MANAGEMENT DISCUSSION AND ANALYSIS REPORT Indian Economy In 2014, the geopolitical events and a slow recovery from the brvious economic slowdown countered some of the optimism that was felt towards the end of 2014. The Central Statistics Office (CSO) has recently undertaken a revision in National Accounts aggregates by shifting to the new base of 2011-12 from earlier base of 2004-05. According to the data released by the Central Statistics Office (CSO), the Indian economy grew at 7.3 per cent in 2014-15 as compared to 6.9 percent in 2013-14 calculated as per the new series of national accounts with base year of 2011-12, which indicates a marginal growth of 0.4 percent in the Financial Year 2014-15 due to improvement in performance of both manufacturing and service sectors2. The Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, rose by 7.2 per cent in 2014-15 compared to 6.6 per cent in the brvious fiscal1. The manufacturing sector GVA rose by 7.1 per cent during the year as against 5.3 per cent in 2013-14. Similarly, the output of electricity, gas, water supply and other utility services rose by 7.9 per cent as against 4.8 per cent a year ago. The construction activity too registered an increase of 4.8 per cent, up from 2.5 per cent a year ago. Financial, real estate and professional services also showed an improvement by registering a growth of 11.5 per cent as against 7.9 per cent in brvious fiscal2. 1. Source: www.worldbank.org 2. Source: Financial Exbrss dated May 29, 2015 INFRASTRUCTURE INDUSTRY - AN OVERVIEW India is a growing economy. It is estimated to be the third largest economy by 2050. Because of the GDP growth and more emphasis on infrastructure growth, from roadways to airways, ports to airports and power production facilities, Indian infrastructure segment is vital for the development of the nation and hence enjoys intense attention from policy makers of the country. Infrastructure growth is a stepping stone towards a stable and productive society; it brsents unique challenges but also brings opportunities for private and public sectors in the field of construction. Construction sector is also viewed as a service industry. It generates substantial employment and provides growth impetus to other manufacturing sectors like cement, bitumen, iron and steel, chemicals, bricks, paints, tiles, construction equipment etc. The growth of this sector is necessary to create employment opportunities, mobilize resources and generate revenue, which will help in reviving the economy. Infrastructure Development continues to be the thrust area and he Union Ministry of Urban Development has asked states to offer their recommendations on areas of the country that can be turned into smart cities. India's rate of urbanisation is high. Add to that a burgeoning middle class and the need for sound infrastructure becomes paramount. OUTLOOK Your Company is continuously doing efforts for seeking to concentrate on certain key geographic markets, and to achieve a suitable product and price combination in these markets. Your Company is also investing in the development of supporting urban infrastructure in certain select, strategic locations to ensure the high quality of developments. Your Company's current strategy is aimed at developing its core business, rationalizing its costs and reducing its levels of indebtedness. However, as your Company seeks to focus on its core business, it faces several challenges, including an uncertain economic, regulatory and taxation environment. Your Company believes that demand conditions in the real estate sector are exhibiting early signs of improvement, and signs of declining interest rates as well as renewed activity in the lending and public capital markets are expected to ease funding brssures. As your Company continues to build on its core business of real estate development and leasing, your Company believes that it is well placed to achieve its targets of reducing its overall indebtedness, executing its real estate development and leasing operations and taking advantage of a potential revival in economic growth and its resultant positive effects on the real estate sector. Expansions are required to be made in developing Shopping Complexes. Foreign institutional Investors have also shown confidence in the country's construction and are showing up investments in India. This is a positive sign and will open new areas of growth and development. STRENGTHS Newtime Infra has the following principle competitive strengths: • Positioned strategically to realize opportunities in the sector • Experience and end to end expertise in the Infrastructure Projects • Sustained investment in equipment and fixed assets • Professional Board and Management Team This steady growth owes itself to the Company's unerring strategy of leveraging its core competencies and drawing heavily upon past experience. An effective combination of energy, excellence and endurance is evident everywhere, from the construction site to the administrative division. The result, a holistic growth pattern that has seen the company grows into a brferred choice for national projects. OPPORTUNITIES Better Business Opportunities means better growth. In today's era, a lots of Growth opportunities are available to infrastructure industry and the only need is to grab and act on them with perfect vision and mission. After analysis, broadly speaking, the following opportunities are available to the Company to achieve the desired position and goal: Increasing Income Levels: The economic growth in India contributed to increasing income levels. This, combined with trends of higher urbanization, increase in working age population and nuclear families, created greater demand for housing. Much of the demand was backed by easier availability of housing finance that often converted people from living on rent to having their own housing asset. Rising Foreign Direct Investment Levels:. FDI upto 100 percent allowed with the Government permission for development of township and settlements will provide opportunities in the sector. In view of shortage of housing for low income groups in major cities and town, in the union budget 2012-13 there are proposals to set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans, allowing External Commercial Borrowing (ECB) for low cost affordable housing projects which are positive for the growth of housing sector. The infrastructure of India is also growing day by day so it adds to the better facility to different sectors which boost the real estate projects. Growth in IT/ITES Sector: The primary growth driver of commercial real estate is the IT/ITES sector, which, is growing at a rapid pace. Expansion in organized retail sector: Concept of specialized malls is also gaining popularity with auto malls, jewellery malls, furniture malls, and electronic malls anticipated to be the part of the sector in the future. Several other factors, such as rising incomes, evolving brferences, emergence of nuclear families, tax incentives and home loans at competitive rates have been responsible for the growth in demand for homes and residential construction. Demand for newer avenues for entertainment: As the demand for more and more amusement parks is growing, development of same needs to take place. Hotel Industry: Despite the temporary slow down that the Indian hospitality industry faced due to the global economic crisis, India is still one of the world's fastest growing hotel markets. Supply Push Factors: Certain Factors like, Policy and Regulatory factors providing with simplification of urban development guidelines, infrastructural support and development by government, some fiscal benefits to developers, positive outlook of global investors etc have also increased the opportunities at real estate sector. THREATS/RISKS What needs to be determined is: a. The proportion of real versus perceived risks. b. The monetary quantification of risks. c. The real import and the impact of a type of risk. Risks, when indeterminate, are worse than assessed risks. The obvious outcome of the situation is that the Banks and Financial Institutions hesitate in lending to the operators of Construction Industry or alternatively lend in absence of authentic and reliable inputs. Either of the situations is detrimental to the overall growth of the industry and thus, the economy. It is therefore of paramount importance that the brsent operating systems be substantially strengthened to provide comfort to the financial systems. Mitigation of risks is the all en-compassing requirement. Broadly speaking, Construction Projects face the following type of risks: Completion risk: This is the risk that the project may not be completed on time, or at all, due to various reasons such as cost overruns, technology failure, force majeure etc. Price risk: This is the risk that the price of the project's output might be volatile due to supply-demand factors. If new capacities are coming up or if there is likelihood of fall in demand of the project output, the price risk is high. Resource risk: This risk includes the non-availability of raw materials for the project operation. It also includes the risk that the raw material prices might move adversely. Technology risk: This is the risk that the technology used in the project is not sufficiently proven. Operating risk: This is a risk that the project operational and maintenance costs would escalate. It also includes the risk that the project will have operational problems. Political risk: This risk relates to matters such as increased taxes and royalties, revocations or changes to the concession, exchange controls on proceeds, forced government participation in shares and refusal of import licenses for essential equipment. Casualty risk: This is the risk of physical damage to the project equipment. It also includes liabilities to third parties on account of accidents at the project site. Environmental risk: This risk refers to increased project costs for complying with new environmental standards. There could also be environmental protests from the local populace against the project. Permission risk: This is the risk that official clearances for the project may not be forthcoming or subject to expensive conditions. Exchange rate risk: This is the risk that the currency of sale of the project produce would debrciate with reference to the currency of the project loans. Even though the debt being rated might be Rupee denominated, the brsence of foreign currency liabilities can decrease the debt service coverage ratio of the bonds in case there is adverse exchange rate movement. Interest rate risk: This is the risk that the floating interest rate of the project loans would increase beyond the levels assumed for brparing projected cash flows. Insolvency risk: This is the risk of insolvency of contractors, project sponsors, suppliers, and purchasers of project output, insurers or a syndicate bank. Project development risk: This is the risk that the project development might not take place in an orderly manner. Site risk: This is the risk that the project site might have legal encumbrances. It also includes the risk that the site has technical problems. SEGMENT WISE PERFORMANCE The Company deals in only one segment i.e. Real Estate. Therefore, it is not required to give segment wise performance. DISCUSSION ON FINANCIAL PERFORMANCE - STANDALONE REVENUES The Revenue of the company for 2014-15 is Rs. 21.96 Lacs as compared to Rs. 33.35 Lacs in 2013-14. Profit before Tax: The Profit before Tax for 2014-15 is Rs. 3.00 Lacs, as compared to Profit before Tax of 6.14 Lacs in 2013-14. Profits after Tax: The Profit after Tax for 2014-15 is Rs. 2.07 Lacs as compared to Profit after Tax of Rs. 4.58 Lacs in 2013-14. INTERNAL CONTROL SYSTEMS The company has proper and adequate system of internal controls commensurate with its size and nature of operations to provide assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly; applicable status, the code of conduct and corporate policies are duly complied with. The Company has an internal audit department which conducts audit in various functional areas as per audit programme approved by the Audit Committee of Directors. The internal audit department reports its findings and observations to the audit committee, which meets at regular intervals to review the audit issues and to follow up implementation of corrective actions. The committee also seeks the views of statutory auditors on the adequacy of the internal control system in the company. The audit committee has majority of independent directors to maintain the objectivity. HUMAN RESOURCES DEVELOPMENT Employees are the key to achieve the Company's 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. FORWARD LOOKING STATEMENTS This communication contains statements that constitute 'forward looking statements' including, without limitation, statements relating to the implementation of strategic initiatives and other statements relating to our future business developments and economic performance. While these forward looking statements rebrsent the management's judgements and future expectations concerning the development of our business a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors includes, but not limited to general Market, Macro Economic, Governmental, regulatory trends, movement in currency exchange, interest rate, competitive brssures, technological developments, changes in Financial Conditions of third party dealing with us, legislative developments and other key factors that could adversely affect our business and Financial Performance Newtime Infra undertakes no obligation to publicly revise any forward looking statements to reflect future events or circumstances. By Order of the Board For Newtime Infrastructure Limited Sd/- (Ashish Pandit) Whole time Director DIN:00139001 Place : Gurgaon, Haryana Date : August 25, 2015 |