CHAIRMAN AND MANAGING DIRECTOR’S MESSAGE
It is indeed a pleasure to report to you at the end of another interesting year. While we continue to maintain steady performance, what I am more excited about is the interesting developments in the economy and real estate industry. The bold and decisive initiatives undertaken by the government bring in a renewed sense of optimism, improve the country''s investment sentiment and shall in all likelihood facilitate it in graduating to the next level of growth.
The year 2016-17 saw the government taking the bold measure of demonetization and passing the crucial Goods and Services Tax (GST) bill. Demonetization, a step initiated to curb black money generation and terrorist funding, also facilitated in channelizing idle funds back to the formal sector and improving banks'' liquidity status. This in turn shall contribute towards reduction in interest rates. In addition to this, the government''s strong focus on meeting fiscal targets has also resulted in improving the macroeconomic fundamentals. Repo rates have declined to its lowest since 2014 at 6.25%, core CPI inflation remained under 5% for a prolonged period and forex reserves surged over '' 24 trillion. Besides, strong focus on Make in India, promoting entrepreneurship, and improving infrastructure and agriculture scenario shall lead to holistic development of the country.
GST is another critical initiative that focuses on bringing the entire nation under one taxation regime. This is intended to remove all hurdles related to multiple taxation structure and at the same time improve logistics movement across the country resulting in improved national productivity. Further, GST shall also enhance accountability and prevent tax evasion leading to higher government revenues necessary for funding infrastructure projects.
Speaking specifically of the real estate, I believe the sector is entering its golden era with a series of positive developments. RERA is one such move that will completely revitalize the industry. RERA will do the real estate industry, what TRAI (Telecom Regulatory Authority of India) did to the telecom industry. Before TRAI, the industry was highly unregulated, players charged indiscriminately, and there were no laws to protect customer interest. However, with TRAI introducing positive regulations, the industry witnessed a huge surge in subscriber base, creating a win-win situation for both consumers as well as telecom operators.
A similar turnaround is expected in the real estate sector with RERA. With focus on bringing in more transparency, having better regulations and protecting consumer interests, the industry is in for revival. As the investor and buyer confidence in the industry improves, it shall attract more investments and enhance buyer base.
Simplification in REITs'' regulations and taxation is another move which is likely to improve liquidity for cash-strapped players. REIT, a type of financial asset, enables investors to directly invest in real estate, while benefiting the asset holder to monetize cash-generating assets. However, non-facilitative norms were preventing REITs to become a reality. With the government undertaking initiatives to make REITs attractive, we can soon expect some developments in it.
Review of the year 2016-17
During the year, the Company witnessed steady performance in spite of several headwinds in the form of demonetization and temporary slump due to change in real estate regulations. The total income during the year increased by 3.82% to Rs, 494.60 Crores. EBITDA and PAT recorded a stronger growth at 5.13% and 11.13% respectively to Rs, 169.45 Crores and Rs, 77.07 Crores respectively.
Resilience to Rise
With years of perseverance and future-focused approach, we have been able to develop strong competencies and business model that provides us long-term business sustainability, revenue visibility and the resilience to rise. While in favorable industry scenario this shall enable us to deliver superior performance, in times of industry distress it shall protect our bottom-line. Some of our initiatives towards this include:
- Consistent investment in land bank to build a portfolio of 1,050 acres, which provides us the option to either monetise for instant cash flows or undertake development to generate superior returns over the longer term. Besides, with most of the land being within 50 km radius of Delhi, it has significant upside potential. These land parcels acquired by at low costs provide us the advantage of undertaking low-cost housing projects, which otherwise is not possible as land accounts for majority of the project cost.
- Our focus on leasing commercial space, hotels, IT parks and retail centres has enabled us to build a robust cash flow generating portfolio. These portfolio generated Rs, 50 Crores rentals in 2016-17 with average rentals of Rs, 60/sq ft. Moreover, with major infrastructure developments in progress and rising demand for commercial spaces in the region, the rentals are expected to rise over time.
- We have acquired land plots at strategic locations that are approved for building 5-star hotels. However, the stringent FSI (floor space index) rules earlier limited the number of rooms that can be built on such plot discouraging international hotel chains to establish presence. With relaxing FSI rules in the past two years, we shall be able to develop hotels with greater number of rooms, making our plots attractive.
- We have steadily invested in building competencies, adding new technologies, and acquiring skilled labour. This has enabled us to undertake all operations in-house right from project conceptualisation to designing to construction to marketing.
- We have a robust portfolio of commercial space, hotels, retail outlets and IT parks, that are of grade ''A'' quality and generates steady cash flows, are highly attractive targets for REITs.
- We are ready for new investment opportunities in stressed assets in the form of on-going and/or stalled projects available at extremely competitive rates.
These competitive advantages along with our market knowledge of the NCR provide us significant edge over competitors. We shall leverage these to capitalize on the upcoming growth opportunities.
I take this opportunity to thank all our stakeholders for having shown faith in us. Your Company is strongly focussed on maximizing shareholders'' worth and continues to undertake strategic decisions towards this.
We stand at a cusp of exciting opportunities. With proven execution capabilities, deep knowledge of the NCR real-estate market, fully-paid and ready-to-develop land bank and our strong brand equity in NCR, we believe we are poised and prepared for a positive upturn in the years to come as we overcome challenges with a strong Resilience to Rise.