2016-17 has been a year full of challenges for the Real Estate Industry. These 12months have proved to be both challenging and exhilarating for Arihant in more ways thanone as every challenge presented us with an opportunity to unlearn learn and grow.Demonetisation announced by the Indian Government played the role of a disruptoradversely impacting consumer sentiments. Although the plethora of announcements in UnionBudget on Housing Sector did provide much needed respite to the industry while reversingthe impact demonetisation.
We weathered all the storms successfully during the year and closed FY17 with a stellarfinancial performance. The company reported robust growth in revenues as well as marginsfor FY17. Total revenue was inked at Rs.1862.46 mn as compared to Rs. 1237.13 mn duringFY16 reflecting an increase of 50%. EBITDA stood at Rs.643.50 mn translating into marginof 35% and the Net profit stood at Rs. 359.46 mn for FY17 as compared to Rs.199.19 mn inFY16 a growth of 71 %. We sold 527 units equivalent of 467205 sq feet inFY17 with an average realization of Rs. 3795/- per square feet. Ready inventory of Mar 17stood at 225 flats. Going forward these ready possession inventories as aided by ouraggressive redefined sales strategy shall lead to enhanced cash flows and immediaterevenue recognition.
At Arihant we are actively conscious and aware about debt level and debt profilekeeping it extremely efficient vis-a-vis the pace of construction. Quarterly financialstatements of Real Estate Sector seem to be lumpy due to the revenue recognitionmethodology but it is imperative to state this captures not just one quarter performancebut cumulative performance of the several quarters based on the life cycle of each of theprojects. Last 4 years were invested in getting a number of projects of f the ground andwe managed that very well with high degree of consistency.
Those efforts are yielding results which are there for all of you to see. Even as wespeak the momentum continues with greater intensity. The year was a landmark one in termsof the bold moves by the Modi Government such as Demonetisation Budget RERA&GST.
Government's Demonetisation move has been an excellent initiative in building India'sfuture by curtailing the parallel economy. Although the reform did lend a severe blow tobusinesses across the board due to paucity of cash in the country leading to adverseconsumer sentiments in the short term we believe it has been a step in the rightdirection for India and will surely prove to be a smart pay-off ultimately. We too wereimpacted by demonetisation due to overall aversion in the market but we channelized ourorganisational energy towards investing in a stronger structure through continuedconstruction activity team building exercises skill enhancement and training foremployees and strengthening the organisation's systems and processes to embrace any futurechallenges. We also gainfully utilized the time to strategize the post-demonetisatonscenario. One of the outcomes was the successful launch of Arihant Anaika discussed later.
Union Budget 2017: Housing Policy
Budget 2017 primarily focused on Housing sector in general and "AffordableHousing" in particular echoing Prime Minister's vision of "Housing for All by2022". The budget has incentivized both the developer as well as the home buyerthrough this budget within the gambit of Prime Minister's vision towards 'AffordableHousing'. Further Housing sector has been granted "Infrastructure" status whichis expected to boost the real estate by renewing interest amongst the financial investorsboth Domestic as well as Foreign institutions. For developers it will provide anopportunity to access low cost funds while encouraging funding transparency.
An interesting feature in the 2017 Budget has been 'Total exemption from tax for theproject under affordable housing'. This is a novel initiative by the Government which willboost growth in affordable housing segment for the next 7 years in turn proving beneficialfor the developers catering to this segment in particular. We are confident of Arihantbeing one of the beneficiaries of this opportunity. Home buyers are being incentivizedthrough attractive Interest subsidy coupled with processing fee exemption which wouldprovide much needed impetus to home buyer sentiments. Change in base year from 1981 to2001 as well as reduction of holding period from 3 years earlier to 2 years for capitalgains will make Real Estate Investment more attractive as an asset class. We are pleasedto inform three of Arihant's projects (Arihant Aanchal Arihant Aangan & ArihantAkanksha) were selected for Affordable Housing under "Housing for All by 2022"initiative by Gol & CREDAI.
Introduction of RERA Regime:
Real Estate (Regulation and Development) Act 2016 (RERA) is another path breakinginitiative intended to bring in much needed order transparency and discipline in theIndustry's functioning. With introduction of Real Estate Regulator Industry is expectedto witness lot of churn maturity and consolidation in times to come. GrantingInfrastructure status to the Industry will bring recognition eminence and investorinterest towards this sector.
Arihant has been observing the best practices to do business in the real estate sector.Most principles defined under RERA have been an in practice at Arihant Group since pastdecades such as: disciplined utilization of funds for construction timely completionuncompromised quality and customer-oriented approach highlighted by our Policy of 'NoTransfer charges' 'No Escalation' and 'No lock in period'.
Our philosophy has been: "EkSastaGhar Kharab Ghar Nahi Ho Sakta".
GST - A Game Changer
Goods & Services Tax (GST) is One-Nation One-Tax philosophy. This innovative andprogressive tax regime will avoid complexity provide ease & simplicity bettercompliance & adherence and wider tax base. This is in line with International taxpractice prevalent across the Globe will facilitate interest of International Investorsto Invest in India which shall provide momentum and growth to the Indian Economy.
As GST is set to play the role of a Disruptor in the short term we expect somechallenges as well as resistance amongst the business fraternity. Yet focusing on thelong term benefits to the Indian economy Arihant is supportive of GST and we welcome thislegislation whole-heartedly.
Theme of the Annual Report - Success Stories evolve out of Challenges
The adage 'Change is the only Constant' has never seemed as correct as it is now forthe real estate sector in India. We are in the midst of transformation on back of variouschallenges posed many sectorl reforms undertaken as well as unfolding of macro events allof which are expected to leave a deep imprint on our industry in the long term.
Although these challenges will lead to short term pain for the industry thetransformational journey has to be embarked upon keeping the long term gains in mind.Arihant too will be a part of this transition and we are confident of withstanding thechallenges successfully translating them into opportunities and emerging successful inthis endeavor.
"Arihant Anaika" at Taloja Mumbai was launched in February 2017 saw aheightened traction from customers witnessing sale of 89 flats in just 7 days.
NDTV awarded Arihant as the 'Best developer in affordable category for budget housingin metro cities 2016'. This reinforces the customer trust and belief in brand"Arihant"-which continues to deliver with stability.
Year 2016-17 posed many challenges but Arihant successfully converted every challengeinto an opportunity taking the organization on a sustainable path of steady success. Ourstrategy is focused towards identifying long term business visibility for the next sevenyears which would propel the company on an exponential growth path. We express ourgratitude to all our stake-holders viz. Board members customers employees vendorscontractors bankers & shareholders. We look forward to their steady support and thankthem for their strong belief in our vision which continues to instill confidence in us.
Lehron se darker nauka paar nahi hoti; koshish karne walon ki kabhi haar nahi hoti!
(Chairman & Managing Director)