MANAGEMENT DISCUSSION AND ANALYSIS

Mahindra Lifespace Developers Limited ('Mahindra Lifespaces' or 'the Company') is one of the leading real estate development companies in India. Over the years, the Company has created a reputation for itself by delivering an array of highly successful projects and establishing industry benchmarks in environment friendly and sustainable developments.

Mahindra Lifespaces, along with its subsidiary companies, is engaged in the development of residential projects and large format developments such as integrated cities and industrial clusters. This chapter brsents an overview of the operational and financial performance of the Company during 2015-16 and its strategy for future growth.

INTRODUCTION AND PERFORMANCE HIGHLIGHTS

Mahindra Lifespaces is one of the few real estate companies in India serving both consumer households and businesses through its two segments of operations — residential developments and large format integrated cities and industrial clusters. This continued to be the strategic direction in which the Company moved in 2015-16. Here are the key highlights of the Company's performance:

• In the residential segment, the Company sold over 1,000 residential units aggregating to 1.16 million square feet of saleable area in 2015-16 across its ongoing and newly launched projects, including projects of its subsidiary companies. The Company launched two new projects — 'Vivante' and 'Windchimes', marking its entry in the Bangalore market with the latter. In addition, fresh inventory in four of its existing projects was also launched during the year.

• Another important aspect of the Company's performance in the residential segment was the success it achieved on the execution front — in reducing the project life cycle i.e. time taken from procuring land to delivery of the projects. During 2015-16, the Company completed construction of 3.3 million square feet which is more than twice of what it had achieved in 2014-15. Equally important, it handed over around 820 residential units to its customers as compared to around 540 units in the brvious year. This has been a direct result of building capability and scalable systems: improving pace of project execution with renewed focus on quality and safety, augmenting the customer relationship function and deployment of IT solutions. These have been discussed in greater detail in subsequent sections of the report.

• In the large format developments, the Company's subsidiary Mahindra World City Developers Limited (MWCDL) signed a Joint Venture (JV) agreement with Sumitomo Corporation, Japan to develop an industrial park in North Chennai on the NH-5 (Chennai - Kolkata highway). The first phase of the project of approximately 300 acres will be implemented by Mahindra Industrial Park Chennai Limited (MIPCL), a 60:40 JV between MWCDL and Sumitomo Corporation, respectively. The Company is in the process of considering similar opportunities to create a network of industrial clusters in other upcoming industrial destinations.

• In its existing projects in the large format developments, there was a moderation in leasing activity — 28.66 acres in 2015-16 as compared to 68 acres in 2014-15 — partly because of the increase in the decision making cycle of customers. Within the segment, demand was better for businesses servicing the domestic market as compared to exports. Given this scenario, focus during the year was to unlock leasing potential in the domestic tariff area (DTA), where considerable progress was made during the year. Progress was also made to secure multi-product SEZ status at Mahindra World City, Jaipur, which is expected to improve the demand by broad-basing the target industries. These developments have been discussed in greater detail in the section on 'Operations'.

Despite the headwinds faced by the Company in its integrated cities business, it registered a creditable performance during 2015-16. Moreover, the financial performance of the Company over the brvious year needs to be looked in the context of the land sale transaction, in respect of a delayed project in Mumbai, which contributed Rs. 268 crore to the total income and Rs.  245 crore to the profit before taxes (PBT) during 2014-15. The highlights of Mahindra Lifespaces' financial performance are given below:

• Consolidated Income of the Company in 2015-16 was Rs.  877 crore as compared to f 1148 crore in 2014­15. Excluding the impact of the land sale transaction mentioned above, consolidated total income for the year remained flat whereas the total income of the standalone entity registered an increase of 22 per cent during the year;

• Profit before taxes (PBT) of the consolidated entity stood at Rs.  147 crore in 2015-16 as compared to Rs. 421 crore in 2014-15. Excluding the impact of the land sale transaction, the consolidated PBT for the brvious year was Rs.176 crore;

• Profit after taxes and minority interest, of the consolidated entity was Rs. 93 crore in 2015-16 and diluted earnings per share (EPS) was Rs.  22.61;

In the remainder of the report, we will brsent the operational and financial performance of the Company, which is followed by a discussion on risks and concerns and the outlook for the future. We begin with an overview of the macroeconomic and industry environment.

MARKETS AND OPPORTUNITIES

In a subdued global economic environment, India's macroeconomic performance remained stable in 2015-16. According to the advance estimates released by the Central Statistical Organisation (CSO), India's GDP growth is expected to be 7.6 per cent in 2015-16, marginally higher than 7.2 per cent recorded in the brvious year.

An equally important aspect was the stability in retail inflation around the 5 per cent mark, which allowed the RBI to continue with its accommodative policy stance. However, the rate cuts to the tune of 100 basis points during the year did not translate into desired reduction in lending rates. Consequently, the improvements in business and consumer confidence during the year were weak. As far as the real estate industry is concerned, the overall performance continued to be subdued — housing prices, rents and off take of housing loans continued to be sluggish during the year.

The Government has laid out a combrhensive plan to reinvigorate the rural economy, invest in social and physical infrastructure, and improve the environment for doing business. At the same time, focus on manufacturing sector and programmes such as affordable housing and smart cities are expected to benefit the real estate industry directly. Also, adhering to the path of fiscal consolidation is expected to keep the inflationary expectations in check, enabling the RBI to maintain its accommodative stance. These augur well for the macroeconomic environment in the near term.

Residential Development

During 2015-16, the demand situation in the residential development space remained muted. Among the markets where the Company operates, Delhi-NCR market was the most affected in terms of both absorption and prices. Demand was also weak in Mumbai and Chennai, but the pricing brssure was less pronounced in these markets. In comparison, the demand situation was better in Bangalore, Pune and Hyderabad. The situation resulted in changes in product-mix on offer in these markets — units with fewer rooms and smaller area — to make it attractive for potential home buyers to enter the market. At the same time, there was a clear brmium commanded by branded real estate players in the organised sector, who found it relatively easier to sell in the current environment.

Mahindra Lifespaces, too, benefited in this respect. The 'Mahindra' brand — a name associated with honesty, transparency, fairness and trust — coupled with its track record of executing projects in time as well as its reputation as a professionally managed real estate player helped the Company gained market share in the micro markets that it operates in. At the same time, completion of the first phase of its affordable housing project, 'Happinest' Avadi at Chennai, in just 20 months from launch has vindicated the business model, which relies on faster turnaround as a key element of competitive advantage in the segment.

As far as growth opportunities for the immediate future are concerned, the Company will continue to focus on cities such as Mumbai, Pune, Bangalore, NCR, Chennai and Hyderabad. In terms of market segments, the Company will continue to concentrate on its core strengths, even as it gears up to expand its brsence in the affordable housing space.

Large Format Integrated Cities & Industrial Clusters

The market for industrial land remained subdued during the year. The sluggishness was more pronounced in the Special Economic Zone (SEZ) as compared to demand from businesses servicing the domestic market, which evinced greater interest from potential buyers.

The government's 'Make in India' initiative and focus on smart cities is a favourable development for growth opportunities in this segment. Given the interest from businesses aimed at servicing the domestic market, the Company is in the process of expanding the domestic traffic area (DTA) in its Jaipur project through area re-allocation.

In the near term, this will allow the Company to release additional saleable inventory in the segments where the demand situation is more stable in comparison. At the same time, focus will be on the sales and marketing efforts to benefit from the opportunities brsented by the government's manufacturing push as well as gradual turnaround in the macroeconomic situation.

In terms of its long-term strategy, the Company is actively considering upcoming industrial destinations to diversify its portfolio and create a network of smaller industrial clusters. The first such industrial park, sbrad over 300 acres is being planned in North Chennai on the NH-5 (Chennai - Kolkata highway). This project will be implemented by Mahindra Industrial Park Chennai Limited (MIPCL), a 60:40 JV between the Company's subsidiary Mahindra World City Developers Limited (MWCDL) and Sumitomo Corporation, Japan, respectively.

OPERATIONS

Residential Development

Mahindra Lifespaces' residential business has its brsence across the value chain of real estate development that covers identifying a suitable piece of land, conducting thorough due-diligence on its title and development potential, acquiring the land, product conceptualisation and design management, obtaining requisite statutory approvals, project management and quality assurance. The Company also undertakes the project's branding, marketing and sales while ensuring timely delivery and upkeep of the property until it is handed over to the society of home owners. During the year, Mahindra Lifespaces won the Mint-Institute for Competitiveness - 'Strategy Award' in the Construction, Real Estate and Steel Segment.

As of 31st March 2016, the Company along with its subsidiaries has completed projects covering 12.19 million square feet in the residential segment. It is currently developing 3.94 million square feet (Ongoing). Besides, another 5.51 million square feet are available in the form of new phases of ongoing projects or fresh projects that are at different stages of planning and will be launched in the near future (Forthcoming). A snapshot of the Company and its subsidiaries' project portfolio is brsented below.

Completed and Ongoing Projects

During 2015-16, the Company launched two new projects, including its first project in Bengaluru. In addition, fresh inventory in 4 of its existing projects was also launched during the year. Construction activity was also completed in different phases of 8 of its projects. The total completed area during the year was 3.3 million square feet as compared to 1.22 million square feet in 2014-15. The Company also handed over around 820 units to its customers during the year. The project-wise details are provided below.

'Aqualily' is a brmium project within Mahindra World City, Chennai. This project is being implemented by Mahindra Residential Developers Limited, a subsidiary of the Company. Sbrad across 55 acres of land, the project offers villas and apartments covering an estimated saleable area of 1.57 million square feet, of which 1.39 million square feet has been launched in multiple phases. During 2015-16, construction activity was completed in Phase 2C1 and progressed as per schedule in Phase 2C2. Besides, handing over of units took place in Phase 2B, which was completed in the brvious year. 73 per cent of the total units launched in this project have been sold up to March  2016.

'Iris Court' located in Mahindra World City, Chennai, is sbrad over 18 acres with an estimated saleable area of 0.86 million square feet. This project is being implemented by Mahindra Integrated Township Limited, a subsidiary of the Company. During 2015-16, construction activity was completed for the final phase of the project (IIIB). Handing over of units for this phase will take place in 2016-17. Handing over of a large number of units took place in all phases completed in the brvious year (II & IIIA). 95 per cent of the total units launched in this project have been sold upto March 2016.

'Nova' in Mahindra World City, Chennai is sbrad over 7.26 acres with an estimated saleable area of 0.54 million square feet. This project is being implemented by Mahindra Integrated Township Limited, a subsidiary of the Company. During the year, construction work was completed in Phase I and is progressing as per schedule in the second and final phase, which was launched towards the end of the brvious year. Handing over of units for Phase I will take place in 2016-17. 61 per cent of the total units launched in this project have been sold upto March 2016.

'Aura' in Gurgaon, National Capital Region, is sbrad over 17 acres and has an estimated saleable area of 1.39 million square feet. During 2015-16, construction of the final two phases of the project (IV and V) was completed. Handing over of units to customers was also completed in Phase I and Phase II, and is progressing in the next two phases (III and IV). For the final phase (V), handing over of units is expected to start in 2016-17. 96 per cent of the total units launched in this project have been sold upto March 2016.

'Luminare' in Gurgaon, is the Company's first project in the luxury homes segment in the National Capital Region. It is sbrad across 6.8 acres, with an estimated saleable area of 1.14 million square feet, and has received Gold Rating Pre-certification from IGBC Green Homes. The project is being implemented in collaboration with the developer and the land owners by Mahindra Homes Private Limited which is a 50:50 JV  with SCM Real Estate (Singapore) Private Limited. The second phase of the project comprising 120 units was launched during the year. Construction is progressing as per schedule in the two phases launched so far. 36 per cent of the total units launched in this project have been sold upto March 2016.

'Bloomdale' in Nagpur, Maharashtra, is conceived as a gated community spanning over 25.2 acres and has an estimated saleable area of 1.55 million square feet, offering a choice of low-rise apartments, row houses and duplex homes. It is being implemented by Mahindra Bebanco Developers Limited (MBDL), a subsidiary of the Company which is a 70:30 JV with B.E. Billimoria & Co. Ltd. During 2015-16, the Company launched a new phase (IIIA), taking the total saleable area launched to 0.97 million square feet. Construction activity was completed for the first phase of the project (IA, IB and IC), during the year and is progressing well in the remaining phases. Handing over of units in the first phase will take place in 2016-17. 83 per cent of the total units launched in this project have been sold up to March  2016.

'Antheia' in Pimpri, Pune, is sbrad over 16 acres with an estimated saleable area of 1.60 million square feet. During the year, the Company completed construction of Phase I of the project comprising 512 units, which is expected to be handed over to customers in 2016-17. Including Phase II C, which was launched during the year, the total saleable area launched under the project is 1.07 million square feet. Construction of Phase II of the project, where 49 per cent of the total units have been sold up to March 2016, is progressing as per schedule. 75 per cent of the total units launched in this project have been sold up to  March 2016.

'L'Artista' in Pune is a luxury project located in the heart of the city, which offers spacious three and four bedroom flats with ultra-modern amenities and common spaces amidst green surroundings. It has received Gold Rating Pre-certification from IGBC Green Homes. Out of the total estimated saleable area of around 0.09 million square feet, the Company's share in the project is an estimated saleable area of around 0.06 million square feet. The construction activity is progressing as per schedule.

'Ashvita' in Kukatpally, Hyderabad, is sbrad over 9.28 acres with an estimated saleable area of 1.1 million square feet. The project is being developed in the joint development format with the Company's share at 80 per cent and the land owners' share at 20 per cent. During the year, construction activity was completed for the first three phases of the project (Phase I, II & III). In the final two phases (IV & V), which were launched during the brvious year, construction is in progress as per schedule. 74 per cent of the total saleable units in the Company's share of 80 per cent, have been sold as of March 2016.

'Vivante' in Andheri, Mumbai, is the Company's brmium residential project, which was launched during 2015-16. This centrally located project offers a wide range of amenities, and is built on the Company's philosophy of sustainable urbanisation, for which it has received Platinum Rating Pre-certification from IGBC Green Homes. It is sbrad across 2.9 acres with an estimated saleable area of 0.37 million square feet. Out of the 104 units launched in the first phase, 66 per cent have been sold as of March 2016.

'The Serenes' in Alibaug, Mumbai, is conceived as a weekend home project. Sbrad across 11.8 acres of land just 0.7 kilometres away from the beach, the project will offer 3 and 4 BHK patio and courtyard villas in a gated community with club and common amenities. It has received Platinum Rating Pre-certification from IGBC Green Homes. The project will offer 47 villas with an estimated saleable area of 0.16 million square feet. Construction is on for the first phase of the project, which comprises 20 villas with a saleable area of 0.06 million square feet. 45 per cent of the total units launched in this project have been sold upto March 2016.

'Windchimes', Bangalore, is the first residential development of the Company in the city. Located on Bannerghata Road, the project is being implemented by Mahindra Homes Private Limited which is a 50:50 JV with SCM Real Estate (Singapore) Private Limited. Sbrad across 5.8 acres and an estimated saleable area of 0.87 million square feet, the project offers luxurious 3-4 BHK apartments with all modern amenities amidst a green surrounding. During the year, the Company launched the first two phases (I & II) of the project, comprising 229 apartments with a total saleable area of 0.44 million square feet. 54 per cent of the total units launched in this project have been sold upto March 2016. Construction is progressing as per schedule in both phases.

'Happinest Avadi' near Chennai is the first pilot project of the Company in the affordable housing segment. Sbrad across 13.22 acres with an estimated saleable area of 0.73 million square feet, the project has 1BHK and 2BHK apartments, ranging from 396 square feet to 677 square feet. During 2015-16, the Company launched the second phase of the project which has 176 units. The first phase of the project comprising 604 units was also completed during the year, and will be handed over to customers in 2016-17. 61 per cent of the total units launched in this project have been sold upto March 2016.

'Happinest Boisar' near Mumbai is the Company's second project in affordable housing segment. Sbrad across 14.66 acres with an estimated saleable area of 0.52 million square feet, the project will have 1RK, 1BHK and 2BHK apartments ranging from 351 square feet to 675 square feet. Construction is progressing as per schedule in the first two phases of the project comprising 597 units with an estimated saleable area of 0.33 million square feet. 95 per cent of total units in Phase I and 74 per cent of the total units in Phase II have been sold as of March  2016.

The Company is in various stages of planning new residential developments — projects for which design development or approvals are underway:

• Kandivili, Mumbai: This will be a brmium residential development with an estimated saleable area of 0.10 million square feet.

• Sakinaka, Mumbai: This will be a mid segment residential development with an estimated saleable area of 0.34 million square feet.

• Palghar, Mumbai Metropolitan Region: This will be the Company's third affordable housing project with an estimated saleable area of 0.89 million square feet

Besides these, the Company is in early stages of planning for residential projects in its exiting land at Pune (4.5 acres) and Chennai (9.33 acres). It has an additional landbank of around 11.04 million square feet of estimated development potential across locations, 86% of which within Mahindra World City, Chennai

Large Format Integrated Cities & Industrial Clusters

Mahindra Lifespaces is the first company in the private sector to have successfully developed an integrated business city in India — 'Mahindra World City', Chennai. This is also the first operational Special Economic Zone (SEZ) from the corporate sector. Besides this project, the Company has another operational project in this segment in Rajasthan — 'Mahindra World City', Jaipur — and is planning another 300 acre industrial park in North Chennai in joint venture with Sumitomo Corporation, Japan.

Mahindra World City, Chennai

Mahindra World City, Chennai, is implemented by Mahindra World City Developers Limited (MWCDL), an 89:11 joint venture between the Company and the Tamil Nadu Industrial Development Corporation Limited (TIDCO), respectively . It is the first township in India to receive Green Township Certification (Stage I Gold certification) from IGBC. During the year, Mahindra World City, Chennai was adjudged winner in the category of Best Township (more than 200 acres in size) at the NDTV Property Awards 2015.

Mahindra World City, Chennai, currently has three sector specific Special Economic Zones (SEZs) — IT (services and manufacturing), Apparel and Fashion Accessories and Auto Ancillaries, and a Domestic Tariff Area (DTA) for businesses catering to the Indian market. Integrated to the business zone is a Residential and Social Infrastructure zone.

At the end of 2015-16, the project had a total area of 1,524 acres. It has 64 Industrial Customers, of which 27 are in the SEZ and 37 are in the DTA. Including one company which started operations during the year, 51 companies operate out of Mahindra World City, Chennai. Direct employment in the business city increased during the year to around 38,000 persons. Exports crossed Rs. 6,875 crore in the 9 months between April to December, 2015 as against Rs. 7,800 during 2014-15.

At the end of 2015-16, the project had a total area of 1,524 acres. It has 64 Industrial Customers — of which 27 are in the SEZ and 37 are in the DTA. Including one company which started operations during the year, 51 companies operate out of Mahindra World City, Chennai. Direct employment in the business city increased during the year to around 38,000 persons. Exports crosed Rs. 6,875 crore in 9 months between April to December, 2015 as against Rs.  7,800 during 2014-15.

Mahindra World City, Chennai, has allocated 289 acres for the development of residential and social infrastructure that will eventually cater to the requirements of over 7,000 families. The city has three operational residential projects. Occupancy during the year increased from around 500 families to 700 families. This is expected to increase significantly, with completion and handover of around 500 units in 2016-17. Further, details of the current residential projects have already been provided in the brvious section on Residential developments.

On the retail and social infrastructure, considerable progress was made during the year. 'The Canopy' - the city's commercial centre, added a variety of service providers, enhancing the convenience and quality of life of its residents. The MWC Club, which was inaugurated in March 2015, was well received by the community. The Club also received Gold certification under IGBC LEED India Rating System. JSP Hospitals, which started functioning in the brvious year, expanded its range of services during 2015-16 to include 24x7 services. The construction of Phase I of the hostel for working professionals with 200 rooms by a third party developer cum operator, progressed well and is nearly complete. Also, Mahindra World School has taken up plans to expand its operations by an additional section from LKG to Class XII. During the year, the School received Platinum rating from the IGBC.

In another development, the post office at Mahindra World City, Chennai, was upgraded to a delivery post office and exclusively serves the companies and residential communities. It has its own pin code, and has the distinction of being the first all-women delivery post office in the Chennai circle.

On the sustainability front, Mahindra World City, Chennai, has taken initiatives to maximise the use of grey water. During the year, a bio-gas plant was installed to fully utilise food waste and convert the same to CNG for running internal shuttles and tractors. The city continued to build on its community development and engagement initiatives during the year. This included fresh editions of its flagship programmes: the marathon run in aid of 'Nanhi Kali' which had over 1,200 participants, 'Champions Trophy' an inter-company sports tournament with 40 teams, 'Mindquest ' — the annual MWC quiz competition with over 70 teams and 'Courtyard Performances', which featured street theatre and other forms of performing arts. These were received well by the participants and residents.

Mahindra World City, Jaipur

Mahindra World City, Jaipur, which is being implemented by Mahindra World City (Jaipur) Limited (MWCJL), is a 74:26 joint venture between Mahindra Lifespaces and Rajasthan State Industrial Development & Investment Corporation Limited (RIICO), a Government of Rajasthan enterprise, respectively. It is proposed to be developed as a multi-product Special Economic Zone and a Domestic Tariff Area across 3,000 acres, of which 2,949 acres have already been acquired.

During 2015-16, even as the prices remained firm, demand was subdued, especially in the SEZ, the total land leased out during the year was 28.66 acres, which includes companies across diverse industry segments. The company added four new customers, and three existing customers leased additional land. At the end of the year, the Company had 69 customers in its industrial zones — 25 in DTA and 44 in SEZ.

Seven companies started their development activities during the year and are expected to become operational in the near future. Nine new companies became operational in the city during 2015-16, taking the total number of operational companies to 33. These companies have created direct employment for over 8,000 people. Exports by clients during the year stood at Rs. 1,128 crore.

The Company has installed a 210 KW solar power plant in 'Evolve' — the multi-tenanted IT Park which is sbrad over approximately 25 acres. This plant is generating 20,000 units of power per month since February 2016, which is being utilised by MWC, Jaipur and customers in 'Evolve'. During the year, MWC, Jaipur, reached the brstigious Stage 2 Certification for C40 Climate Positive Development Program, in recognition of plans and commitment to achieve net negative carbon emissions outcome. It is Asia's first and world's largest project to achieve this distinction.

Going forward, the focus will continue to be sale of industrial land in the project. To achieve this, the Company is in the process of expanding its DTA by 500 acres through area re-allocation, for which it has already secured the product-mix approval from the government. Master planning for this phase is currently in progress, after which it will be submitted for final approvals before it is launched. At the same time, it is working on enabling the multi-product SEZ to benefit from emerging opportunities in other industries. Apart from this, the Company has initiated economic land use planning for the residential and social infrastructure area, which will enable development of the same as the project matures.

Mahindra Industrial Park, Chennai

Mahindra Industrial Park Chennai Limited (MIPCL) was established as a subsidiary of MWCDL in 2014-15. In May 2015, MWCDL signed a JV agreement with Sumitomo Corporation, Japan to develop an industrial park in North Chennai on the NH-5 (Chennai - Kolkata highway). This Project will be implemented by Mahindra Industrial Park Chennai Limited (MIPCL), a 60:40 JV between the Company's subsidiary Mahindra World City Developers Limited (MWCDL) and Sumitmo Corporation, Japan, respectively. A state support agreement was signed with the Government of Tamil Nadu in September, 2015 at the Global Investors Meet (GIM) to provide facilitation support to the project.

The location of the project is in close proximity to Ponneri, one of the cities in Tamil Nadu shortlisted for smart cities. It is situated in the influence zone of the Chennai - Bangalore Industrial Corridor (CBIC) and Chennai - Vizag Industrial Corridor (CVIC). The first phase of the project comprises of approximately 300 acres. MIPCL is currently in the process of planning and securing necessary approvals, which will be followed by infrastructure development and related works.

CUSTOMER RELATIONS (CR)

The Customer Relations (CR) function at Mahindra Lifespaces endeavours to service the customers through their entire lifecycle — right from the time of booking to the handover of the property. During 2015-16, focus was on implementing processes aimed at achieving differentiation in terms of the Company's core philosophy of customer centricity. Some of these were:

• Stringent service interaction standards with clear audit parameters to measure performance in terms of both turnaround time as well as quality;

• Robust on-boarding templates for training new hires and providing them with knowledge base and support;

• Continuous training to upgrade technical knowledge and enhance service levels;

In our last year's report, we had reported on the plans to improve the handover experience. This is especially important as the Company gears-up for a substantial increase in the number of handovers. Several such initiatives were implemented during the year:

• Defined standards in important areas of br-handover brparedness such as documentation, minimum readiness, personnel and resource budgeting;

• Improved communication to customers on handover timelines, processes and livability;

• Detailed 'Resident Assist Manual' for customers to enable a smoother transition and enhanced post-handover experience.

Going forward, the focus will be on further streamlining CR processes, increase capabilities and at the same time use best in class technology solutions to upgrade the customer's experience. Towards this end, the Company is in advanced stages of implementing an IT solution which enables a single view of the customer, right from the prospecting stage to post-handover. This is expected to be operational in 2016-17.

INTEGRATED MANAGEMENT SYSTEM (IMS)

Mahindra Lifespaces has embraced an Integrated Management System covering three International Standards — ISO 9001:2008 (Quality Management System), ISO 14001:2004 (Environmental Management System) and OHSAS 18001:2007 (Occupational Health and Safety Management System) for both its business segments.

The main thrust of this approach is to build and institutionalise project execution capabilities through scalable systems and processes that aid in timely delivery, quality of product and safety during construction, with the ultimate goal of adding value to our customers.

QUALITY

Mahindra Lifespaces has adopted the principles of Total Quality Management (TQM) under the banner of 'The Mahindra Way' (TMW) — the Mahindra Group's integrated approach to promote excellence in all spheres of its operations. During 2015-16, the Integrated Cities business moved one step ahead from Level 3 to Level 4, whereas the Residential business maintained its position at Level 4.

The Company's strong quality management system, has been instrumental in improving the quality of its products and processes, and at the same time enhancing the productivity of its operations to make them more competitive. In 2015-16, the focus was on delivering a 'Zero-Snag Product' to customers. Key initiatives included:

• Standardisation of designs, construction technologies, waterproofing methodologies and other critical items in bill of quantities and tender documents;

• Introduction of mock-up for each construction activity to ensure they are performed right the first time, improving the quality as well as the speed of construction;

• Weekly on-site quality reviews by the project and contractors' teams, followed by quality circle meetings for quicker resolution of challenges;

• Implementation of a multi-check handing over process for units across all projects.

To institutionalise a culture of quality and continuous improvement throughout the organisation, the Company has identified business excellence champions, who encourage and guide all employees to undertake improvement projects in their respective areas. The best projects are recognised and awarded.

During the year, the Company tied up with certified training agencies to carry out skill upgradation programs for workers of its contractors with primary focus on improving the quality of product finish. This contractor is scheduled to commence in  2016-17.  

SAFETY

Since 2009, the Company has an established 'Safety Policy' which underscores its commitment to take measures to brvent accidental injuries and occupational ill health of all employees and associates working at its offices and project sites. During the year, the Company implemented several initiatives to sensitise workers on safety and achieve its ultimate goal of "zero tolerance to accidents".

The Company had launched "Safe Methods and Risk Reduction Techniques" (SMARRT) in the brvious year, which implements international best practices and aims to eliminate unsafe acts and conditions by proactive and immediate reporting of such incidents. Significant progress was made on this front during 2015-16. Training programs were organised on risk mitigation, roles and responsibility, technical, legal and statutory requirements. SMARRT has evolved to a level where it is crafting great trainers and risk managers at the operatives' level.

In recognition of its efforts, Mahindra Lifespaces received the 'CIDC Vishwakarma Award' for 'Health, Safety & Environment' by Construction Industry Development Council (CIDC) established by Planning Commission, Government of India, and the Construction Industry. The Company also received 'Shreshtha Suraksha Puraskar' (runner-up) for 'Best Safety Practices in the Construction Industries Group' by National Safety Council -Maharashtra Chapter & Directorate Industrial Safety and Health, Government of Maharashtra.

The Company is planning to use a user friendly software for Environment, Health & Safety, which will incorporate all permits and check lists related to safety processes, providing real-time information on their implementation and reducing paperwork by as much as 95 per cent. This software is expected to be rolled-out in 2016-17.

SUSTAINABLE DEVELOPMENT

Mahindra Lifespaces has been at the forefront of the real estate industry in India to achieve the mission of 'Transforming urban landscapes by creating sustainable communities'. The Company has done this by putting sustainability as a core agenda for the Company.

The Company was awarded the "Investor Relations Society Awards 2015" for the Best Environment, Social & Governance (ESG) Disclosures in Small Cap category.

The details of the Company's approach towards sustainability are covered in the Sustainability Report at Pages 169 to 180 of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Mahindra Lifespaces' guiding principle for CSR is to build its relationship with stakeholders and the community at large, and contribute to their long term social good and welfare. The Company, in every financial year commencing from 1st April, 2014, in line with the new Companies Act, 2013, pledges to spend, two per cent of the average net profits made during the three immediately brceding financial years specifically towards CSR initiatives.

The Company has formulated a CSR Policy which lays out the vision, objectives and implementation mechanisms. The Board of Directors of the Company has constituted a Committee of Directors on CSR. The Company's CSR activities have traditionally focussed on education, skill development, health, environment and promoting sustainable practices.

Of the total budget of Rs.377.26 lakh for FY 2015-16, the Company had earmarked an amount of Rs. 132.73 lakh towards contribution as corpus by the Company to support the establishment of a Centre of Excellence (CoE) for Sustainable Habitats by TERI with the objective of improving energy efficiency in India's residential buildings sector. The discussion and requisite documentation with TERI, although was at an advanced stage, could not be completed by 31st March, 2016. As a result, the amount of Rs.132.73 lakh which was earmarked for aforesaid contribution remained unspent as on 31st March, 2016. The Board has approved that any unspent amount, out of the minimum required CSR expenditure of the FY 2015-16 be carried forward to the next year provided that the carried forward amount shall be over and above the next year's CSR allocation equivalent to at least 2% of the average net profit of the Company of the immediately brceding three years.

Details of the Company's approach towards CSR are covered in the Sustainability Report at Pages 169 to 180 of this Annual Report.

HUMAN RESOURCES

Mahindra Lifespaces recognises that its people are the key to the success of the organisation and in meeting its aspirations. During the year, the Company continued its efforts to strengthen its HR policies and processes to attract and retain the best talent in the industry.

In pursuit of attracting the best talent available both from within and outside the sector, the Company has undertaken various initiatives linked to higher visibility in social media, referral schemes, internal job posting and partnering in excellence programmes where consultants fine tune their approach in talent identification. To achieve this, the Company built relationships with specialised institutions in the construction industry such as National Institute of Construction Management and Research and RICS School of Built Environment for entry level positions in project management and sales.

Catering to the learning and development needs of its employees continues to be a key focus area for the Company. It regularly carries out structured training initiatives in the key functional areas such as sales and marketing, customer service and project management to meet the requirements of its employees. During the year, the Company carried our specialised programme on project management in collaboration with RICS.

As a part of its flagship programme 'My Customer, My Valentine', which aims to make the organisation more customer centric, several initiatives were carried out to engage employees and reward customer centric behaviour. The Company carries out two employee engagement surveys every year namely MCARES for internal benchmarking within the Group and the Great Place to Work survey for external benchmarking. Both surveys showed a significant improvement in employee engagement levels during the year. In particular, the 'Great Place to Work' survey rated Mahindra Lifespaces among the 'Top 5 in the Industry'.

Mahindra Lifespaces endeavours to keep its workplaces safe, transparent and friendly for people to work in. It has a 'Diversity Council' with the objective of creating an inclusive environment to leverage the unique talents of diverse individuals in the workplace. Its gender diversity as of 31st March, 2016 was 20 per cent. It also has a policy which is aligned to the Act on Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

As of 31st March, 2016, the Company had 350 employees and its subsidiary companies had 67 employees on its roll. Employee relations remained cordial during the year.

INFORMATION TECHNOLOGY (IT)

Mahindra Lifespaces sees IT not just as a tool for increasing efficiency, but also as an important source of competitive advantage. The Company has consistently invested significant resources in developing a strong IT and communication infrastructure which encompasses all key business and administrative functions as well as project sites.

The Company's IT infrastructure includes a SAP ERP for its core and peripheral business functions, primary and disaster recovery data centres, best-in-class communication and productivity tools, and access to specialised industry-specific software.

During 2015-16, the Company implemented several initiatives leveraging its IT infrastructure to improve efficiencies and optimise costs:

• SAP document management system which includes digitisation of physical documents and automatic storage of system generated documents;

• Enabling e-commerce transactions by online blocking of inventory; online payment facility for customers through internet banking, credit and debit cards;

• Strengthening the HR module: online test for talent acquisition, automation of LTA and medical claims, and learning management solution;

• Supplier relationship management portal covering registration, online tendering and contract award and payments;

• Risk management system.

The Company is at advanced stages of implementing two major systems in the areas of Customer Relations, and Environment, Health and Safety. These have already been discussed in the respective sections of the report.

FINANCIALS

Table 2 brsents the abridged profit and loss statement of Mahindra Lifespace Developers Limited as a standalone and consolidated entity.

THREATS, RISKS AND CONCERNS

Mahindra Lifespaces has appropriate risk management systems in place for identification and assessment of risks, measures to mitigate them, and mechanisms for their proper and timely monitoring and reporting. Mahindra Lifespaces has constituted a "Risk Management Committee" consisting of two Directors and the Chief Financial Officer, for monitoring and reviewing of the risk assessment, mitigation and risk management plan from time to time. The Board periodically reviews implementation and monitoring of the risk management plan for the Company.

Economic Risks

Even as the RBI has reduced the policy rates, this has not resulted in desired reduction in interest rates for home loans. This can have a direct impact on the performance of the real estate sector and the Company. Secondly, even as there are signs of revival in the advanced economies, it is yet to translate into investment outlays in Indian businesses, especially those in export oriented industries.

Mahindra Lifespaces is conscious of these risks and is taking measures to mitigate them. For instance, the Company's focus on both residential and integrated developments has been a significant source of comfort during periods of subdued economic performance. Besides, the Company's prudent financial management has also kept it relatively insulated from the economic downturn and the Company is well placed to raise capital at competitive rates.

Operational Risks

Key operational risks faced by the Company include longer gestation period for procurement of land, time taken for approvals, inability to sell the project as per plan, inability to complete and deliver projects according to the schedule leading to additional cost of construction and maintenance, erosion of brand value, appointment and retention of quality contractors, inability to attract and retain talent, poor customer satisfaction, fraud and unethical practices, failure to comply with laws and regulations leading to fines, penalties and lengthy litigations.

The Company addresses these issues within a well-structured framework which identifies desired controls and assigns ownership to monitor and mitigate risks. The Company has also invested significant resources in an Enterprise Resource Planning (ERP) solution and transparent customer friendly processes, which are expected to go a long way to address some of these risks. The Company also has a Code of Conduct for all its Employees. The Company's Corporate Governance policies ensure transparency in operations, timely disclosures and adherence to regulatory compliances, leading to enhanced stakeholder value.

Policy and Regulatory Risks

The real estate industry is easily affected by changes in government policies and regulations. There are considerable procedural delays with respect to approvals related to acquisition and use of land. This problem is accentuated as this is an industry which has traditionally been quite unorganised.

The Company, with its approach towards acquisition of land based on thorough due diligence and its transparent processes in developing the projects, has effectively mitigated these risks. For instance, the Company is already in compliance with provisions of the Real Estate (Regulation & Development) Act 2016 related to prior approvals before the launch of its projects. Besides, its focus on environment friendly and sustainable practices also help in mitigating risks associated with environmental regulations.

INTERNAL CONTROLS

The Company has adequate internal control systems, commensurate with the size and nature of its business. The system is supported by documented policies, guidelines and procedures to monitor business and operational performance including an ERP solution, all of which are aimed at ensuring business integrity and promoting operational efficiency.

An independent internal audit firm appointed by the Company conducts periodical audits to ensure adequacy of internal control systems, adherence to management policies and compliance with the applicable laws and regulations. Their scope of work also includes internal controls on accounting, efficiency and economy of operations. The internal auditors also report on the implementation of their recommendations.

Reports of the internal auditors are regularly reviewed at the Audit Committee meetings. The Audit Committee of the Board reviews the adequacy and effectiveness of the internal control systems and suggests improvements for strengthening them.

OUTLOOK

Global economic environment continued to be subdued in 2015­16. While a modest recovery continued in advanced economies, growth in emerging markets and developing economies—which together account for 70 per cent of global growth — has been declining for the last few years. Growth has also decelerated in China, which is gradually rebalancing its economic activity away from investment and manufacturing towards consumption and services.

India is the only large economy that has maintained a steady growth rate. In addition, the fiscal situation has been stable and there has been a broad-based decline in inflation, allowing the RBI to maintain an accommodative monetary policy stance. But, the investment-growth cycle is yet to kick-in, given the weak global outlook and low capacity utilisation levels across industries. Persisting corporate sector stress and risk aversion in the Indian banking system has meant that the rate cuts by the RBI have not translated into the much needed reduction in interest rates for both businesses and consumers, which can spur both demand and confidence.

Given the capital intensive nature of the business, the real estate industry in India has also been affected by this situation. Mahindra Lifespaces believes that it is well positioned to benefit from the opportunities that will emerge as the economic situation improves further. So, the outlook for 2016-17 is cautiously optimistic.

Cautionary Statement

Certain statements in the Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or brdictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those exbrssed or implied. Important factors that could make a difference to the Company's operations include labour and material availability, and prices, cyclical demand and pricing in the Company's principal markets, changes in government regulations, tax regimes, economic development within India and other incidental factors