MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT INDUSTRY AND ECONOMIC SCENARIO The GDP growth of the Indian economy has recovered from the decadal lows of 4.6% year-on-year in First Quarter of 2014 to 7.5% year-on-year First Quarter of 2015 putting it ahead of China as the world's fastest growing large economy. With Government of India's focus on pro-business legislations, expeditious clearances to large scale infrastructure projects, lowering the fiscal and current account deficit, controlling inflation, there are expectations of a major economic revival and growth. Economists and governing authorities have projected India to remain as the fastest growing economy in the coming years. INDUSTRY STRUCTURE AND DEVELOPMENTS The Centre's recent announcement to build 2 crore houses by 2022, launch 100 smart cities and Atal Mission for Rejuvenation and Urban Transformation ("AMRUT") of 500 cities are the breminent things to be welcomed in Real Estate Industry. These initiatives will throw a plethora of opportunities for the industry and will offer solutions to today's unplanned urbanization and prove instrumental in developing, planning and providing infrastructure solutions from a futuristic perspective. Slum rehabilitation will be an integrated part of urban redevelopment, which will be highly beneficial for the Company. The road map is expected to entail fast track approvals for project clearances, ease land conversion rules, encourage affordable housing and to bring additional credit linked subsidies to weaker sections of the society and to encourage low cost housing. The real estate market is projected to reach US$ 180 billion by 2020. The expected growth rate of the industry is at a compound annual growth rate ("CAGR") of 19% for the period 2010-2015, with Tier I metropolitan cities contributing to almost 40% of this growth. Real estate in India is being recognized as urban infrastructure service that is driving the economic growth engine of the country. Housing contributes to 6% of the country's GDP today. The falling interest rates, controlled inflation, positive policy initiatives such as a regulator for housing, setting up of Real Estate Investment Trust ("REIT"), easing of lending norms for affordable housing, infrastructure status for affordable housing, increasing exposure from the commercial banks towards the real estate sector, will encourage the sector to boom. However, factors such as red tapism, delay in project approvals, lack of tax benefits will prove to be detrimental to growth. According to data released by Department of Industrial Policy and Promotion, the construction development sector in India has received Foreign Direct Investment ("FDI") equity inflows to the tune of US$ 24,012.87 million in the period April 2000- December 2014. Sensing the investment opportunities, several large global investors, including a number of sovereign funds, have taken the first move by partnering with successful local investors and developers for investing in the Indian real estate market. OPPORTUNITIES AND THREATS • Opportunities: The announcement by the Central Government on Housing for all by 2022, 100 Smart Cities and AMRUT are expected to tremendously benefit the players of the Real Estate Industry and the Company is eyeing to clutch the opportunities arising thereon. The favourable Government policies on urban infrastructure and real estate development is expected to give boost to the sale of residential, retail, commercial and Floor Space Index ("FSI"). The Company has been in the real estate and infrastructure domain having developed over 100 million sq. ft. of commercial, residential and retail space. The Company is market leader in Residential, Affordable housing and Slum Rehabilitation Area ("SRA") projects. New Government policies and reforms will boost the development of SRA. Also the rising demand in affordable housing and FSI which will boost the market for your Company. During 2014, Institutional private equity capital contributed USD 4.3 billion in Indian real estate, which is highly significant for the industry and it shows that the Real Estate Industry is moving towards the trend of structured financing, which is eyed as a great opportunity. • Threats and Risks Perception: The fallout of the Greek crisis and the overall ailment of the Global economy may impact the domestic economic scenario, which might lead to a negative bearing on inflation or interest rates that, will largely impact the real estate sector. An escalation in the interest rates might hold back investors from investing in properties. Apart from that higher interest rates will increase the cost of borrowing that will impact the profitability and the tempo of funding. Delay due to policy amendments which can be detrimental for the image of the Company and can effect its relationship with the customers. The Company has constituted a Risk Management Committee which monitors risk tolerance limits, reviews and analyzes risk exposure related to specific issues and provides oversight of risk across the organization. The Board of Directors of your Company has adopted a Risk Management Policy, which lays down guidelines in identifying, assessing and managing risks that the businesses are exposed to. Presently, Real Estate Sector is supposedly highly regulated with various laws of Central, State and Local authorities. However, any person can become a developer without any past experience in the Sector. There are no timeframe for approvals and accountability on approving authorities. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE Your Company has performed well in the sluggish economy environment and the Management of your Company is satisfied with the performance during the current financial year. Your Company plans all its projects taking into the intricacies of designing, developing and construction of each Project to details. Your Company employs expert team of Engineers, Architects, Designers, Structural Consultants and Human Resource Personnel to execute all its projects. As on March 31, 2015, the portfolio of your Company comprised of residential component of 74%, commercial and retail 11% and SRA 15%. Your Company has handed over 1,336 tenements which includes 1,244 residential, 50 commercial and 42 entities units to Municipal Corporation of Greater Mumbai ("MCGM") built for rehabilitation of slum dwellers under SRA scheme at Premier compound in Kurla (West). With the commencement of the hand over process, MCGM has now released outstanding Transferable Development Rights ("TDR") for the project. In the coming months, HDIL plans to deliver the remaining units under the scheme to MCGM or any designated authority as per SRA directions. Presently Company is executing projects at Nahur, Mulund, Kurla, Andheri, Bandra-Kurla Complex, Goregaon and Santacruz and are at various stages of construction. OUTLOOK Despite being cautious, we are hopeful that the global economic scenario will have negligible impact on India. We are seeing sure signs of revival in the industry, especially the residential sector. With inflation in control, interest rates lowering and anticipation of strong successive GDP growth, the real estate industry is positioned for a healthy growth period over the next 4-5 years. With our swift project execution and debt reduction strategy, your company is poised to grow strongly over the next 3-4 years. We plan to reduce our debts by Rs. 750 Crores this year, remain cash positive throughout and expect to sell 2 million sq. ft. of TDR throughout financial year 2015-16. RISKS AND CONCERNS The sale of units in real estate projects are highly dependent on the economic scenario of the country. The sales are subject to factors such as inflation and interest rates. If the factors are conducive we can expect good sales. Government has cleared the room regarding the appointment of a regulator at the Central and the State levels. The Government should also ensure that the approval process for real estate projects need to be speedy. Otherwise there is a possibility of the projects getting delayed in approval process. INTERNAL CONTROL AND SYSTEMS Your Company has always believed in being a knowledge based organization and has continued to keep focus on processes and controls. Your Company has a proper and adequate system of Internal Controls, to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposal and commercial transactions are authorized, recorded and reported correctly. Internal Control System of the company has been devised through its extensive experience that ensures control over various functions in its business. The internal auditor of the Company directly submits his reports to the Board/ Audit Committee. The statutory audit of the Company is conducted by M/s. Thar & Co., Chartered Accountants who discuss their findings to Board / Audit Committee. The performance of the Company is regularly reviewed by the Audit Committee and/or the Board of Directors to ensure that it is in consonance with the overall corporate policy and in line with br-set objectives. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE Over the next two quarter the Company will focus on execution of existing projects, given its business in TDR vertical is looking promising. The key components of our strategy will be focused around: • Enhance and leverage HDIL brand; • Focus on residential, commercial and industrial projects; • Execution of the projects and • Financial strength and liquidity; Our focus on customer care and the brand equity for HDIL are our core strengths. Stakeholders consisting of our customers, vendors and financial community perceive HDIL as a trusted quality service provider. We will keep on improving our sales efficiency through innovative pricing, higher product visibility and more customised sales agreements. Our focus is going to remain on residential, commercial and industrial projects. Ramping up of our execution capabilities will remain a part of our continuous improvement measures. This will help to bring greater visibility to our projects, which in turn will speed up our sales. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED Manpower is always a biggest strength in the Real Estate Sector. Relations between employees and the Management continued to be cordial during the year. Your Company recognizes people as its most valuable asset and it has built an open, transparent and meritocratic culture to nurture this asset and it endeavours to retain and develop its human resources and making a better place to work by providing an atmosphere of trusteeship, competition and challenge, thereby providing opportunities for personal and professional growth, through training and ample career enhancement opportunities. HDIL group now has a highly competitive, experienced, multifunctional team which through its sheer team work, is focused to achieve the organizational goals. HDIL's Learning and Development initiatives are focused on enhancing functional skills and competencies of its employees and its other Learning and Development interventions include Executive Development Programs, e-learning and various class room based training programmes. HDIL is committed to strive towards full engagement of all its employees, partners, contractors, suppliers and clients to ensure safe working conditions and safe behaviour as well as to take care of their health. The total strength of permanent employees as on March 31, 2015, is 652. Your Company leveraged its rich experience in project management and execution supported by competent human capital. Your Company continued to balance the recruitment of top and senior management professionals at one end with middle, junior and general management professionals at the other. Financial Year 2014-15 has been remarkable in the area of Industrial Relations. The harmony and strength of Industrial Relations has gone a step further. |