MANAGEMENT DISCUSSION & ANALYSIS REPORT

1. INDUSTRY STRUCTURE AND DEVELOPMENTS:

Indian Economy:

The Indian economy has been reporting a growth of less than 5% for the past two financial years. India's GDP growth was 4.5% and 4.7% in FY 2013 and FY 2014, respectively. However, since the start of FY 2015, business and investor sentiments have been positive which coincided with the new government assuming power at the Centre.

The real estate sector continued to face a challenging environment due to lackluster demand scenario, various policy hurdles, delay in approval cycle, continued high borrowing costs both for the industry and the customer.

Real estate is a critical sector for India's economy due to its large potential for employment generation, capital attraction and revenue generation for the government. It is one of the fastest growing sectors contributing about 6% to India's GDP. The real estate sector witnessed a slowdown in FY15 due to moderate end user demand, rising inventory and high finance costs. However, despite adverse sector dynamics, prices were resilient in most cities and have dropped only in select micro markets.

To cope with reduced demand and high pricing, developers are now reducing the sizes of apartments in new projects in order to target mid-income customers.

Although FY2014-15 was a difficult year for the real estate sector the long-term potential for the sector remains intact and it continues to be an important catalyst to the nation's overall economic growth.

(i)Residential Real Estate:

The residential real estate sector in India witnessed moderation in sales, absorption and new launches. Divergent trends were witnessed based on location and price. Overall, demand continued to be weak across top cities and did not witness a meaningful pick up after the general elections. Despite the subdued performance in recent years India's demographics and urbanization trends brsent an optimistic future for the residential market. Demand is expected to revive given the reduction in interest rates and higher GDP growth. The rate cut cycles bodes well for the residential sector with lower outgo for mortgage payments improving affordability.

(ii)Commercial Real Estate:

Developers were wary of launching new office projects on account of cautious expansion plans of corporate and oversupply of office space. Overall vacancy is likely to gradually reduce over Cy15-17, owing to limited launches of new office space. Corporate entities have already begum rolling out their expansion plans due to an improvement in business fundamentals. The anticipated revival of the economy is expected to be a key trigger for the segment.

Given that the market has seen an oversupply in the last few years, the gap between demand and supply is likely to shorten, leading to a further increase in rentals. IT/ITeS, financial and services segments continued to drive demand for office space in India's leading cities.

(iii)Retail Real Estate:

As India's retail industry aggressively expands itself, great demand for real estate is being created. Favorable demographics, increasing urbanization, nuclear families, rising affluence amid consumers, growing brference for branded products and higher aspirations are other factors which will drive retail consumption in India.

Tourism and Hospitality - Industry-Structure and Development:

The Indian Tourism and Hospitality Industry has emerged as one of the key drivers of growth among the services sector in India. Hospitality as major segment of tourism has growth by 1015% on the back of better consumer sentiment with the change of government. As demands going up occupancies are improving. The supply of rooms hitting the market now is from projects announced between 2009 and 2011. Most hotel owners are in a wait and watch mode.

IRDA limited rating agency expects the revenue growth of Indian hotel industry strengthening to 9-11% in 2015-16.

2. OPPORTUNITIES AND THREATS: A. Opportunities:

A no. of factors are expected to contribute to the growth of housing demand in India. Chief among them are rapid urbanization, decreasing average household size and easier availability of home loans. The socio-cultural shift towards nuclear families is also providing an additional impetus to housing demand in India. The urban sector currently contributes around to 60% of India's GDP.

(i)Demand for housing:

Yours company expects demand from the mid income residential segment to remain strong as we believe there is significant demand in this category across the country and state as well. Increasing disposable incomes, rapid urbanization and strong demographics are some of the trends favoring the mid-income residential market.

(ii)Monetary Easing:

The real estate sector performance is directly bound by the country's economic fundamentals and monetary policies. Monetary easing initiatives will provide an impetus to housing demand. Even a nominal roll-back in rates can positively impact sentiments and encourage home buyers and real estate developers.

(iii)Government reforms:

Real Estate Regulation Bill - the Union Cabinet approved amendments to the long-pending real estate bill to bring all ongoing projects under its ambit. The bill entails the formation of a Housing Regulatory Authority (HRA) to ensure compliance by the developer and increase transparency in the housing sector.

This bill provides a renewed boost to transparency levels in the Indian real estate sector. This will instill more confidence among global investors and in turn provide better access to structured capital for the sector.

(iv)Foreign Direct Investment (FDI) in Real Estate:

The government's policy initiatives to ease FDI rules in construction by reducing the minimum capital requirement from US$10 million to US$5 million and the built up area from 50,000sq. mt. to 20,000 sq.mts. is likely to boost foreign fund inflows significantly. This will bring in both capital and expertise, ensuring development of sustainable and quality urban housing in India. The relaxation of lock-in period also comes as a major relief for the industry.

(v)Bank's long term bonds for financing affordable housing:

RBI has allowed issuance of long-term bonds by banks for raising capital, in order to ensure adequate credit flow to the affordable housing sector. Lending to the affordable housing sector, the RBI has allowed issuance of long-term bonds by banks for raising capital. Lending to the affordable housing sector includes mortgage loans that are limited to INR 5 million in 6 metro cities - for houses valued up to INR 6.5 million in Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad and up to INR 4 million for houses valued up to INR 5 million in other locations.

(vi)Real Estate Investment Trusts (REITs):

The introduction of REITs will provide access to funding for developers, better valuations for commercial properties, access to individual investors in commercial real estate and a more structured and transparent commercial real estate market. REITs primarily invest in completed real estate assets that generate revenue and the majority of their earnings are distributed among investors. REITs are thus a low-risk investment avenue providing regular income.

The union budget 2015 rationalized the capital gain tax regime for the sponsors of REITs. The budget also proposed that the rental income arising from real estate assets directly held by the REIT would be allowed to pass through and will be taxed in the hands of the unit holders of the REIT.

This would help to channel both the domestic and over seas investments into real estate projects in the country.

Opportunities - Hyderabad Real Estate:

Hyderabad's superior infrastructure, affordability and cosmopolitan ethos still make Hyderabad the choice of many home buyers.

A survey by indiaproperty.com during December, 2014 says that a major buying trend that can be seen in the real estate industry, include high proportion of end-users looking for mid-segment properties, buyers giving importance to infrastructure, brsence of public transport and security before deciding the locality.

When it comes to purchasing property, apartments continue to be the most popular choice among buyers in Hyderabad.

On analyzing commercial leasing and absorption in Hyderabad over the last few years, it emerges that grade A commercial leasing picked up from 6.8% in 2011 to 8.6% in 2014. Inspite of the uncertain political environment, Hyderabad still held a 9% share of total Indian office leasing. It is quite possible that Hyderabad's share could move into double digits over the next few months.

Centre & State Government Initiatives:

Government of India has launched the 'Make in India' campaign, which includes major new initiatives designed to facilitate investment, foster innovation, protect intellectual property and build best-in-class manufacturing infrastructure. There is also an increased emphasis on reducing entry barriers by introducing new de-licensing and deregulation measures thereby reducing complexity and significantly increasing the ease of doing business.

Housing and urban development are key priorities of the new government, the recent policy measures to relax foreign direct investment (FDI) norms, providing housing for all by 2022, create 100 smart cities and approve Real Estate Investment Rusts (REITs) have boosted the confidence of stakeholders.

The Govt. of Telangana is aiming to rebuild brand 'Hyderabad' by concentrating on the information technology sector. Among the companies geared up for expanding their operations in and around Hyderabad are tech major such as Amazon, Google, Face book, Microsoft, Cognizant, and TATA Consultancy Services (TCS).

-ITER project is coming with a central funding of over 1.32 lakh crores, is a long term programme expected to be completed by 2024.

-Cognizant, has plans to expand operations to develop its own encryption software and anti-spam software products for which is has sought 54 acres of land at Adibatla village on the city outskirts, which would provide over 12,000 jobs.

-Google -is looking to build its own township on a 20 acre plot in Kokapet to house its entire operations in Hyderabad.

The govt. plans to set up an IT governing body that will monitor various sector-related issues. The government wants to take the sector to Two Tier and Three Tier cities. Special incentives and tax rebates have been planned for start-ups and investors in these corridors.

B. THREATS AND CHALLENGES

(i)Regulatory hurdles: Unfavorable changes in government policies and the regulatory environment can adversely impact the performance of the sector. There are substantial procedural delays with regards to land acquisition, land use, project launches and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operating within the sector

(ii)Funding problems: The RBI has set a threshold of 15% for the total maximum exposure of banks to real estate, including individual housing loans and lending to developers for construction finance which is quite low and is curtailing the growth of the sector. Absence of long term funding from banks is forcing developers to look at alternative sources of funds, most of which do not offer affordable interest rates.

(iii)Shortage of manpower and technology: Despite being the second largest employer in the country the construction sector as a whole faces a manpower shortage. Further the sector is heavily dependent on manual labour which increases the timelines for projects and results in supply getting deferred. Hence, less labour intensive alternative methods of construction need to be adopted on a large scale through training and skill development of manpower.

3. SEGMENT WISE - PRODUCT WISE PERFORMANCE:

A detailed status of projects being implemented by the company is given below:

Prajay Waterfront City situated at Murharpally Village, Shamirpet: Water front City is sbrad across 72 acres of brmium property, nearby a large natural lake offers an alluring lifestyle and is nearby Genome Valley. This property is well developed and approved by DTCP with all gated community features and nearest to Alexandria, a multi crore Biotechnology SEZ. This project is completed 90% in all respects and got 5% bookings during the year thereby aggregating to 85% of the first phase of the project.

Prajay Virgin County (SPV Project) situated at Baghmankhal Village, Maheshwaram Mandal, R.R. District: Due to its proximity to International Airport, ORR, Hi-tech city / Gachibowli Financial District and other companies like FAB city, TATA aerospace, Adibatla, the project, since its launching, has achieved 90% of sales in villa segment. Due to the political and economic scenario brvailing in the country and especially in the state after bifurcation, only a little portion in the apartment segment is sold so far.

All the infrastructure works in the villa parcel are completed and around 40 villas have been handed over and families have started living in the villas.

The civil structure for 10 towers consisting of 432 flats in phase I of apartments is completed and the balance work is taken up at a slow pace considering the brsent market offtake.

Prajay Megapolis (SPV Project) situated at Hafeezpet Village, Serilingampally mandal, R.R. District: it is one of the brstigious projects of the company which is sbrad across 21 acres and will comprise around 3200 plus flats with 5762778.44 sq.ft built up area including parking comprising of 3 cellars, ground + 18 upper floors with all gated community facilities. First phase of the project consists of three blocks with 9 towers consisting 1113 flats of different sizes. During the year under review only 20 flats have been sold (after accommodating the cancellations in second phase).

Construction work in Three Blocks (comprising of 9 Towers) is in an advanced stage and it is planned to hand over possession of 3 towers by October first week for carrying out interiors to customers and rest of the towers by March 16.

Prajay Windsor Park situated at Pocharam, Ghatkesar Mandal, R.R. District: This project is proposed as a gated community apartments on about 11 acres of land near Hyderabad-Warangal Highway and shares neighbourhood with brmier institutions like Raheja Mind Space, Sanskrity Township and Infosys campus. Since the really sector is passing thourgh a tough phase for the past few years, the company plans to hold this project in the pipeline for some more time.

Prajay Gulmohar situated at Kuntloor, Hayathnagar Mandal: A gated community project with 198 independent plots, out of which 73 are independent houses, 89 duplex houses and 36 being villas, is set on 21 acres of land. This project is almost completed in all respects and families are staying with all amenities in place.

All the villas have been handed over and 50% of the apartment's portion is sold already.

Prajay Homes Extension: The project has come on a sbrad of 4.5 acres of land within the vicinity of Celebrity Club, emerging Biotech Hubs and top notch multinational companies like Zenotech, SP Biotech, ICICI Knowledge park, Alexandria and many other brstigious schools, colleges besides hospitals.

Prajay Princeton Towers situated at L.B. Nagar, Saroornagar Mandal, R.R. District: Princeton Towers project is one of its kind business opportunity in the heart of Saroornagar, LB Nagar with 13 floors - Ground+ 4 floors are meant for commercial purpose, 5th for office space and the rest 7 floors for hotel rooms, restaurant and banquet halls. The project has been funded by a consortium lead by State Bank of India.

Part of the commercial space in ground floor and fifth floor are sold. Third & fourth floors are occupied by Future Lifestyle (Brand Factory), first & second floors are vacant at brsent. Part of office space in fifth floor is leased to different firms/clients.

Prajay Blue Hope (Joint Development with Legend) situated at Abids Road, Hyderabad - Prajay Blue Hope is a commercial cum residential project with 8 floors on 4032 sq. yards and situated at the heart of the city at Abids. Ground and First floor are meant for retail purpose, 2-4 floors earmarked for Office space and the rest 5-8 floors are meant for residential purpose - the construction work is in progress.

4.OUTLOOK

Your Company continues to implement its strategy to concentrate on its core business & geographies and to develop a right product mix well suited for the market.

Although FY2014-15 was a difficult year for the real estate sector, the long-term potential for the sector remains intact and it continues to be an important catalyst to the nation's overall economic growth.

Hyderabad's superior infrastructure, affordability and cosmopolitan ethos still make Hyderabad the choice of many home buyers. The Govt. of Telangana is aiming to rebuild brand 'Hyderabad' by concentrating on the information technology sector. Among the companies geared up for expanding their operations in and around Hyderabad are tech major such as Amazon, Google, Facebook, Microsoft, Cognizant and TATA Consultancy Services (TCS).

Yours company expects demand from the mid income residential segment to remain strong as we believe there is significant demand in this category across the country and state as well. Increasing disposable incomes, rapid urbanization and strong demographics are some of the trends favoring the mid-income residential market.

5.RISKS AND CONCERNS

Your company is exposed to a number of risks such as economic, regulatory, taxation and environmental risks and also the investment outlook towards Indian real estate sector. Some of the risks that may arise in its normal course of its business and impact its ability for future developments include inter alia, credit risk, liquidity risk, counterparty risk, regulatory risk, commodity inflation risk and market risk. Your company's chosen business strategy of focusing on certain key products and geographical segments is also exposed to the overall economic and market conditions.

Your company has implemented robust risk management policies and guidelines that set out the tolerance for risk and your company's' general risk management philosophy. Your company has established a framework and process to monitor the exposures to implement appropriate measures in a timely and effective manner.

The real estate market is inherently a cyclical market and is affected by macroeconomic conditions, changes in applicable governmental schemes, changes in supply and demand for projects, availability of consumer financing and illiquidity.

Statutory approvals - the real estate sector in India is heavily regulated by the central, state and local governments. Real estate developers are required to comply with a number of laws and regulations, including policies and procedures established and implemented by local authorities in relation to land acquisition, transfer of property, registration and use of land.

Many of company's future projects are in brliminary stages of planning and any delay in obtaining approvals could warrant revised scheduling of project timelines.

6.INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has internal control systems in place to ensure protection of assets of the company against any loss or un-authorized usage and all the transactions are authorized, recorded and reported correctly. The control systems are also supplemented by internal audit conducted by a team of experts.

The internal audit reports are reviewed by the audit committee of the board and the audit committee reviews the internal controls at periodical intervals in close co-ordination with the management and the internal auditors.

7.FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONS PERFORMANCE. Revenue /loss from Operations:

The company revenues are reduced to Rs. 5812.10 lacs during the year as against Rs.8747.78 lacs during the brvious year, reduced by 33.56%.

The company has incurred a loss of Rs. 2360.18 lacs during the year as against loss of Rs. 202.91 lacs for the corresponding brvious year.

Operational cost:

The increase in operating cost was primarily due to lower volume of operations, rising energy costs and cost of key inputs.

EBIDTA:

EBIDTA is negative and is at Rs. (1180.03) lacs in the financial year 2014-15 as against Rs. (363.40) lacs in the financial year 2013-14.

The reasons for negative EBIDTA is due to adverse market conditions in Real estate and construction sectors in and around Hyderabad where the company has concentrated its operations and also due to rising energy costs and cost of key inputs.

Profits & ratios:

The company has incurred a loss of Rs. 2360.18 lacs during the year as against a loss of Rs. 202.91 lacs for the corresponding brvious year.

The basic earnings per share stood at Rs. (3.37) for the current financial year as against Rs. (0.30) for the brvious financial year.

However, the current ratio of the company for the year 2014-15 stood at 1.48 which is comfortable. Shareholders' Funds:

There is no change in the capital structure of the company during the year under review and the net worth of the company stands at a comfortable position of Rs. 636.39 crores.

Loan Funds:

The company continues to get support from its bankers and financial institutions. The debt to equity position of the company remains at a comfortable position of 0.32 when compared to acceptable level of 2:1. The secured borrowings of the company stood at 203.45 crores as at the end of the year.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

Our human capital continues to be the key driver for growth, effectiveness and success. Our focus was to ensure optimum utilization and development of our talent pool aligned with our existing business plans and outlook. As on 31.3.2015, our company's 'on rolls' talent pool comprise of about 275 Employees.

The company's HR practices and policies are geared toward retention and capability building of our key talent. Career growth opportunities & lateral movements are provided as a part of the growth trajectory for our employees. Reward & retention strategy aims at strengthening alignment of performance and reward. We continue to work towards employee well being through various welfare programs.

Pursuant to the provisions of 'The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressel) Act, 2013 and the rules framed there under, we have aligned our existing policy to bring it in line with the provisions of the Act and also taken necessary steps to ensure compliance with the Act.

To redress complaints of sexual harassment, an Internal Complaints Committee has been formed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules made there under

CAUTIONARY STATEMENT:

The above management discussion and analysis contains certain forward looking statements within the meaning of applicable security laws and regulations. These pertain to the company's future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals time cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulations etc.