MANAGEMENT DISCUSSION AND ANALYSIS REPORT INDUSTRY STRUCTURE AND DEVELOPMENTS The Indian economy continues to be down since the last quarters and the expectations were that it would change for better after the new Government came into power. The country has been looking forward for improvement in economy with the Modi Government's announcement on policy changes and investment drive as part of a revival strategy. Unseasonal rain and forecast of poor monsoon also add to the concern over economic recovery. Global macro economic factors viz fears of slowdown in China and fall in commodity prices viz energy, metals etc will have its impact on India. The comfort factor is that India is yet to spend huge amounts on infrastructure, which will boost the economy when it happens. The economy will start seeing revival when huge roads and other infrastructure projects start getting implemented and investments by both the Government and private sectors start taking place. A slew of announcements made by the Prime Minister on 100 smart cities, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme of 500 cities, Home for All, Digital India, Make in India etc., when implemented should bring in huge economic activity across industries with big boost to investments for new job creation, which will not only help the GDP to grow but will also help the real estate sector as the demand in urban areas will improve over long term. The near term outlook for the Real Estate Sector still remains negative though the long term outlook due to urbanization, increasing nuclear families and aspirations of young population to buy homes looks positive. In the last few years, the Real Estate investments have not apbrciated in value much. The rental yields have also been very low. The salaried class has not seen increment in the last two years and in fact some of the Corporates have either cut down the salaries or have even retrenched their employees with the result that the salaried employees are not willing to commit themselves in availing home loans for investment into Real Estate. With the sales slowdown, unsold inventory of residential units have been built up across India. The new launches have also not taken place and many of the developers are not able to deliver the projects on time. However, your Company has not only completed the residential projects viz Kiruba Cirrus, Lumina (E & F blocks), Sonnet Square, Townsville (A, B & C Blocks) on time and obtained completion certificate with all services in place, the customers have also started to live in these projects. As per Knight Frank Research report, the unsold inventory as at the end of December 2014 is about 42000 residential units as against which your Company's unsold inventory is 131 which is 0.31% of overall Chennai's unsold inventory scenario. The estimate is that it would take about 12 months for the industry to start seeing signs of recovery. During this time, your Company is looking for ways to remain liquid by containing costs as much as possible. OPPORTUNITIES Most of the projects of your Company are in an advanced stage of completion and hence as the market picks up and the sales happen, it will have its positive effect on the cash flows, profitability and debt position of your Company. RISKS & CONCERN Labour scarcity, continued rise in materials costs and the existing over supply are the risks that are associated in this business. However, your Company is better positioned as the projects are almost completed and they are developed in locations which are in good growth corridors and City Centers. The sluggish demand in real estate sector is expected to continue. However, your Company is increasing its marketing efforts by focusing more on digital platforms to tap NRI customers as well and has constant referral schemes to reconnect with the existing customers. Lancor has a proven track record in servicing its debt obligations and the gearing levels of the Company have always been efficiently managed. Internal control systems and their adequacy: The Company has adequate internal control systems to monitor internal business process, financial reporting and compliance with applicable laws. The Company periodically reviews the adequacy and effectiveness of the control systems. The audit committee at their meeting regularly reviews the significant observations of the compliance and other monitoring reports. The heads of various monitoring / operating cells and statutory auditor are invited to attend the Audit Committee meetings. Discussion of Financial Performance With Respect To Operational Performance Following are the key financial takeaways for fiscal 2014 - 2015 • Registered a turnover of Rs.1,07,36,23,210- Rs. 87,38,74,561- of revenues from Real Estate Operations • Rs.14,42,96,144- Revenues from Rental Income • Net operational cash flows at Rs.12,53,23,355- • PBT of Rs.21,78,66,235- • PAT of Rs. 14,75,85,958- • Debt Equity Ratio as on March 31, 2015 at 1.32 • CRISIL Credit Rating re-affirmed 'BBB + ' During the year under review the Company has registered an aggregate turnover of Rs.107.36 Crores as against the brvious year turnover of Rs.86.40 Crores and posted a net profit of Rs.14.75 Crores as against the brvious of Rs.15.95 Crores. Material developments in Human Resources / Industrial Relations front, including number of people employed Number of employees as on March 31, 2015 was 83 which include 10 women employees and relation remains very cordial. As per disclosure made by the Senior management to the Board there was no material financial and commercial transactions, where they have personal interest that may have a potential conflict with the interest of the Company at large. The Code of Conduct for the Board of Directors and the senior management was disclosed on the website of the Company CAUTIONARY STATEMENT The financial and operational information contained in the Management Report is based on the consolidated operations of the Company unless stated otherwise. Further, statements in the Management Report describing the Company's objectives, projections, estimates, expectations may be "forward looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those exbrssed or implied. Shareholders and readers are cautioned that in the case of data and information external to the Company, no rebrsentation is made on its accuracy and combrhensiveness though the same are based on sources believed to be reliable. Utmost care has been taken to ensure that the opinions exbrssed by the management herein contain its perceptions on the material impacts on the Company's operations but it is not exhaustive. Place: Chennai Date: 14th August, 2015 |
