky geographical areas. The Company however takes pride in executing brstigious works in the nation building task. The Company has taken measures with the help of the Government to provide adequate security, facilities, and also insurance coverage in such places. The Company has a formal Enterprise Risk Management framework in place which will be reviewed periodically. The Company however takes pride in executing brstigious works in the nation building task. The Company has taken measures with the help of the Government to provide adequate security, facilities, and also insurance coverage in such places. The Company has a formal Enterprise Risk Management framework in place which will be reviewed periodically. By Order of the Board of Directors Sd/- (Rameshchandra Patel) Director DIN:02423697 Sd/- (Samir Patel) Joint Managing Director DIN: 01852150 Sd/- (Shailesh Shah) Director DIN: 02231177 Place : Ahmedabad Date : 23/05/2015 |