MANAGEMENT DISCUSSION AND ANALYSIS 1. MACRO-ECONOMIC OVERVIEW Global economy The global economy grew at a moderate rate of 3.4 percent in 2014, reflecting a pickup in growth in advanced economies and a slowdown in emerging markets and developing economies. The advanced economies registered a moderate pickup in growth rate at 1.8% which was supported by accommodative monetary policy in many countries, fall in headline inflation owing to decline in oil prices and softening of commodity prices among other factors. The growth in the United States was stronger than expected, averaging about 4 percent annualized in the last three quarters of 2014. In Japan, economic growth in 2014 was close to zero. In the euro area, activity was weaker than expected in the first half of 2014; however there were signs of pickup in the fourth quarter and in early 2015, with consumption supported by lower oil prices and higher net exports. In the emerging economies, the growth was weaker than expected at 4.6 percent in 2014 compared to 5 percent in the brvious year. The gradual slowdown in China and the partly related decline in commodity prices weakened the growth momentum to some extent in commodity-exporting countries and others with close trade links to China (Source: International Monetary Fund, April 2015). 2 Going forward, the global economy is expected to grow at 3.5 percent and 3.8 percent in 2015 and 2016, respectively. Growth in advanced economies is projected to increase from 1.8 percent in 2014 to 2.4 percent in 2015, supported by growth in the economies of United States, Euro area and Japan. Growth in emerging markets and developing economies is projected to slow down from 4.6 percent in 2014 to 4.3 percent in 2015. Indian economy During the year 2014-15, the Central Statistics Office (CSO) revised the national accounts aggregates by shifting to the new base of 2011-12 from the earlier base of 2004-05. As a result, the Gross Domestic Product (GDP), estimated at 5.1 per cent and 6.9 per cent respectively during 2012-13 and 2013-14, was higher than the corresponding figures of 4.7 per cent and 5.0 per cent released under the 2004-05 series in May 2014. The Indian economy continued to revive from the vulnerabilities associated with an economic slowdown, persistent inflation, elevated fiscal deficit, slackening domestic demand, external account imbalances, and oscillating value of the rupee. During the year 2014-15 the economy witnessed various positive developments such as steep decline in oil prices, plentiful flow of funds from the rest of the world, and potential impact of the reform initiatives of the new government at the centre, along with its commitment to calibrated fiscal management and consolidation. As a result, the Indian economy grew at a rate of 7.4% in 2014-15, supported by improvement in the performance of both services and construction sectors, on which the growth of the real estate is dependent. The services sector registered a growth rate of 10.6%, up from 9.1 percent during the brvious year and the construction activity registered an increase of 4.8 percent, up from 2.5 percent a year ago. Looking forward, considering the government's commitment to reforms, the outlook for the country's macro-economic scenario looks optimistic. However, uncertainties could also arise from an increase in the interest rates in the United States and situation brvailing in Greece within Eurozone. Going forward, the Indian economy is expected to register a growth rate of 8.5 percent in 2015-16, supported by the revival of agriculture, better monsoon, better growth prospects of the world economy and higher exports of products and services. INDIAN REAL ESTATE SECTOR Overview The Indian real estate sector, comprising of four sub-sectors - housing, retail, hospitality, and commercial, is among the fastest growing markets in the world and is the second largest employer in the country after agriculture. The growth of this sector is well complemented by favorable demographics, rapid urbanization, rising purchasing power of people, growth of the corporate environment, favourable government policies and supportive monetary policy by the Reserve Bank of India. The year 2014-15 was a challenging year for the real estate sector, as the growth slowed down due to various factors such as reduced end user demand, rising inventory, increasing prices of raw material, high cost of debt, inflation, high interest rates, difficulty in availability of working capital fund, time lag in delivery of projects, higher statutory levies and unavailability of skilled workers. The performance of the sector across the country was subdued, where the NCR region was the worst affected by slowdown and the Bangalore market was resilient. Although the short term perspective of the sector looks gloomy, things changed for better in early 2014 after a stable government came to power at the centre. The government with its plans to relax Foreign Direct Investment (FDI) norms, to provide housing for all by 2022, to create 100 smart cities and to approve Real Estate Investment Trusts (REITs) in the country has boosted the confidence of stakeholders. The initiatives by the new Government are expected to drive reforms and regulations in order to trigger recovery and fuel growth of the sector. a. Residential segment Overview The residential real estate segment is fragmented with few large players and accounts for around 80% of the real estate sector. During the year under review, the residential segment faced a backlog of unsold property due to a huge delay in finishing projects. This was because of delay in getting timely approvals & permits, delay in project clearances, decrease in government spending and difficulty in procuring funds, among other factors. In addition, due to ever-increasing land and input costs, many residential projects are being developed in the mid, high-end and luxury segments, while demand is highest in the affordable and mid segments. This demand-supply mismatch has created massive brssure on the sales, negatively affected the projected cash flows, increased the unsold inventory and made it difficult for developers in servicing the project-level funding secured from various investors. Market dynamics - Demand As per the latest report by international property consultants - Cushman & Wakefield, new residential unit launches across top eight cities of India declined by 12% y-o-y in 2014 with total launch of 1,53,000 units. The top three cities of Bengaluru (27%), NCR (17%) and Mumbai (16%) comprised of 60% of the total new launches in 2014. The number of new unit launches dropped substantially (46%) in Hyderabad as developers reconcile to the changing market dynamics post the bifurcation of the state. During the year under review, mid segment residential units continued to remain favourite amongst developers with a two-third share in total launches; also, unit launches in this segment increased by 5% from the brvious year. Unit launches in the high-end segment dipped by 29% in a year; whilst in the affordable segment they declined by 38% from the brvious year. Although luxury units contributed only 1% to total unit launches, they increased by five times from the brvious year (Source: Cushman & Wakefield). Market dynamics - Supply The supply of houses increased by 9% year-on-year to a total of 34,00,251 sq. mt. (36.6 mn. sq. ft.) in 2014 compared to brvious year. Of the top 8 cities, Bengaluru recorded the highest supply addition of 8,73,288 sq. mt. (9.4 mn. sq. ft.), followed by Delhi-NCR (8,08,256 sq. mt. / 8.7 mn. sq. ft.) and Mumbai (5,48,127 sq. mt. / 5.9 mn. sq. ft.) (Source: Cushman & Wakefield). Delhi NCR In 2014, approximately 27,000 units were launched in Delhi-NCR, a 30% decline from the brvious year. Due to subdued demand and significant unsold inventory, developers launched fewer projects. In 2014, majority of the projects were launched in the suburban and peripheral locations and were targeted at affordable and mid segments, which have witnessed continued demand. 61% of new unit launches were in Noida in submarkets such as Central Noida Extension, Yamuna Exbrssway and Noida Extension. Gurgaon witnessed launches primarily in the affordable segment along Sohna Road and mid segment along the SPR (Southern Peripheral Road) and in New Gurgaon. Mid segment had the highest share (69%) in total units launched during the year, followed by affordable segment (22%). Developers offered heavy discounts as well as various payment schemes/plans in order to woo buyers and increase sales (Source: Cushman & Wakefield). Growth drivers • Rapid urbanization: India's urban population is expected to go up from 410 million in 2014 to about 590 million in 2030. Around 60% of the growth in the urban population in the past was due to natural increase, and 20% was the result of rural-urban migration. At this growth rate, there will be a higher demand for new homes to settle in urban areas in the ensuing years (Source: National Housing Bank). • Rise of nuclear families: With the growing convergence between the Indian and the western lifestyles and perceptions, the number of nuclear families in need of a home has been growing. The average household size of families has decreased from 5 members per family in 2001 to close to 4 members per house in 2011 as per census 2011, and it is further expected to decrease to close to 3 members per house in the coming years. Fall in household size is expected to add demand for around 10 million new housing units. As 65% of India's population is below 35 years, it is expected to drive demand for housing over next 15 years (Source: Census 2011). Housing shortage: As per government estimates in 2012, the urban housing shortage is 18.8 million units, of which 95.6 per cent is in economically weaker sections (EWS) / low income group (LIG) segments (Source: Economic Survey, 2015). The total rural housing shortage in India stood at 47.4 million as of 2012 and is expected to grow to 48.8 million during Twelfth Five Year Plan period (2012-2017). With increasing population, the demand for houses is likely to continue increasing in the future (Source: Economic Survey, 2015). • Smart cities: The government plans to develop 100 smart cities over the next 20 years for which an initial allocation of Rs. 7,060 crores was provided for in the Union Budget, 2014-15. These cities will include the construction of satellite towns near existing mega cities, upgrading existing mid-sized cities and construction of settlements along industrial corridors in addition to the construction of a few new cities altogether. Housing schemes by government that fuels the demand for residential houses • Bharat Nirman: The Bharat Nirman programme focuses on providing basic amenities like drinking water, roads, irrigation facilities and electricity, and also builds houses in rural areas through its six flagship sub-programs. • Indira Awas Yojana (IAY): It provides cash subsidy to rural below-the-poverty-line (BPL) families for construction of dwelling units using their own design and technology. • The National Urban Housing & Habitat Policy 2007 (NUHHP-2007): It promotes public-private partnerships (PPPs) in building affordable housing for the urban poor. • The Interest Subsidy Scheme for Housing the Urban Poor (ISHUP): It subsidizes interest rates on home loans extended by Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs), so as to reduce the amount of the monthly installment repayments of borrowers. • The Golden Jubilee Rural Housing Finance Scheme (GJRHFS): It is aimed at providing institutional credit at special interest rates, set up by the Reserve Bank of India, for building rural housing in the country. Outlook The recent instance of monetary easing implemented by the Central Bank is expected to boost housing demand and also improve sentiments in the sluggish property market. With positive business sentiments, improvement in economic situation and further reduction in interest rates, housing demand is likely to pick up in the forthcoming months. Developers, of late, are increasingly focused on supply of affordable housing keeping in mind the huge gap between demand and supply in that segment. This trend is expected to continue in the near future. Even as they focus on the mid-end to affordable segment of housing, overall project launches across cities are expected to remain low. Troubled by subdued demand, developers are expected to defer new project launches, and focus mainly on the completion of under-construction projects. b. Commercial segment Overview The commercial real estate market comprises around 20% of the total real estate market in the country. It is dominated by few large developers with a pan-India brsence and comprises of mainly office, retail and industrial segments. It is primarily dependent on growth in services (IT/ITeS and BFSI) and industrial (logistics, warehouse, and manufacturing) sectors of the economy. Over the years, the operating model of the commercial sector has changed from sales to a lease-and-maintenance model. The office market of the top eight cities have been recovering steadily with vacancy levels falling from 18.5% in 2013 to 16.9% in 2014. Over the past few years until 2014, the supply of office real estate was higher than demand by 3,71,612 to 9,29,030 sq. mt. (4 to 10 mn. sq. ft.) and the price for office space remained subdued. However, by the end of 2014, there was a gradual increase in prices as commercial real estate developers began to strategically reduce the incoming supply to a new-normal level of occupier demand in the range of 25,08,382 to 27,87,091 sq. mt. (27 to 30 mn. sq. ft.) each year (Source: Jones Lang Lasalle). Market dynamics - Demand During 2014, close to 27,87,091 sq. mt. (30 mn. sq. ft.) of office space got absorbed, a 3.0 million jump in net absorption compared to the brvious year. The highest level of year-on-year absorption rate was registered in Bangalore at 72% in 2014, followed by NCR-Delhi (48%), Hyderabad (41%) and Pune (13%). The considerable growth of the IT-ITeS and e-commerce sectors is clearly visible in the growth of office space demand in these IT cities. The highest decline in year-on-year absorption rate was seen in Kolkata (-55%), followed by Chennai (-43%) and Mumbai (-21%). One of the prime reasons for the drop in absorption in Mumbai and Chennai was the lack of availability of suitable office space in the brferred micro-markets and lack of expansion in the BFSI sector (Source: Jones Lang Lasalle). Market dynamics - Supply The total stock of Grade-A office space across major Indian cities grew by 8.0% in 2014 over the brvious year, with an additional supply of slightly below 27,87,091 sq. mt. (30 mn. sq. ft.) Bangalore saw the biggest addition in office supply in absolute area terms, followed by NCR-Delhi. Mumbai, Pune and Hyderabad witnessed only moderate increases in supply. Chennai and Kolkata added very little supply to the overall basket during the year (Source: Jones Lang Lasalle). Market dynamics - Vacancy Pan-India office space vacancy dropped from 18.5% as of end-2013 to 16.9% as of end-2014. Mumbai, Chennai and Pune were responsible for this steep fall in vacancy during the year. While limited supply was helpful in reducing vacancy in Mumbai and Chennai, Pune benefited from both moderate supply and healthy growth in absorption. Despite a significant rise in supply in Bangalore, a healthier absorption resulted in reduced vacancy. The current vacancy levels in Mumbai were the lowest seen over the last 36 months Growth drivers • Rapid growth of services sector: India's services sector remains the major driver of economic growth. Services-sector growth has increased from 8.0 per cent in 2012- 13 to 9.1 per cent in 2013-14 and further to 10.6 per cent in 2014-15 (Source: Economic Survey, 2015). The IT-ITeS sector has been the main consumer of commercial office space and is likely to be a strong contender in coming years as well. The National Association of Software and Services Companies (NASSCOM) has projected that the sector is likely to employ 10 million people by 2020 from around 3 million in FY 2012-13. • REITs: REITs will provide an alternate means of raising funds and also help developers acquire high-grade office space to deleverage their balance sheets. It can also be the game-changer for major developers with large commercial assets. • FDI policy: The recent reforms in FDI policy, which raised foreign investment ceilings for various industries is expected to spur demand for commercial real estate, including industrial and retail properties, in India in the coming years. Outlook Given the improvement in the macroeconomic scenario and real estate transparency, demand for office space is likely to improve. In addition, the increase in corporate profitability, corporate confidence and economic growth will continue to result in headcount growth and expansionary leasing activity across most markets in 2015. Corporate entities have already begun rolling out their expansion plans due to improving sentiments in the country. The anticipated revival of the economy is expected to be a key trigger for the segment. Given that the market has seen oversupply in the last few years, the gap between demand and supply is likely to shorten, leading to a further increase in rentals. In the near-to-medium-term, the outlook for Indian office real estate appears bright, as it is expected that around 20,43,866 sq. mt. (22 mn. sq. ft.) of office space will be ready at right locations against the demand forecast of 27,87,091 to 29,72,897 sq. mt.(30-32 mn. sq. ft.) by the end of 2015 (Source: Jones Lang Lasalle). c. Retail segment Overview The retail real estate market accounts for a small portion of the Indian real estate market with very few organized retailers. Retail real estate in India has witnessed interesting transitions over the past decade, from the dominance of unorganised mom-and-pop stores to organised shopping centres, and thereafter, the emergence of large-format, developer-managed shopping malls. Market dynamics During 2014, the total space occupied by brick and mortar retail space was 65,31,083 sq. mt. (70.3 mn. sq. ft.), where Delhi NCR occupied the highest retail space at 19,97,415 sq. mt. (21.5 mn. sq. ft.), followed by Mumbai (13,09,932 sq. mt. / 14.1 mn. sq. ft.) and Chennai (11,70,578 sq. mt. / 12.6 mn. sq. ft.). Considering the impact of E-tail, the requirement for brick and mortar modern retail is projected to increase from 65,31,083 sq. mt. (70.3 mn. sq. ft.) in 2014 to 85,56,369 sq. mt. (92.1 mn. sq. ft.) in 2019, resulting in a moderate annual growth rate of 5.6 per cent. The top seven cities of India will require an incremental modern retail space of 3,99,483 sq. mt. (4.3 mn. sq. ft.) per annum during 2015-2019. NCR will require the maximum amount of incremental space, at 1,30,064 sq. mt. (1.4 mn. sq. ft.) per annum during 2015-2019. This will be followed by Bengaluru, at 83,612 sq. mt. (0.9 mn. sq. ft.) per annum. While Bengaluru is expected to witness the highest growth rate in space requirement, at 6.5 per cent per annum from 2014-2019, Kolkata will witness the slowest growth, at 4.5 per cent per annum (Source: Knight Frank, Think India, Think Retail, 2015). Delhi NCR In Delhi NCR, 57 per cent of the modern retail distribution is in malls, and the remaining 43 per cent, in shopping streets. The agglomeration of NCR outshines other Indian cities in the available modern retail space per thousand of the area's population. In 2014, the total retail spending in NCR was estimated to be Rs. 899 bn, with a massive 42 per cent share taken up by North and South Delhi. NCR's 26 per cent of the total retail spending was taken up by modern retail formats in 2014, of which brick and mortar accounted for 23 per cent, and 3 per cent was rebrsented by E-tail. By the year 2019, modern retail in NCR is expected to grow at a CAGR of 22 per cent, with the total retail spending projected to increase from Rs. 899 bn in 2014 to Rs. 1,919 bn in 2019. Currently, E-tail takes up 10 per cent the overall modern retail spending in NCR and it is projected that by 2019, the online retail platform will increase its share to 45 per cent. It is estimated that brick and mortar modern retail spending will grow at 11 per cent CAGR, while its overall share will decline from 23 per cent in 2014 to 19 per cent by 2019 (Source: Knight Frank, Think India, Think Retail, 2015). Growth drivers Booming retail spending: Currently, the total retail spending in the top seven cities of India amounts to Rs. 3,586 bn, with Mumbai accounting for the lion's share, at 29 per cent. This is followed by NCR and Bengaluru, at 25 per cent and 15 per cent respectively. The modern retail penetration in the top seven cities of India stood at 19 per cent in 2014, of which brick and mortar modern retail was at 17 per cent and E-tail, at 2 per cent. The total retail spending in the top seven cities of India is projected to more than double from Rs. 3,586 bn in 2014 to Rs. 7,650 bn in 2019. The share of modern retail is estimated to increase from 19 per cent to 24 per cent during that period (Source: Knight Frank, Think India, Think Retail, 2015). Liberalization of FDI policy in the retail sector: Liberalisation of the FDI policy will encourage shopping centre developers to build larger quality malls as per the requirements of international retailers. Improving quality of retail assets in India: In the future, retail real estate developments will be transformed to meet international standards in terms of design, ambience and store formats. In order to shape the concept of next-generation malls in India, a lot of investment and funding will be required. Entry of international retailers in India: The Indian retail sector has witnessed increasing interest from various international retailers, thus boosting the demand for organized retail real estate in India. Several international retailers have already ventured into partnerships with domestic retailers in the cash-and-carry format or under franchise agreements. The entry of multi-brand retailers will augment the need of large-scale infrastructure both at the front and the back end. Opportunities for state of the art retail infrastructure: In the future, the average size of malls is likely to increase as developers are focusing on mall sizes that allow for a critical mass in terms of offering various formats and categories under one roof. This, in turn, creates a large pool of investment opportunities for real estate investors to partner with mall developers as they set out to create state-of-the-art retail infrastructure. Outlook The lack of clarity on policies for retail in India and the simultaneous strengthening of the e-commerce sector have had an adverse effect on Indian retail real estate. However, with clarity emerging on multi brand retail policy, expected implementation of GST and rising consumer confidence, the retail sector is likely to witness a bounce back in the near future. In addition, REIT is currently open for office space, but developers of malls are anticipating extension of REITs to shopping centers, which will boost development of malls in the country. Furthermore, relaxation of FDI norms may encourage foreign single- and multi-brand retailers to set up shop in India and create a significant demand for retail space. d. Special Economic Zones Special Economic Zones (SEZs) have been recognized as an important mechanism for trade and investment promotion, creation of infrastructure, employment generation, increase in foreign exchange earnings, improving export competitiveness and transfer of skills and technology. In order to revive the stagnating growth of the manufacturing sector the new government has introduced various policy initiatives in order to enhance the functioning of SEZ units in the country. The government has taken a number of initiatives including implementation of brscribed timelines for service delivery, digitization, standardization of procedures, practices and forms and improved redressal mechanism to improve 3. ease of doing business in the country. The outlook for the sector looks very optimistic as the new Government has set up a high-level team to revive development of SEZs (which was lost after tax advantages and other sops were removed in 2011) in the country. As part of the plan, states will soon be allowed to set up their own Export Processing Zones (EPZs). Along with policy reforms of land acquisition and labor laws, this is likely to usher in a new era in the SEZ segment (Source: Ernst and Young, Real Estate - Making India, November2014). e. Hospitality segment The Indian hospitality industry has emerged as one of the key drivers of growth among the services sector in India. During the year 2014, the hospitality sector was affected by various factors such as volatile economic environment, debrciating rupee, high interest rates and high power cost. In addition, the sector was hit by continued demand-supply mismatch across most of the gateway cities, which contributed to a major slump in hotel occupancies as well as room rates, despite a small pickup in demand. Further, the negative international brss coverage about safety of women in India has led to a slowdown in the inbound leisure business. The average daily rates (ADRs) continued to suffer due to undercutting of prices and nearly doubling of inventory in key markets like Delhi, Mumbai, Pune, Bangalore and Chennai. Looking forward, the outlook for the Indian hospitality sector appears to be bright. The Government's announcement of e-Visa facilities at nine airports and its announcement of a clear roadmap on its Visa on Arrival Policy (VoA) is a positive step for India's hotel sector. Business and leisure travel is expected to pick up in the country with economic recovery supporting the revival of its hospitality industry. This is expected to add more than 50,000 branded rooms in the next 5 years, taking the total supply in the country to around 1,44,000 such rooms by FY18 (Source: Ernst & Young, Real Estate - Making India, November 2014). COMPANY OVERVIEW The Parsvnath Group, having an experience spanning over three decades in the real estate industry, is one of India's leading Real Estate Developers, with pan India brsence across 42 cities in 15 states. The Company is engaged in the business of promotion, construction and development of integrated townships, residential & commercial complexes, multi-storied buildings, flats, houses, apartments, shopping malls, DMRC projects, IT parks, hotels and SEZs. The Residential projects developed on large areas of land comprises of plotted developments, houses and villas, group housing, commercial, hotels and common amenities like medical care and schools. The Commercial project provides integrated commercial complexes for the IT and BPO industry. The DMRC project offers malls. The Integrated Townships projects comprise the residential plots and houses. As on date, the company has total developable area of over 1,32,89,966 sq. mt. (143.05 mn. sq. ft.) across all real estate verticals. During FY 2014-15, Parsvnath registered consolidated revenues of Rs. 763 cr., an increase of 34.53% compared to FY 2013-14. Profit before Exceptional items & Tax is at Rs. 157 cr. for FY 2015 as compared to Rs. 39 cr. in FY 2014. Pursuant to an Arbitration Award in respect of residential cum commercial project (Prideasia) at Chandigarh, the company has written off Rs. 470 cr. which has been reflected as exceptional items. The loss after Exceptional items, Tax & Minority Interest is at Rs. 108 cr. in FY 2015 as compared to Profit after tax & Minority Interest of Rs. 16 cr. in FY 2014. EBIDTA and EBIDTA margins have increased to ` 342 cr. and 45% respectively for FY 2015 from ` 227 cr. And 40% respectively in FY 2014. As on date, the total area under construction is 64,81,171 sq. mt. (69.76 mn. sq. ft.). Integrated Townships contributed 41,26,005 sq. mt. (44.41 mn. sq. ft.), Residential segment contributed 19,66,088 sq. mt. (21.16 mn. sq. ft.), Commercial contributed 1,66,046 sq. mt. (1.79 mn. sq. ft.), Retail/ DMRC contributed 1,28,777 sq. mt. (1.39 mn. sq. ft.) and Hospitality & IT Parks contributed 94,255 sq. mt. (1.01 mn. sq. ft.). Business segment review a. Residential segment Parsvnath has become a strong brand name in the residential segment in north India. In this segment, the company offers high-rise apartments and row houses. Over the years, the company has successfully completed and delivered 20 residential projects aggregating to 8,61,825 sq. mt. (9.28 mn. sq. ft.) of total developable area. At brsent the company has 16 ongoing projects across the country with a total developable area of 19,66,088 sq. mt. (21.16 mn. sq. ft.) which is expected to be completed over the span of next 4 - 5 years. Segment highlights, 2014-15 • Offered possession for an area of 60,566 sq. mt. (0.65 mn. sq. ft.) of 4 residential projects • Sold an area of 12,503 sq. mt. (0.14 mn. sq. ft.) in residential projects totaling worth Rs. 6,840.00 lakhs b. Integrated townships Parsvnath has a wide portfolio of 14 integrated townships sbrad over an area of 50,86,441 sq. mt. (54.75 mn. sq. ft.). The townships have a wide variety of projects spanning from residential plots, houses, villas, floors, apartments, facilities for schools etc. The company sells the residential plots and houses in the townships. As on date, the Company has already developed 12,78,726 sq. mt. (13.76 mn. sq. ft.) of township projects. Segment highlights, 2014-15 • Offered possession for 1,08,437 sq. mt. (1.17 mn. sq. ft.) of integrated townships • Sold an area of 96,142 sq. mt. (1.04 mn. sq. ft.) worth Rs. 11,103.00 lakhs in integrated township projects • Received an additional license for 12.37 hectares (30.572 acres) of land at Karnal Integrated Township in Haryana • Received license in the name of M/s Ratan Parsvnath Developers (AOP) for development of an Integrated Township on 41.51 hectares (102.58 acres) of land at Kanpur, Uttar Pradesh c. Commercial segment The company has a significant amount of projects in the commercial segment. Over the years, the company has developed 12 commercial projects across 7 cities amounting to 70,788 sq. mt. (0.76 mn. sq. ft.) of leasable/ saleable area. At brsent, 9 commercial projects amounting to 1,66,046 sq. mt. (1.79 mn. sq. ft.) of leasable/saleable area is under construction, which the company expects to complete over a period of three years. The timely completion and leasing of these projects will provide stable cash flows to the company. Segment highlights, 2014-15 • Sold 2,861 sq. mt. (0.03 mn. sq. ft.) of commercial projects totaling Rs. 1,049 lakhs sbrad across 4 cities • Commenced the construction of a world class commercial complex, "The Parsvnath 27" at KG Marg, New Delhi with a total developable area of 14,864 sq. mt. (0.16 mn. sq. ft.) and saleable/ leasable area of 12,129 sq. mt. (0.13 mn. sq. ft.) • Completed the construction of Phase - I of Red Fort Parsvnath Tower (20,438 sq. mt. / 0.22 mn. sq. ft.) at Bhai Veer Singh Marg, New Delhi; received all approvals for Phase - II of the project (6,039 sq. mt. / 0.07 mn. sq. ft.) and started the construction d. DMRC malls The Company has entered into concession agreements with Delhi Metro Rail Corporation Limited (DMRC) for developing 13 shopping malls near metro stations on Build-operate-transfer (BOT) basis. As on 31 March 2015, the company has completed construction of 11 malls aggregating 87,900 sq. mtr (0.95 mn. sq. ft.) of developable area. At brsent construction of 5 malls with developable area of 1,28,777 sq. mtr (1.39 mn. sq. ft.) is going on. This will help • the company generate significant cash flows in future. e. Special Economic Zones . Parsvnath entered into the SEZ markets aggressively through its subsidiary company named Parsvnath Infra Limited. Through this subsidiary, the company develops both single . product and multi-product SEZs. At brsent the company has four SEZs measuring an area of 27,45,284 sq. mt. (29.55 mn. sq. ft.) for development. f. Hospitality segment In the hospitality segment, Parsvnath is currently developing a hotel property at Shirdi through a 100% subsidiary, Parsvnath Hotels Limited (PHL). This hotel project, in the affordable hospitality segment, will be managed by a leading national hotel chain on completion. Recognitions Our passion and consistent efforts for providing cost-effective and holistic solutions for our customers while creating and adding value for our partners and stakeholders has helped us win numerous awards and recognitions. Selected as winner for "Developer Of The Year -Integrated Township" under Developers Awards by Estate Avenues on May 29, 2015 Received award for being the "Best Developer of Delhi NCR" on June 27, 2014 at the Annual Estate Avenues - North India Real Estate Awards held at Chandigarh Received Prestigious Excellence Award for "Innovative Marketing Concept of the Year" on September 10, 2014 conducted by Exchange4media Group in New Delhi Received award for "Best Developer (Commercial) of the Year" in Real Estate Awards 2014 conducted by M/s Worldwide Achievers in New Delhi Received "Realty Kings Award for Excellence" 2014 for being Realty Giant of North India and "Realty King Marketer" of the year 2014 at Award Night Conclave by Think Media Inc. One of the residential project, Parsvnath La-Tropicana, New Delhi has been ranked among the "Most Promising Projects of North India 201415" by Estate Avenues on February 01, 2014 Company Outlook Looking forward, the company will remain committed to its focus on timely delivery of projects, draw up a detailed project development and execution roadmap and engage with other third parties to expedite construction of projects which are in progress. The company is optimistic that these strategic efforts of fast track construction, effective project management and timely delivery of projects will help it to achieve much better results in the ensuing quarters. With respect to deleveraging, the company will continue to work towards asset monetization by divesting non-core assets including land, raise long term capital to reduce debt and expedite execution of projects to add better revenue. Further, the company will also focus on developing a portfolio of regular income yielding assets through a mix of commercial and other segments. In addition, the company's ability to bag contracts from DMRC and timely execution of the projects will ensure regular cash inflow and improve the prospects of getting more government projects. The demand supply mismatch in the mid income and affordable residential housing segment offers immense opportunities to the company to utilize its forte of providing high quality, value for money offerings in these segments. The company is confident that its innovative marketing campaigns and strategies, ability to provide projects at appealing price ranges and uncompromising attention to quality and details will make it stand out from the crowd and help in ensuring regular cash flows, even under tighter economic conditions. Further, the company will continue to operate in its existing market and also look out for exploring new avenues and opportunities for further addition of new projects. 4. SUBSIDIARIES AND ASSOCIATE COMPANIES • Parsvnath Infra Limited (PIL) Parsvnath operates in the SEZ segment through Parsvnath Infra Limited (PIL), in which PDL holds 94.87% equity. PIL is currently focusing on an Information Technology SEZ at Kochi, Kerala and a Bio-technology SEZ at Hyderabad, Andhra Pradesh. The projects are at initial stages. • Parsvnath MIDC Pharma SEZ Private Limited (PMPSPL) PMPSPL, a subsidiary of PIL, was incorporated to implement a pharmaceutical SEZ project in Maharashtra. However, after careful evaluation, PIL decided to surrender the project and refund of the installment of land brmium paid has been received after certain deductions • Parsvnath Landmark Developers Private Limited (PLDPL) Construction of the brmium residential project "La Tropicana" at Civil Lines, Delhi, is in progress. The project was part funded by the J.P. Morgan Group. . Parsvnath Hotels Limited (PHL) The hotel project at Shirdi is under construction. • Primetime Realtors Private Limited (PRPL) The Company has received all the requisite approvals for construction of a commercial building on plot of land measuring 0.49 hectares situated at 27, Kasturba Gandhi Marg, New Delhi-110001, owned by PRPL and the construction is in progress. • Parsvnath Estate Developers Private Limited (PEDPL) The Company has tied up with Red Fort Capital (RFC), a leading international Private Equity Real Estate firm, to jointly develop "Red Fort Capital Parsvnath Towers", a modern state of-the-art office-cum-commercial complex of international standards, located adjacent to Connaught Place on Bhai Veer Singh Marg. Construction has been carried out by Larsen & Toubro (L&T), and the building (Part A) has been leased out to various users such as State Bank of India, Axis Bank, Aditya Birla Management Corporation, Regus Connaught Place Business Centre etc. • Parsvnath Hessa Developers Private Limited (PHDPL) PHDPL is developing the brmium luxury residential project "Parsvnath Exotica" at Gurgaon, Haryana. Handing over of the flats to the customers continued in a phased manner. On exit of the private equity investor during 2013-14, PHDPL has become a wholly owned subsidiary of the Company. • Parsvnath Buildwell Private Limited (PBPL) PBPL is implementing a brmium residential project "Parsvnath Exotica - Ghaziabad" in Ghaziabad District, Uttar Pradesh, sbrad over an area of approx. 12.55 hectares. Private equity firm SUN-Area Property Partners has invested Rs. 90 crores in the project. • Parsvnath Realcon Private Limited (PRPL) PRPL, a subsidiary of PBPL is operating as a project SPV for developing a luxury residential project at Subhash Nagar in West Delhi on land acquired from DMRC. • Parsvnath HB Projects Private Limited (PHBPL) PHBPL, a subsidiary of your company and a joint venture with HB Estate Developers Ltd., is developing a Hotel-cum- Multiplex-cum Shopping Mall Project viz., 'Parsvnath Mall Matrix' at Mohali in Punjab. • Parsvnath Film City Limited (PFCL) The Arbitral Panel vide its order dated 10 March, 2012 had decided the matter in favour of PFCL and awarded refund of Rs. 4,919.00 lakhs towards the earnest money paid and other expenses incurred by PFCL along with interest @ 12% per annum. Subsequently, the CA filed a petition before the Additional District Judge at Chandigarh challenging the award under section 34 of The Arbitration and Conciliation Act, 1996. The said petition was dismissed by the Hon'ble District Judge vide his Order dated 7 May, 2015. The Hon'ble Judge vide his judgement has decided the matter in favour of the Company and stated that the Arbitration Award is final and that there is no occasion to set aside the Award of the Arbitrator. Considering the facts and the discussions with Legal Counsel, the Management considers the above advance as good and fully recoverable. • Parsvnath Telecom Private Limited The Company has still not ventured into telecommunication related business and is still in the process of exploring the possibilities to undertake this business. • PDL Assets Limited The Company is still in the process of exploring various possibilities of undertaking asset management and asset holding activities, and shall venture into this business as and when suitable opportunities are identified. Parsvnath Promoters and Developers Private Limited (PPDPL) The residential project near Rani Jhansi Road, Delhi was assigned to Parsvnath Rail Land Project Pvt. Ltd. as approved by Rail Land Development Authority. The investments made by the foreign investors in this Company are in the process of transfer to Parsvnath Rail Land Project Private Limited. • Parsvnath Rail Land Project Private Limited (PRLPPL) Parsvnath Rail Land Project Private Limited was incorporated for implementing the residential project near Rani Jhansi Road, Delhi, on land leased by 'Rail Land Development Authority' (RLDA) as a result of a successful bid by your Company. Your Company has tied up with Red Fort Capital Group, international private equity investors, for investment in the project and inked an agreement with two investment companies for setting up the project. The Company is in arbitration with RLDA for settling disputes regarding payment of lease brmium and interest as stated in Development Agreement and acquisition of development rights over the project site. The Company is in the process of submitting the statement of claim with the Arbitration Tribunal. • Amazon India Limited The Company has already developed a Residential Project, viz. Parsvnath Green Ville at Sohna Road, Gurgaon in Haryana and has handed over possession of flats to the respective allottees quite some time back. Large number of families is already living in the Complex. • Homelife Real Estate Private Limited The Company is implementing a Township Project, viz. Parsvnath King City at Rajpura in Punjab. The development of the project has been done in three phases and possession of developed plots in Phases I & II have been handed over to the respective customers and major development work in Phase III has already been completed and once the development is fully complete, the possession of plots in Phase III will also be handed over to the respective customers. • Vardaan Buildtech Private Limited The Company is in the process of constructing a Commercial Mall at Sonepat in Haryana on the land owned by the Company. It is expected that it will take some more time for commencing the construction work. • Palakkad Infrastructure Private Limited (PIPL) PIPL was set up as a joint venture with the Leela Group and Muthoot Group to implement an Information Technology/ Information Technology enabled services SEZ in Kerala. However, due to changes in government policy towards SEZs especially withdrawal of some tax concessions, and the brvailing economic environment, it has been decided not to go ahead with the SEZ project. 5. HUMAN RESOURCES The one thing that sets us apart from the rest is the capabilities and commitment of our employees. At Parsvnath, we believe that the prudent management of talent is one of the important aspects of achieving success in a sector which is marked by growing competition and complexity. In line with this, we take measures to make sure that our employees get ample opportunities to grow both professionally as well as personally. As of 31 March, 2015, the company has a talented and dedicated workforce of 579 employees. 6. MANAGING BUSINESS UNCERTAINTIES Risk is the face of business uncertainty, affecting corporate performance and prospects. As a diversified enterprise, Parsvnath has a system-based approach to business risk management. The Company has internally instituted an integrated risk management framework, comprising risk identification, creation of an appropriate risk management structure and evaluation of performance. 7. INTERNAL CONTROLS AND SYSTEMS A combrhensive in-house Internal Audit Department has been set up to conduct regular audits to ensure the adequacy of the internal control system, adherence to management instructions and compliance to achieve the objective of maximum productivity and output. The scope of activities of this department includes safeguarding and protecting the Company's assets against unauthorized use or disposition, maintenance of proper accounting records and verification of authentication of all transactions. Also, in order to further strengthen our Internal Audit systems, an independent firm of Chartered Accountants has been appointed to carry out the internal audit of various project sites, commercial and other functions of the Company. Having a sound reporting system with regard to compliance, the management can ensure that the Company follows best practices only. The Audit Committee and/or the Board of Directors periodically review audit plans, observations and recommendations of internal and external auditors with reference to significant risk areas and adequacy of internal controls. Forward looking statement Statements made in the Management Discussion and Analysis Report describing the Company's objective, projections, estimates, expectations may be forward looking statements within the meaning of applicable laws and regulations, based on beliefs of the management of your Company. Such statements reflect the Company's current views with respect to the future events and are subject to risks and uncertainties. Many factors could cause the actual result to be materially different from those projected in this report, including among others, changes in the general economic and business conditions affecting demand/ supply and price conditions in the segment in which the Company operates, changes in business strategy, changes in interest rates, inflation, deflation, foreign exchange rates, competition in the industry, changes in governmental regulations, tax laws and other Statutes & other incidental factors. The Company does not undertake any obligation to publicly update any forward looking statements, whether as a result of new information, future events or otherwise. |