Parsvnath Developers Chairman Speech
BSE:532780 | NSE:PARSVNATHBE | IND:Real Estate | ISIN code:INE561H01026 | SECT:Real Estate
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Dear Shareholder''s
The financial year 2017-18 was an extremely challenging, yet transformational year for the country and the real estate industry. We had hoped and anticipated that the effect of demonetisation would be over latest by first quarter of 2017-18. However, not only did the after-effects of demonetisation linger much longer, the adverse situation was compounded with Goods & Services Tax (GST) implementation and the delayed and differential progress in RERA implementation across the country meant that the buyers stayed away from the sector till everything settled down. Similar situation was experienced across most sectors of the economy, and this meant that the GDP growth was only 6.7% for the FY2017-18. In the real estate sector, housing sales declined during this period and the absorption in commercial office space was robust, but flat.
The scenario, however, took a turn for better towards the end of the year with the economy growing at 7.7% in the last quarter of FY2017-18, and Construction sector contributing handsomely to this jump with an 11.5% increase over Q4 FY2016-17. Real estate sector metrics also reflected this acceleration with housing sales going up by 33% on a YOY basis. The transition phase and turmoil because of the monumental reforms in regulatory framework now seems nearly complete, and the outlook for the future seems brighter. The picture is further enhanced because of sustained buoyancy in private consumption, and Government’s mega investment thrust in urban infrastructure and transportation sectors.
Company’s Performance
During the year under review, our consolidated revenues saw a decline of 30.6% to Rs.193.67 crores against Rs.278.90 crores in FY2016-17. The bottom line was a net loss of Rs.323.93 crores as against net loss of Rs.148.87 crores in the previous year, mainly on account of revenue decline and 38.8% jump in finance costs. The Company has established itself as a trusted name in developing quality commercial properties that have become landmarks over the years. In the reported year, it has seen considerable uptake of its Grade ‘A’ office and Retail offerings from marquee Corporate names such as CP wholesale (Thailand), Miniso (Japan), Adidas, Reebok etc. In its nearly three decade long existence, the Company has completed 13 independent projects and 11 projects for Delhi Metro Rail Corporation (DMRC) in the commercial and retail segment, totaling up to 1.91 million sq. ft. It has ongoing projects in commercial space (luxury office and retail) with a Saleable/Leasable area of 2.27 million sq. ft. Some of the major ongoing Commercial projects are, The Parsvnath 27, K.G.Marg New Delhi, Rohini Mall, Delhi, DMRC - Bhai Veer Singh Marg, New Delhi. In FY2017-18, possession/fit-out for 1573 units was offered during the reported year across residential, commercial, retail and integrated township segments, which totaled to 3.53 million sq. ft. of space.
Way Forward
Similar to the past few years, the focus of Company’s efforts and investments in new projects will be for the Commercial segment given the steadily increasing demand for Grade A office space in major markets. Propensity of investors is clearly towards investing in quality assets that generate a stable return, which is true for the luxury office and retail formats. Hence, it will be easier for the Company to raise capital for new launches in this segment. Within the Residential segment, the Company’s energies will be directed towards completion of under-construction projects and offer possession to successfully fulfill all outstanding commitments. Reduction in the debt burden is another important area of thrust for the Company; which will be done through sale of non-core assets and having steady cash flows from commercial assets or fee-based projects.
Outlook
Further to the grant of infrastructure status for the Affordable Housing segment and Credit Linked Subsidy Scheme (CLSS) for interest subsidy to Low Income Group (LIG) and Middle Income Group (MIG) in budget 2017, Indian government has announced further support to the Affordable Housing segment through formation of Affordable Housing Fund in National Housing Bank for funding the Affordable Housing projects. It also extended the CLSS scheme for MIG up to March 2019 and liberalized the norms for qualification. With such consistent support and latent demand for low ticket housing, the Affordable Housing segment is expected to grow at a fast pace. In the Commercial segment, absorption of office space is likely to remain above 30 million sq. ft. for the fourth consecutive year and 11 million sq. ft. of retail supply is going to be released in 2018. Availability of funds for quality projects is likely to be much easier with REITs expected to make a debut in 2018, and a greater number of Foreign Institutional Investors (FII) and/ or Private Equity (PE) investors are lining up to invest in the sector.
The real estate sector is expected to flourish in the coming year alongside the Indian economy, which is expected to grow at 7.4% in 2018-19. Performance of the economy in fourth quarter of 2017-18 is likely to be the harbinger of sustained good performance here onwards for the next few years. One of the downside risks to industry growth is from Reserve Bank of India (RBI) pushing through interest rate hikes in light of sustained high inflation. This is highly probable, however, the overall effect is likely to be only a small dampener on the expected breakaway performance. Parsvnath’s meticulously honed capabilities will see us through, while taking advantage of this market opportunity to the fullest. We are indeed in a difficult space, but there is no wavering from our commitment to reclaim our rightful place in the industry, as a leading player and again generate value for all stakeholders.
In conclusion
On behalf of the Board, I would like to take this opportunity to express our gratitude to all our shareholders, financial institutions, bankers, investors, esteemed customers and associates for their constant trust and continued support. I would also like to thank all our employees, who have performed with great dedication and devotion for the organization to the best of their skills and capabilities. As we embark on another fiscal, it is my pleasure to communicate our results and accomplishments in this report for the year under review.
With warm regards,
Pradeep Jain
Founder Chairman
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