MESSAGE FROM MD & CEO:
It is indeed an honour for me to present before you the Annual Report of the companyfor the financial year 2018-19. If I were to define the year gone by for the Indian realestate industry in one phrase then it would be a year of consolidation'. Changeslike RERA and GST were pivotal in driving the consolidation process that saw non-seriousand unorganized players phasing out and ensuring that only credible developers drive themarket. At Arvind SmartSpaces-our single line vision statement clearly states ourendeavour to redefine trust in the real estate industry and I must say that the structuralreforms enacted by the government in the last few years have certainly ushered in muchneeded transparency and accountability in the sector.
I am elated to report that your company has done extremely well in the financial year2018-19. The same is indicated by our overall sales performance in the year underreview-wherein we have achieved a record fresh sale of र 277 crore an impressiveincrease of 120% compared to the previous year. During the period we have also been ableto create a strong pipeline by doubling our inventory to 2600 units from 1300 units lastyear. I am also happy to share that we have already delivered seven projects measuringapprox. 2.8 million sq. ft. and are currently having another set of eight projectstotalling 13 million sq. ft. under various stages of development and slated for completionin next 3-4 years. It is of immense satisfaction that we've been able to achieve thesemilestones despite the sectoral challenges such as implementation of structural reformsand pressures of liquidity in financial markets. This reaffirms the trust that the endcustomers have reposed in brand Arvind along with the efforts being put in by thededicated and motivated team at Arvind SmartSpaces.
Let me now talk about few of the strategic priorities that we will continue to focuson:
1. Invest aggressively in growing the business
In the coming years your company shall continue to invest in acquiring new projects togrow the business. To fund growth the company intends to utilize the surplus generatedout of business and is also actively looking at other forms of capital including bothequity and debt. The company is also particularly keen to explore and evaluate asset lightways to scale up its business which includes the Joint Development Model DevelopmentManagement Model and so on. The company intends to take 3 to 4 new projects in the year2019-20. The company shall continue to invest in building a strong team ahead of time toensure that it has enough management bandwidth as it grows.
2. Optimum Leveraging
Your company has been and it intends to remain true to its belief that"leveraging" as a growth engine is an option which needs to be used in a veryjudicious manner. Accordingly the company has refrained from any aggressive land bankingthrough leveraging. As a strategy that we embarked on since last several years land istreated as a typical raw material and as a professional developer our endeavour has beento quickly convert this important and capital intensive raw material into world classfinished product and sell. With this approach the company has been successful in keepingits overall capital structure extremely balanced and healthy. This is indicated by thefact that our Debt/Equity ratio has remained significantly below 1/1 for the severalquarters. Besides this also leaves us with enough resources to exploit any marketopportunity which may come in due to corrections in land markets.
3. Focussed expansion
While your company is fully aware of the vast potential that Indian real estateindustry offers to any organised player it intends to remain focussed on specificgeographical product and pricing segments in medium to long term. Being less capitalintensive and less prone to cyclical changes the company remains focussed on mid pricedand affordable housing segment. The company remains majorly focussed on its currentmarkets of Bangalore Ahmedabad and Pune. Last year the company decided to venture intothe Pune market owing to the synergy of its product positioning and brand appeal vis-a-visdemand and customer segment in the city. Our mid-market products targeted towards themiddle and upper middle class consumers are a perfect fit for the consumer segment inPune mostly working in the flourishing IT and manufacturing sectors. We are veryencouraged with the initial response in Pune market. The company continues to believe thatit is important to penetrate deep in every single market it enters and every new geographyrequires careful understanding of the-local opportunities and challenges that it presents.As an ongoing process the company keeps its eyes on markets like Surat Mumbai andHyderabad for any future expansion.
4. Product and customer focus :
Your company has always focussed on product design and innovations. In the processcompany has partnered with some of the top professionals and firms in the business forproduct design and deliveries. The company has now established a strong track record ofon-time delivery of world class products. Value for money for the customer has beenanother important pillar of our overall strategy and we have been successfully deliveringthe same through our various innovations and initiatives towards cost and time management.The company is investing further into human resources IT and other infrastructure tofurther create benchmarks in cost efficiencies and on-time deliveries.
5. Maintain the sales momentum
The sales momentum that the company has achieved during the last fiscal year wasremarkable and it intends to build on that. The impact of slew of changes brought by theGovernment is now settling down coupled with affordability at very attractive levels. Theinitiatives to formalise the sector are likely to be reflected at the customer end aswell as they seek spaces developed by established and trusted names like Arvind. Giventhe strong value proposition of our products along with our brand equity I am confidentthat we are well poised to capture the opportunity.
6. Environmental Social and Governance
I have been associated with Arvind group for nearly two decades now and I can assureyou that among some of the closely guarded corporate values of the group-"CorporateGovernance" and "Inclusive and Sustainable Development" are right on thetop. At Arvind SmartSpaces we endeavour to continuously contribute not just to the growthand development of the society but also to the environment we operate in. Apart fromhighest quality standards ensuring sustainability of every project that we undertake isour commitment to environment. From planting more than 4000 trees in our flagship projectUplands building large numbers of efficiently functional recharge wells using fly ashblocks rejuvenating water bodies to undertaking social initiatives-related to slumre-development rural education and healthcare and providing basic medical services at ourconstruction sites. ESG (Environment Sustainability and Governance) has been at the coreof our business approach. We shall unfailingly continue to ensure that it remains anessential part of our strategy.
As for the future outlook-it seems that the government's continuous thrust of givingpriority to the real estate sector is making it more attractive for the customers.Initiatives like reduction in GST rates on residential projects tax incentives for homebuyers gradual easing of interest rates etc. are helping further in improving demand forend consumption. However some medium-term challenges still remain. Liquidity crisis andcorresponding interest rates for real estate developers are yet to come down to thepre-crisis level. Demand although better as compared to a few quarters earlier is yet tofully recover and lesser excitement in investors for real estate as an asset class aresome of the challenges that the industry continues to face. However I maintain an overallpositive outlook for the industry as there are several credible indicators which pointtowards further stabilization and improvement in overall demand cycle. Also the clearmandate in the 2019 General Elections will ensure that the focus on affordable housing andaugmentation of infrastructure will be among the key agenda of the Government of India fornext 5 years.
Finally I would like to say that at Arvind SmartSpaces backed by strong brand equityof Arvind' along with the credibility achieved through already delivered projectsadvantages of positive macro environment indicators and opportunities the stage is allset to aggressively expand and grow. I am confident that you will share my optimism andenthusiasm as we take next steps forward in this exciting journey.
With warm regards
MD & CEO.