MANAGEMENT DISCUSSION AND ANALYSIS REPORT ECONOMIC AND INDUSTRIAL REVIEW The real estate sector in India assumed greater prominence with the liberalization and growth of the economy. At brsent, the real estate, construction and infrastructure sectors are playing a crucial role in the overall development of India's core infrastructure. Though, India's real estate sector was going through a slowdown for last couple of years because of a lack of clear policy, delayed government clearances, non-availability of funds and slowed demand - especially for residential properties. Now, with a stable government at center, fundamentals of Indian economy as well India's real estate sector are however improving, as seen by better liquidity and improved demand. Real Estate as a matter of fact has always been an attractive investment option and with the additional support of the new rules and regulations by the government, it resulted in significant growth in the residential and commercial Real Estate. The new government has already indicated its desire to revive the investment cycle and to empower the bureaucracy to ensure successful execution of the government's plans. The Recent government policies like "Housing for all by 2022", "Affordable Housing", and "100 Smart Cities Plan", will create tremendous demand in Real Estate, Infrastructure sector, specifically residential. The recovery has given way to belief in the sustained healthy levels, if not a rapid growth. Increase in business opportunities and labor migration led to rising demand for commercial and housing space. Demand for commercial property is being driven by the country's economic growth. Urban population has been increasing and this urbanization and growing household income is driving demand for residential real estate. OUTLOOK With the government initiatives to re-build the trust in the consumers by regulating the real estate sector with the proposed Real Estate (Regulation & Development) Bill, it will be a great time for the Company, which has the execution capabilities and track record of delivery. Outlook: Residential Real Estate • Fragmented market with few large players. • Demand of over 3 million units in the seven major cities. • Demand for brmium products to continue, albeit at a slower pace. • Demand for Ultra Low Cost (ULC) Housing 'Housing for all' to enhance at very high growth rate. Outlook: Commercial Real Estate • Few players with brsence across India. • Operating model shifting from sales to lease and maintenance. • Rentals have started apbrciating during the current FY. • IT/ITES and BFSI would continue to account for 60-70% of office demand. Outlook: Retail Real Estate • Fragmented market with few large players. • More collaborative models such as revenue sharing to emerge in the sector. • Demand for retail spaces on high streets increasing. • With FDI in multi brand retail more international retailers to venture into India, which would result high demand and increased rentals in retail real estate. • Retailers would continue to expand beyond Tier I into Tier II and III cities and large number of malls slated to become operational. Outlook: Hospitality Real Estate • A competitive market with major players. • NCR and Mumbai by far the biggest hospitality markets in India due to economic growth and business meets. • Government initiative to promote tourism in Tier 2 and Tier 3 cities generating demands. BUSINESS OVERVIEW Indiabulls Real Estate is one of the largest real estate companies in India and a national player across multiple realty and infrastructure sectors with development projects sbrad across high-end office and commercial complexes, brmium residential developments, mega townships, retail spaces etc. It has focused and significant brsence in Key Indian Metros and London. The Company has fully paid land bank of 1,017 acres in key cities across India, of which more than 95% of the Land Bank is in high value super-metro cities - Mumbai (MMR), National Capital Region (NCR) and Chennai, and which is sufficient for proposed development over the next 7 years. In addition to the said land bank of 1,017 acres, the Company also possesses 2,588 acres of SEZ land in Nashik, Maharashtra. Recently, the Company has received the Environment Clearance from the Ministry of Environment, Forest and Climate Change. The Company's ongoing projects have 30.14 million square feet saleable area with a gross development value of Rs. 22,803 Cr. Each project bears a stamp of thoughtful solutions and highest quality and an optimum mix of different categories and is a testimony of Company's diversified portfolio of super brmium category, brmium category & mid income category. Ongoing major projects: The following ongoing projects with total estimate saleable area of 30.14 million sq ft with gross development value of Rs. 22,803 Cr are under development: • BLU, Worli, Mumbai - which has total saleable area of 1.17 million sq ft with gross development value of Rs. 6335 Cr. • Indiabulls Golf City, Savroli, MMR - which has total saleable area of 5.22 million sq ft with gross development value of Rs. 3139 Cr. • Indiabulls Greens, Panvel, MMR - which has total saleable area of 8.66 million sq ft with gross development value of Rs. 4446 Cr. • Indiabulls Greens, Chennai - which has total saleable area of 2.07 million sq ft with gross development value of Rs. 831 Cr. • Centrum Park, Gurgaon - which has total saleable area of 2.16 million sq ft with gross development value of Rs. 915 Cr. • Enigma, Gurgaon - which has total saleable area of 1.76 million sq ft with gross development value of Rs. 1124 Cr. • Indiabulls City, Sonepat, Haryana - which has total saleable area of 1.76 million sq ft with gross development value of Rs. 242 Cr. • One Indiabulls, Gurgaon - which has total saleable area of 6.15 million sq ft with gross development value of Rs. 4918 Cr. • Mega Mall, Vadodara - which has total saleable area of 0.23 million sq ft with gross development value of Rs. 85 Cr. • Indiabulls One 09, Gurgaon - which has total saleable area of 0.96 million sq ft with gross development value of Rs. 768 Cr. Major new launches/ proposed launches The projects, including the following, with total estimated saleable area of 7.87 million sq ft with gross development value of Rs. 12,517 Cr are launched / proposed to be launched in FY 2015-16: •Indiabulls Mint, Sector 104, Gurgaon - a commercial project located in Sector 104, Gurgaon on Dwarka Manesar exbrssway with net development area of 2.12 acres with estimated gross development value of approx. Rs. 310 Cr. •Indiabulls Imperial, Sector 106, Gurgaon - a mixed development of luxury residential and commercial project located in Sector 106, Gurgaon on Dwarka Manesar exbrssway with net development area of 35.2 acres with estimated gross development value of approx. Rs. 5933 Cr •Silverlake Villas, Alibaug - a unique lifestyle project sbrad over 7 acres at Alibaug, MMR with estimated gross development value of approx. Rs. 164 Cr • 22 Hanover Square, London, a unique luxury & residential project with total saleable area of 0.10 million sq ft with gross development value of approx. Rs. 5,200 Cr The Company's operations span all aspects of real estate development, from the identification and acquisition of land, to the planning, execution, construction and marketing of its projects (including architecture, design management and interior design), through to the maintenance and management of its completed developments, as well as providing consultancy and advisory services on engineering, industrial and technical matters to all forms of industries including companies engaged in construction-development of real estate and infrastructure projects. COMPETITIVE STRENGTHS The Company's principal competitive strengths are set forth below: Track record of delivery The Company has a track record of fastest and largest delivery in value terms and enjoys high confidence of the investors and customers in view of its execution and quality delivery. The Company stuck to its commitment of early delivery of the projects, towards this: (a) Company has handed over the project Vatika, Ahmedabad to the Society. (b) Part completion certificates for our 100 acre township at Sonepat in Haryana and Centrum Park Group Housing Project, Sector 103, Gurgaon have been received and the Phase-I of these projects has been offered for possession to the valued customers. (c) Occupancy Certificate for Phase I and II for Indiabulls Mega Mall, Vadodara was received during the year and accordingly Phase-I & Phase II of this projects have been offered for possession to the valued customers. Execution capabilities The Company has put together an experienced team that has strong capabilities in various aspects of project execution, as well as in-depth knowledge of the localities in which the Company is developing projects. Our highly professional business approach and a very adept technical and design team handpicked from across the world, ensures that there is high efficiency with zero tolerance for lapses. It has the personnel and internal systems to successfully manage large construction projects with on time delivery and quality. International safety equipment like edge protection system, fan catch etc. are used and paramount importance is given to safety in all phases of construction. Quality construction Highest quality construction is the key driver for achieving the long term results. The Company employs the most advanced construction equipment, cutting-edge technologies like advanced jump form technology, advanced vertical transportation system, wind tunnel engineering and also finest quality raw materials. Strong brand recognition The strong brand recognition with the brand name "Indiabulls" is one of the key strengths. Our The Company forms part of Indiabulls Group, one of the country's leading business houses with business interests in several businesses. The Company believes that the brand recognition and trust associated with the brand "Indiabulls" has a cascading effect on company's real estate business. Unvarying the past, Company's project Indiabulls Golf City, Savroli, Mumbai has been awarded "BEST GOLF DEVELOPMENT - 2015", by international property award. Land Bank - key to future profitability The Company through acquisitions and government allotments has established a sizeable land bank in brferred locations at competitive prices. In addition to 2,588 acres of SEZ land in Nashik, Maharashtra, the Company has fully paid land bank of 1017 acres in key cities across India, which is sufficient for proposed development over the next 7 years. The size and location of the Company's land reserves allows it to respond more effectively to changes in market conditions and demand. The Company believes that sizeable land reserves are the most important resource for a property developer. High demand locations of the projects The Company has more than 95% of its portfolio in Indian key locations i.e. Mumbai (MMR), Delhi (NCR) and Chennai and in the high demand prime location at London. The Company's commercial developments are located in areas that are attractive to corporate and multinational clients. The locations of the Projects provide a strong basis for the success of its core property-development business and a platform from which it can further expand its related business such as project management and investment advisory services. Your company possesses these lands with no outstanding amounts of due to be paid. The size and location of these lands allows us to respond quickly and effectively to the changes in the market conditions, regulatory environment and the overall demand. Our credit rating - a reflection of sound financials The Company's rating for long-term debt (Term loans and NCDs) has been upgraded to AA- (making it the highest rated company in the Indian real estate industry peer group), and for short term debt Company has retained A1+ (A One Plus) rating for its short-term debt, which is the highest rating that can be assigned for short-term debt. With this the Company enjoys ease and most favorable terms on the loans/facilities being availed from the Banks/Financial Institutions. The ratings are the manifestation of the Company's strong fundamentals, low gearing and execution track record and mirror its long term growth prospects. STRATEGY The key elements of the Company's strategy include: New launches- Planned Projects, value to be generated in coming years Some of the new projects envisaged to be launched in coming years, mainly - One Indiabulls, Sector 104, Gurgaon; Indiabulls Mint, Sector 104, Gurgaon; Indiabulls Imperial, Sector 106, Gurgaon, Silverlake Villas, Alibaug and 22 Hanover Square, London, will generate significant cash flows for the Company. Consolidation of land bank - building momentum to the growth With the continued acquisition of quality land in brferred locations at competitive prices, the Company has sufficient land to meet its development plans. The Company acquires land adjoining existing land parcels which would build momentum for the growth of its existing successful projects. The Company is also acquiring new low cost land parcels with good future potential. During the year, the company acquired 7 acres of high end residential land in most prime location in Thane. The land was acquired in auction for a price of Rs. 236 crore. The launch of brmium residential apartments at this land will generate value to the Company's financials. Unsold inventory of existing projects renders visibility on future cash-flows and revenue During the year under review, Company's various existing projects gained momentum, while the Company launched several new ones at strategic locations. Almost entire inventory of existing projects have been sold out, with very little inventory left out of the existing stock. These projects are generating very good response and their selling prices are creating new benchmark in their respective locations. The projects, expected to be delivered in coming years have been steadily apbrciating in terms of price realization for all incremental sales. Focus on super metros More than 95% of the Company's portfolio is in Super-Metro Cities i.e. Mumbai Metro Region, National Capital Region and Chennai. Both the residential and the commercial projects are located in the areas of high growth with regards to infrastructure, connectivity and have high future potential. The Company will continue to focus on the areas which have high demand for both the residential and commercial. Monetize non-core assets The Company focuses only on large scalable developments, both the residential and the commercial which are located in the areas of high demand and future potential. The Company shall monetize its small non-core land assets as and when opportunity arises at good market value and the Company believes that in following this strategy, it will be able to maximize its earnings per share and return on capital. Acquisition of clear title lands for clear title projects The Company focuses on acquisition of clear title lands, which allows timely execution and speedy delivery of its project. The speedy and efficient execution of our projects remains a key priority. $900 million worth lands were acquired through government auctions. In its endeavor to generate value with acquisition of clear title lands through auctions, during the year, the company acquired 7 acres of high end residential land in most prime location in Thane for a price of Rs. 236 crore. The Company will continue to acquire such clear title lands in future also to retain customers'/ investors' confidence on our timely delivery without any delay. International Foray The Company has recently made its first international foray, with the acquisition of 22 Hanover Square, an iconic landmark in Mayfair, the heart of central London, which is currently a commercial office building sbrad over 87,444 sqft of area. The project envisages redeveloping it into a luxury residential building with estimated total saleable area of 0.10 million sq ft with gross development value of approx 5200 Cr. Focus on execution and timely delivery On time delivery is our key driver for success of all our projects. The Company has a track record of timely and fast delivery, subject of course to constraints of external factors like delay in approvals and uncertainty in state government's policies. Focus on results Whilst, Company seeks to turn over its land as soon as possible by adding value through its developments and then selling the properties or holding them for rental income, the Company intends to concentrate its construction and development activities towards projects that are br-sold or br-leased. The Company intends to continue developing its land reserves, replacing its developed land as and when required for new developments. The Company believes that in following this strategy, it will be able to maximize its earnings per share and return on capital. RISKS & OPPORTUNITIES The Company believes that there are lots of opportunities and demand in Indian Real Estate Sector. Following are the key drivers: Key demand drivers: Residential Real Estate • Rapid Urbanization • Rise in number of nuclear families • Rising disposable incomes • Repatriation by NRIs / HNIs • Easy availability of finance • Tax incentives Key demand drivers: Commercial Real Estate • Expected economic growth recovery • Continued growth in IT/ITES and BFSI sectors • Expanding brsence by MNCs in India Key demand drivers: Retail Real Estate • Rising disposable incomes • Growing consumerism • Growing organized retail • FDI in multi brand retail Key demand drivers: Hospitality Real Estate • Increased business travel • Growing tourism In the course of its business the Company is exposed to stiff competition from other developers in the market. In addition, it is exposed to certain market related risks, such as increase in interest rates and foreign currency rates, customer risks and changes in the government policies. HUMAN RESOURCES Your Company's multi-business context poses unique challenges to the Human Resource function. The Company's businesses are managed by a team of competent and passionate leaders, capable of enhancing your Company's standing in the competitive market. The Company's employees have a defining role in significantly accelerating its growth and transformation, thereby enhancing its position as one of the largest corporate houses. The Company has a structured recruitment process. The focus is on recruiting people who have the right mindset for working at Indiabulls, supported by structured training programs and internal growth opportunities. The Company's focus is on unlocking the people potential and further developing their functional, operational and behavioral competencies. The launch of new Employee Stock Option Schemes for its employees ensures the employee participation in the growth and progress of the Company. The belief "great people create great organization" has been at the core of the Company's approach to its people. INTERNAL CONTROLS AND THEIR ADEQUACY The Company has a proper and adequate system of internal controls commensurate with the size of the Company and the nature of its business to ensure that all the assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded and reported correctly and adequately. The Company's internal controls are supplemented by internal audits, review by management and documented policies, guidelines and procedures. The system has been designed to ensure that financial and other records are reliable for brparing financial information and for maintaining accountability of assets. All financial and audit control systems are also reviewed by the Audit Committee of the Board of Directors of the Company. Indiabulls Foundation As a responsible corporate citizen the Indiabulls Group believes in giving back to the society. Indiabulls Foundation has contributed extensively in the fields of Health, Education and Rural Development. The Indiabulls Foundation Free Medical Clinics in Worli and Santa Cruz, Mumbai, is an ongoing initiative which amplifies the healthcare aid and reaches out to the underprivileged. In addition to the clinics in Mumbai, 7 JanSwasthyaKalyanVahika™ vehicles, a mobile medical van project, provide free primary healthcare services to the needy within Mumbai, Panvel and Thane areas, and caters to approximately 1,68,000 patients per year. Further, partnering with Smile Train in an endeavour to help 600 children this year with surgeries of cleft or palate deformities across 6 major states took the total benefited over 1,200 children. Understanding the benefits of a literate economy, Indiabulls Foundation has offered scholarships to deserving students to enable them to continue their studies beyond the 12th standard and launch a sustainable career in a field of the student's choosing. Indiabulls Foundation has also donated sophisticated e-Learning systems and computers to Tribal Asharam Schools. Indiabulls Foundation had provided free Paushtik Aahar (nutrition supplements) to 3000 underprivileged malnourished individuals to various institutions in Thane, Palghar, Raigad and Mumbai districts. These supplements are made by the Foundations's support to women self help groups simultaneously tackling the problem of employment for the underprivileged. Cautionary Statement Statements in this report on Management Discussions and Analysis describing the Company's objectives, estimates and expectations may be forward looking statements based on certain assumptions and expectations of future events. Actual results might differ substantially or materially from those exbrssed or implied. The Company here means the consolidated entity consisting of all its subsidiaries. Similarly Company's land bank and Company's project means the consolidated land bank and project of the Company as consolidated entity along with all its subsidiaries. The Company assumes no responsibility nor is under any obligation to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events. |