Unitech - Annual Report - 2008-2009

UNITECH LIMITED
ANNUAL REPORT 2008-2009
DIRECTOR'S REPORT
To the Members,
Your directors have pleasure in presenting the 38th Annual Report of your
company, together with the Audited Accounts for the year ended March 31,
2009.
FINANCIAL RESULTS
Your company's performance during the year as compared with that during the
previous year is summarized below:
(Figures in Rs. million)
Particulars 2008-09 2007-08
1. Total Income 24549.13 29,697.25
Less: Operating Expenses 8029.15 12,372.02
2. Gross profit before Interest
and Depreciation 16519.98 17,325.23
Less: i) Interest 6853.16 3,584.35
ii) Depreciation 100.38 6953.54 85.79 3,670.14
3. profit before Tax 9566.44 13,655.09
Less: Provision for Tax
i) Current 2150.00 3,340.00
ii) Fringe Benefit 15.00 15.00
iii) Deferred 4.81 (6.68)
2169.81 3,348.32
4. profit after Tax 7396.63 10,306.77
Add/(Less):
i) Balance of Profit as per
last Balance Sheet 13940.30 4,342.12
ii) Foreign Project Reserve
Written Back 20.00 20.00
iii) Taxes Paid for earlier
years (Net of Provision) - (3.77)
iv) Debenture Redemption
Reserve written back 1250.00 1,600.00
15210.30 5,958.35
balance available for
appropriation 22606.93 16,265.12
5. Appropriations
i) Proposed Dividend 204.44 405.85
ii) Tax on Dividend 34.75 68.97
iii) Transfer to Debenture
Redemption Reserve 6400.00 1,250.00
iv) Transfer to General Reserve 600.00 600.00
v) Balance carried over to
Balance Sheet 15367.74 13,940.30
22606.93 16,265.12
FINANCIAL HIGHLIGHTS AND OPERATIONS
The total income of your Company for the year under review is Rs 24,549.13
million. The real estate division contributed Rs. 16,598.17 million in the
revenues of your company for the year, whereas the revenues from
construction division and consultancy stands at Rs.963.68 million and Rs
756.33 million respectively.
On consolidated basis, the total income of your Company and its
subsidiaries stands at Rs. 33,156.35 million. The consolidated profit
before tax (PBT) and profit after tax (PAT) stood at Rs.14,392.03 million
and Rs. 11,968.06 million respectively. The earning per share (EPS), on an
equity share having face value of Rs. 2/-, stands at Rs. 7.37 considering
the total equity capital of Rs. 3,246.75 million.
The key highlights pertaining to the business of your company, including
its subsidiaries and joint venture companies, for the year 2008-09 and
period subsequent thereto, are given hereunder:
* In order to strengthen its financial position and capital base of the
Company and for execution of projects, repayment of loans and general
corporate purposes, the Company had successfully raised USD 325 million (Rs
1621 Crores) of equity capital (including premium), through Qualified
Institutional Buyers, mostly reputable foreign investors. It gave immense
satisfaction to the Company, that even in the time of crisis; our Company
continues to enjoy investors' confidence.
* New business initiative- The Company believes that India's
telecommunications sector presents potential for growth. Last year, Unitech
Wireless received pan- India telecommunication licenses viz. Unified Access
Service Licences ('UASL'), in all 22 telecom circles and this year they
have received initial spectrum (4.4 Mhz) in 21 telecom circles. The Company
and Unitech Wireless, along with other group companies of Unitech have
entered into a subscription agreement with Telenor Mobile Communications
AS, Norway and its subsidiary, Telenor Asia Pte Ltd, Singapore ('Telenor'),
a global telecommunications company wherein Telenor agreed to acquire 67.25
per cent stake in Unitech Wireless, subject to receipt of requisite
regulatory approvals. Under the agreement, Telenor has agreed to subscribe
to fresh issuance of equity shares of Unitech Wireless in four phases for a
total amount of investment of Rs. 61.2 billion with an anticipated
completion date of December 2009. Upon completion of the fourth phase,
Telenor will have a 67.25 per cent stake in Unitech Wireless.
Unitech Wireless also entered into an infrastructure sharing agreement with
Wireless-TT Infoservices Ltd. ('WTTIL'), the tower arm of Tata Teleservices
Limited and Quippo Telecom Infrastructure Limited ('QTIL'), under which
Unitech Wireless will lease tower infrastructure from WTTIL and QTIL across
India to operate its telecommunications business. In addition, Unitech
Wireless has also entered into an agreement for the provision of
transmission services with Tata Teleservices Limited. Unitech Wireless has
also placed orders for equipment with Alcatel-Lucent, Huawei and Ericsson
and entered into an IT services outsourcing contract with Wipro.
* Primary focus on the affordable housing segment- The Company has recently
started focusing on the affordable housing segment of its business. It
believes that this is a segment where a demand-supply mismatch exists and
which is relatively less affected by the recent fall in demand for real
estate projects in India. In this segment, the Company is offering products
in the price range of Rs. 1 million to Rs. 5 million, depending on location
of the project. The Company believes that there is stronggrowth potential
in this price range as the demand for such properties can be expected to
continue to increase with the growth in the Indian economy and the
corresponding increase in urbanization. To enable it to provide housing at
affordable prices, the Company is striving to reduce its costs of
development and is also decreasing the area of the units in each project.
Within the affordable housing segment, the Company is planning to launch
relatively lower priced affordable housing projects under the brand name of
'Unihomes' in eight cities across India. These projects will be in the
price range of Rs. 1 million to Rs. 2.5 million. The other launches in the
affordable category are Uniworld Gardens II- Gurgaon, The Residences at
Uniworld Resorts- Gurgaon, Brahma at North Town, Chennai, Ananda at North
Town, Chennai, Wood Stock Villas at Nirvana Country- Gurgaon, The
Residences- Mumbai and Vistas at Uniworld City, Kolkata.
* Implementation of value engineering to reduce costs and enhance customer
value -The Company has commenced implementation of 'value engineering'
across all its ongoing and future projects with the objective of reducing
expenditure and optimising space usage while maintaining the high quality
standards of the Company. In this regard, the Company has standardised the
systems, processes and technology deployment. The Company has also
undertaken data analysis of past projects to set up internal benchmarks for
evaluating ongoing and new projects. Implementation of these techniques
have already resulted in reducing costs of various inputs including steel
and civil works, electrical, water supply and plumbing works amongst
others. The Company expects that these savings will reduce its costs and
enable it to offer its projects more competitively, especially in the
affordable housing segment.
* Reducing capital-intensive projects- The Company has a large, low cost
and diversified land bank which it believes is sufficient to meet its
expansion plans over the coming years. The Company intends to focus on
exploiting its existing land bank to develop its future projects in order
to improve the cash realisation from its projects. In addition, the Company
plans to acquire new land very selectively and only when it considers that
the acquisition affords an exceptional value proposition. The Company
intends to concentrate its future construction and development activities
towards projects that are presold or pre-leased. Further, in the commercial
segment, the Company is planning to adopt a strata sale model rather than a
lease model. The Company believes that this business model will ensure that
the Company does not need to raise capital extensively from external
sources for developing each project. For instance, the Company has recently
launched a commercial project under the strata sales model, The Chambers at
Vile Parle, Mumbai. More details about the business and operations of your
Company are provided in the Report on Management Discussion and Analysis
forming part of the Annual Report.
DIVIDEND
Keeping in view the current economic scenario and the future fund
requirements of the Company, your directors have recommended a dividend @
Re. 0.10 per equity share of face value of Rs. 2/- each fully paid-up for
the year ended March 31, 2009. The dividend, if approved, will be paid:
(i) to those members, holding shares in physical form, whose names appear
on the Register of Members of the Company at the close of business hours on
20th August 2009, after giving effect to all valid transfers in physical
form lodged with the Company or its Registrar and Shares Transfer Agent
before 8th August 2009 and
(ii) to those beneficial owners, holding shares in electronic form, whose
names appear in the statement of beneficial owners furnished by the
Depositories to the Company as at the close of business hours on 7th August
2009.
SUBSIDIARIES
During the year, 35 companies were added as the subsidiaries of your
company, thereby taking the total number of subsidiary companies to 351 as
on March 31, 2009. The financial details of the subsidiary companies as
well as the extent of holdings therein are provided in a separate section
of the Annual Report.
SUBSIDIARY COMPANIES' ACCOUNTS
The company has applied to the Central Government under section 212(8) of
the Companies Act, 1956, seeking an exemption from attaching a copy of the
balance sheet, Profit & Loss Account, Directors' Report and Auditors'
Report of the subsidiary companies and other documents required to be
attached under section 212(1) of the Act to the Balance sheet of the
Company and the said approval is expected shortly. Accordingly, the said
documents are not being attached with the Balance sheet of the Company. The
Annual Accounts of the subsidiary Companies are available for inspection by
any member/investor and the Company will make available these
documents/details upon request by any Member of the Company or its
subsidiaries interested in obtaining the same. However, the financial data
of the subsidiaries has been furnished alongwith the statement pursuant to
Section 212 of the Companies Act, 1956 forming part of the Annual Report.
Further, pursuant to Accounting Standard (AS)-21 issued by the Institute of
Chartered Accountants of India, your company has presented the consolidated
financial statements which include the financial information relating to
its subsidiaries and forms part of the Annual Report.
CHANGES IN CAPITAL STRUCTURE
Authorised Share Capital
During the year under review, the authorised share capital of your Company
was increased from Rs 5,000 million divided into 2,500,000,000 equity
shares( 2500 million equity shares) of Rs.2/- each to Rs.10,000 million
divided into 4,000,000,000 equity shares( 4,000 million) of Rs.2/- each and
200 million preference shares of Rs. 10/- each.
Issued and Paid-up Share Capital
On 22nd April 2009, your Company allotted 421064935 equity shares of Rs.2/-
each at a premium of Rs. 36.50 per share on private placement basis to
Qualified Institutional Buyers (QIBs) in terms of Chapter XIIIA of the
Securities and Exchange Board of India (Disclosure and Investor Protection)
Guidelines, 2000. Accordingly, after the said allotment, the issued and
paid-up share capital of your Company stood at Rs. 4,088,879,870/-,
comprising of 2044439935 equity shares of Rs. 2/- each.
DIRECTORS
In accordance with the relevant provisions of the Companies Act, 1956 and
Article 101 of the Articles of Association of the Company, Mr. Anil Harish,
Ms. Minoti Bahri, Mr. A. S. Johar and Mr. Ravinder Singhania are liable to
retire by rotation at the ensuing Annual General Meeting. Mr. Anil Harish,
Ms. Minoti Bahri and Mr. Ravinder Singhania, being eligible, offer
themselves for re-appointment and therefore, the board recommends their re-
appointment at the ensuing Annual General Meeting.
Further, the approval of Shareholders pursuant to Section 269 of the
Companies Act, 1956 read with Schedule XIII thereof, is sought w.e.f. 1st
January 2009, for the reappointment of Mr. Ramesh Chandra - Executive
Chairman, Mr. Ajay Chandra - Managing Director and Mr. Sanjay Chandra -
Managing Director for a period of five years and of Mr. A. S. Johar as
Executive Director upto the date of forthcoming Annual General Meeting. The
brief resume and other details relating to the directors, who are to be re-
appointed as stipulated under Clause 49(IV)(G) of the Listing Agreement,
are furnished in the Corporate Governance Report forming part of the Annual
Report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 217(2AA) of the Companies Act, 1956, your
directors confirm that:
i) in the preparation of the Annual Accounts for the financial year ended
March 31, 2009, the applicable accounting standards have been followed with
proper explanation relating to material departures, if any;
ii) the Directors have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of your
Company at the end of the financial year and of the profit of your Company
for that period;
iii) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of your
Company and for preventing and detecting fraud and other irregularities;
iv) the Directors have prepared the Annual Accounts for the financial year
ended March 31, 2009 on a going concern basis.
REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS
Committed to good corporate governance practices, your company fully
conform to the standards set out by the Securities and Exchange Board of
India and other regulatory authorities and has implemented and complied
with all of its major stipulations. The Report on Corporate Governance
along with the Compliance Certificate issued by M/s. K. K. Singh &
Associates, Company Secretaries in line with Clause 49 of the Listing
Agreement validating our claim and the Report on Management Discussion and
Analysis are annexed and forms part of this Annual Report.
AUDITORS AND AUDITORS' REPORT
The auditors, M/s. Goel Garg & Co., Chartered Accountants, hold office
until the conclusion of the ensuing Annual General Meeting and being
eligible, are recommended for re-appointment. A certificate from the
auditors has been received to the effect that the re-appointment, if made,
would be in accordance with Section 224(1B) of the Companies Act, 1956.
M/s A. Zalmet, Certified and Legal Public Accountant, Libya who had been
appointed as Branch Auditor for Libya Branch of your Company will also
retire at the ensuing Annual General Meeting and being eligible, are
recommended for re-appointment.
There is no qualification in the auditors' report on the annual accounts
for the financial year ended March 31, 2009.
CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION,
FOREIGN EXCHANGE EARNINGS AND OUTGO
Since your Company does not own any manufacturing facility, the
requirements pertaining to disclosure of particulars relating to
conservation of energy, research & development and technology absorption,
as prescribed under the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988 are not applicable.
The foreign exchange earnings and expenditure of the company during the
year under review were Rs. 16.81 million and Rs. 79.42 million as compared
to NIL and Rs. 147.73 million in the previous year respectively.
FIXED DEPOSITS
Your Company has Fixed Deposits to the tune of Rs. 73.48 million as on
March 31, 2009. 78 deposits aggregating Rs.1.93 million were due for
renewal/repayment on or before March 31, 2009 against which no
communication was received from the deposit holders.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 217(2A) of the Companies Act,
1956, read with the Companies (Particulars of Employees) Rules, 1975, the
names and other particulars of employees are set out in the annexure
included in the directors' report. However, as per the provisions of
Section 219(1)(b)(v) of the Companies Act, 1956, the directors' report and
the accounts are being sent to all members of the Company excluding the
aforesaid information. Any member interested in obtaining such particulars
may write to the Company.
ACKNOWLEDGEMENTS
The Board acknowledges with gratitude the co-operation and assistance
provided to your Company by its bankers, financial institutions, government
as well as nongovernment agencies. The Board wishes to place on record its
appreciation to the contribution made by employees of the Company and its
subsidiaries during the year under review. Your Directors thank the
customers, clients, vendors and other business associates for their
continued support. Your directors are thankful to the shareholders and
depositors for their continued patronage.
For and on behalf of the Board
Ramesh Chandra
Chairman
Place : New Delhi
Date : June 25, 2009
MANAGEMENT DISCUSSION AND ANALYSIS
2008-09 has been a challenging year for the world economy and the global
real estate sector in particular. While India hasn't witnessed the kind of
major turmoil witnessed in some advanced economies it has certainly been
impacted adversely. Given its leadership position in the Indian real estate
space with a large diversified portfolio of businesses that includes
development of residential space, commercial office space, retail
destinations, entertainment centres, hospitality properties and SEZ
projects, Unitech Limited (also referred to as 'Unitech' or 'the Company')
had to face and confront most of these challenges. As was reported in last
year's Annual Report, a slowdown in the sector was evident but the
deterioration was far more rapid and widespread than what was expected.
Consequently, on several fronts, Unitech had to rapidly recalibrate its
strategy and execution plans to align them with the needs of the
transformed business environment.
In order to get the right perspective of the Company's operations in 2008-
09, it is important to track the development of the real estate sector in
the last few years, understand the critical elements that were driving
growth and trace how they were affected by the developments in the macro-
economic environment in 2008-09.
REAL ESTATE IN INDIA - THE GROWTH PHASE
The Indian real estate sector grew at an accelerated pace of 40%-45% per
annum between 2004-05 and 2007-08. There was boom in demand for real estate
across segments driven mainly by the sustained high growth trajectory of
the Indian economy. Chart A shows the year on year growth in GDP and
construction in India in real terms over this period. There is strong
correlation between the two.
Much of this growth was driven by the following factors in different major
segments of the real estate sector:
* Residential Segment: The economic growth in India contributed to
increasing income levels. This, combined with trends of higher urbanisation
and nuclear families created greater demand for housing. Much of the demand
was backed by easier availability of housing finance that often converted
people from living on rent to having their own housing asset
* Commercial Segment: India rapidly emerged as a global back office for
services. There was huge demand for commercial space from information
technology (IT) and IT based businesses. Also, the sustained growth in the
economy prompted several multinational companies to open their operations
in India increasing demand foroffice property
* Retail and Entertainment: Given growing disposable incomes and the
emergence of organised retail in India, there was demand for retail
development and entertainment destinations
In this backdrop, prices of residential, office and commercial properties
reached dizzy heights (up 100%-200% from the levels prevailing in 2005).
The spurt in demand and rapid asset appreciation made real estate very
attractive for investments. While, initially much of these investments were
from domestic sources, with easing up of government regulations on foreign
direct investments (FDI), there were high levels of global capital inflows
into this sector. Most developers could sustain large developments that
have long gestation lags with the help of these large capital flows.
However, by the end of 2006-07, the Reserve Bank of India (RBI) had reacted
to concerns on rapid appreciation in asset values in India. It had asked
banks to set apart 1% (raised from the earlier 0.4%) of personal loans,
capital market exposures, residential housing loans beyond Rs.20 lakh and
commercial real estate loans, as a reserve to safeguard against the impact
of bad loans in the event of an asset bubble burst. There were also
restrictions introduced on external commercial borrowings (ECBs). This
tightened capital flows into the sector and removed speculative investments
in the market. And, the real estate market growth subsided to some extent
with only end-user demand. The capital squeeze became much more apparent
with the macro-economic developments in 2008-09.
MACRO ENVIRONMEN
The fall in housing prices in the US had sparked off the subprime lending
crisis in the middle of 2007. Downgrading and increased default risk of
various housing backed paper - particularly collateralised debt obligations
(CDOs) that were sliced, diced and far removed from the original assets -
rapidly spread throughout the US, and then to the European and Asian
financial systems.
In a matter of months, what had started as a US housing problem became a
major crisis that affected the entire global financial system. While
financial markets in the US and Europe were feeling the pressure in the
second half of 2007-08, other capital markets, especially in emerging
economies, did not seem to think that the sub-prime problem would play out
into a full blown crisis of financial confidence. That changed by the first
half of 2008-09, when everyone began to see a clearer picture of the extent
of write-downs undertaken by the major international financial houses on
account of their non-performing assets. Even accounting for under-
reporting, the numbers were staggering.
Reported write-downs reached US$760 billion by end- September 2008, of
which US$580 billion were incurred by global banks. As expected, losses
were mostly mortgagerelated, and primarily related to the US and European
banks. It only increased with an increase in loan-loss provisioning and
further mark-to-market write-downs. Chart B shows how such a crisis in the
global financial system has been unprecedented in modern history. The
estimated losses incurred by the financial system is over five times what
was witnessed in the nearest other such banking crisis seen in Japan
between 1990 and 1999.
Naturally, several large international financial institutions were left to
grapple with the consequences of large asset write-downs. The plight for
deleveraging led to an unprecedented contraction of credit in the system -
especially in the last three and a half months of 2008, after the collapse
of Lehman Brothers on 14 September 2008.
While the Indian financial intermediaries did not witness such fragility,
the global financial system had an adverse effect on India as well. There
was a significant capital flight especially by foreign institutional
investors; lower capital inflows; sharp depreciation of the Indian rupee
against most major currencies, but especially the US dollar; and huge fall
in equity values on account of reverse capital flows. Moreover, virtually
all overseas lines of credit for banks and Indian companies dried up. The
months of September, October and November were particularly bad as the
financial system witnessed significant pressures on the liquidity front.
Within the real estate sector, Unitech has been focusing on large-scale
mixed-use developments. In the last few years, as has been reported in past
Annual Reports, the Company has grown rapidly. While, initially it had been
ploughing back its internal accruals into its growth plans, in the next
phase, which was centred around being a pan-India diversified real estate
major, it leveraged its balance sheet to expand. This was done consciously
as at the prevailing market conditions, debt financing was optimal in terms
of costs. While the underlying expansion plans are starting to bear fruit,
on hindsight the debt based financing strategy put the Company under
pressure.
However, the developments in the global financial system, especially after
September 2008 were unprecedented and the sharp downward spiral in cash and
credit in the system exacerbated by very negative investor confidence and
business sentiments was beyond any realm of expectation. It left Unitech,
like many other companies in this sector under major refinancing risk in a
market with very tight liquidity.
And, matters were made much worse by the fall-out that the financial crisis
has had on the global real economy. Chart C shows the decline in global
output growth from 5.2% in 2007 to 3.2% in 2008 and an estimated -1.3% in
2009. Much of the slowdown has been in the advanced economies of the USA
and the EU. US growth reduced to 1.1% in 2008 and is estimated to be -2.9%
in 2009. EU growth was a mere 0.9% in 2008. In 2009, it is expected to be -
3.5%. Japan has got into yet another crisis, with 2009 growth forecasted at
-6.5%. Thanks to such acute de-growth in the real sectors of developed
economies, global trade is predicted to shrink by 11% in 2009 - the worst
since the Great Depression.
India, too, has been affected. After growing by over 9% for three
successive years - 2005-06, 2006-07 and 2007-08 - India's growth for 2008-
09 fell to 6.7%, particularly because of poor performance in the second
half of the fiscal year. To be sure, it is better than all developed and
most emerging markets. Nevertheless, a 230 basis point compression in
growth has affected demand and sentiments. Chart D plots the Indian growth
data.
The slowdown in the real economy has had a very negative impact on
discretionary and high value purchases in India. Much of this was triggered
by a sudden reduction in disposable income and doubts about job security.
The demonstrative effects of slowdown in some of the previously faster
growing sectors like IT led to widespread negative economic sentiments in
India. These developments directly affected demand for residential housing
in India as customers refrained from getting into long term indebtedness by
taking housing loans and preferred to hold on to liquid assets like cash.
The global downturn has severely affected services exports from India and
IT and ITES companies started cutting down expansion plans and costs. This
affected growth of commercial real estate. With consumer sentiments hitting
lows, retail and tourism has also suffered. As a result, most segments
within the real estate space witnessed pressure from the demand side and it
became very difficult to sell projects at a rapid pace to improve cash
flows.
Therefore, large real estate companies like Unitech faced a crisis of short
term asset liability mismatch in Q3, 2008-09. And, overcoming this became
the single most important challenge for the Company in the second half of
2008-09.
UNITECH'S FOCUS: BALANCING ASSETS AND LIABILITIES
With demand coming to a virtual standstill post September 2008, there was
little scope of generating cash. Even existing customers started delaying
payments. In 2007-08, with the tightening of RBI regulations for bank
credit to real estate, Unitech had to raise funds from mutual funds. With
negative investor sentiments, the mutual funds faced redemption pressures
and the severe capital squeeze not only raised capital costs but merely
raising capital became a major challenge. Box 1 lists the adverse
developments at Unitech during Q3, 2008-09
While operations and project execution continued to be important, much of
the Company's energies in the second half of 2008-09 were spent on
addressing the cash flow mismatch.
box 1: The dismal third quarter of 2008-09
* Sundry Debtors increased substantially from Rs.746 crore on 31 March 2008
to Rs.1,345 crore on 31 December 2008
* Sales dipped to an all time low. If sales are indexed to1 for Q3, 2008-
09, the sales in Q2, 2008-09 was 6.8 and in Q1,2008-09, it was 3
* The Company became highly leveraged. Outstanding debt increased from
Rs.8,552 crore on 31 March 2008 to Rs.10,900 crore on 31 December 2008
* Significant near term maturities of loans. Approximately Rs.2,600 crore
of loan repayments were scheduled between October 2008 and March 2009
* The cost of debt increased by about 200 bps
The strategy adopted was four pronged. It included:
1. Debt management: Despite a challenging environment, through its
proactive approach, Unitech has been able to successfully manage its debt
obligations
2. Monetization of non-core assets: By de-leveraging through sale of assets
like hotels, commercial properties, office buildings and infusion of
private equity at individual project level
3. Reduced the capital intensity of business: By shifting the strategy from
'land banking to banking on land'
4. Improve operational cash flows: By changing the mindset from
maximization of realizations to maximization of volumes
DEBT MANAGEMENT
As part of its strategy to strengthen its financial position, the Company
undertook restructuring of some of its existing indebtedness. Since
September 2008, the Company had engaged in discussions with some of its
lenders and had undertaken a significant restructuring exercise in January
2009.
For this initiative, the Company was able to benefit from the relaxation of
the restructuring norms of the RBI pursuant to which restructured loans
extended to real estate sector are permitted to be treated as _ Standard
Account loans instead of non-performing assets.
This restructuring has been undertaken through different arrangements.
These include agreements to extend the maturity of loans particularly those
with near term maturities and replacing short term loans with long term
ones. Following the restructuring exercise, the Company was able to defer
the payment of a total aggregate amount of approximately Rs. 1,647 crore
due as repayment of principal under various loan agreements during the
period from October 2008 to March 2009. On this front, the Company also
focused on collateralising loans wherever possible and reducing cost of
debt.
MONETISATION OF NON-CORE ASSETS
The Company sold The Mariott Courtyard Hotel, Gurgaon and is in the process
of selling some of its other hotel properties. It has also sold an office
building at Saket. Having identified a strategic partner, Unitech has
operationally exited its telecom business Unitech Wireless. This had a
positive impact on Unitech's balance sheet and cash flows. The Company is
also exploring ways of infusing private equity into some of its projects.
REDUCTION IN CAPITAL INTENSITY OF BUSINESSES
Unitech has a large, low cost and well diversified land bank, which is
sufficient to meet its development plans for the next seven to eight years.
As a result, Unitech has no plans to acquire further land in the near
future except for extremely attractive opportunities. The Company has also
not undertaken any construction or development activity on a speculative
basis. Construction is currently underway only for presold or preleased
projects. For commercial assets, Unitech has shifted its strategy from a
lease model to a sale model.
IMPROVING OPERATIONAL CASH FLOWS
Unitech's focus going forward is on rapidly developing, marketing and
selling projects on its existing land base. The focus is on tapping the
large untapped low cost housing market. Details of developments on this
front are given in a subsequent section on Unitech's residential real
estate operations.
These initiatives have paid dividends (see chart E).
* Debt outstanding has reduced from Rs.10,900 crore as on 31 December 2008
to Rs.9,055 crore as on 31 March 2009
* Cost of debt has reduced by approximately 70 bps.
The Company's cash position has been further improved in April 2009 with
the successful raising of Rs. 1,621 crores of equity through a QIP. This
equity raising enabled the Company to have better negotiating power with
banks for loans and with potential buyers of non-core assets for price
negotiations. Further, it will provide greater confidence to customers on
project delivery.
Apart from balancing assets and liabilities, the other major non-
operational development during 2008-09 was that of finding a strategic
partner for Unitech Wireless - the Company's telecom venture.
UNITECH WIRELESS
The Company believes that Indias telecom sector presents significant
potential for growth. Consequently, through its subsidiary Unitech Wireless
it bid and received pan-Indian telecommunication licenses in all 22 telecom
circles in February 2008. As of March 2009, it received initial spectrum
(4.4 Mhz) in 21 telecom circles.
While it believed in the investment, Unitech did not intend to have
operational control of this business as it was not part of its core
competency. After evaluating several potential strategic partners, on 28
October 2008, the Company and Unitech Wireless entered into a subscription
agreement with Telenor Mobile Communications AS, Norway and its subsidiary,
Telenor Asia Pte Ltd, Singapore, a global telecom major. Subject to
compliance with certain conditions mentioned in the agreements and receipt
of requisite regulatory approvals, Telenor has agreed to subscribe to
shares of the companies comprising Unitech Wireless in four phases for a
total amount of Rs. 6120 crores with an anticipated completion date of
December 2009. With this investment, Telenor will acquire a 67.25 % stake
in the companies comprising Unitech Wireless. The first phase of investment
by Telenor was completed on 20 March 2009, where Telenor invested Rs. 1250
crores in Unitech Wireless for a 33.5 % stake in the companies comprising
Unitech Wireless. And, in mid-May 2009, the second tranche of investment
worth Rs.1,300 crores was completed. With this, Telenor's paid out stake
increased to 49%.
In January 2009, the Company transferred 75% of its stake in Unitech
Wireless to three associate companies, namely Cestos Unitech Wireless
Private Limited, Simpson Unitech Wireless Private Limited and Acorus
Unitech Wireless Private Limited, to fulfil the conditions precedent for
investment under the Subscription Agreement. However, the Company continues
to hold economic interest in Unitech Wireless through compulsorily
convertible debentures and options in the three associate companies.
These developments had the following direct or indirect financial impact on
Unitech Limited:
* Transfer of Debt and Guarantees totalling Rs. 2,100 Cr on Unitech's
balance sheet to Unitech Wireless.
* Unitech Ltd. has an economic interest of 32.75% in the companies
comprising Unitech Wireless. Based on entry valuation of Telenor, Unitech's
economic interest in the companies comprising Unitech Wireless is valued at
around Rs. 3,000 Cr translating into a per share valuation of around
Rs.12.50
The day to day management of Unitech Wireless will be undertaken by
Telenor. A strong management team of over 300 employees is in place.
Several regional offices have been established with critical manpower.
Unitech Wireless has entered into an infrastructure sharing agreement with
Wireless-TT Infoservices Ltd. (WTTIL), the tower arm of Tata Teleservices
Limited and Quippo Telecom Infrastructure .Limited (QTIL), under which
Unitech Wireless will lease tower infrastructure from WTTIL and QTIL across
India to operate its telecom business. In addition, an agreement for the
provision of transmission services has been entered into with Tata
Teleservices Limited. It has also closed major contracts with best in class
parameters for network equipment and IT services.
For Unitech Wireless, development of value proposition and brand position
is underway, while a robust distribution and retail strategy is also being
put in place. Roll-out of services is expected by the end of calendar year
- 2009. While operationally, Unitech will focus on its core real estate,
the telecom business will be managed with the domain expertise of Telenor.
This business will leverage various strengths of Unitech such as its strong
relationships with regulatory authorities and financial institutions, well
recognised brand name, real estate domain knowledge etc.
BUSINESS OPERATIONS
The operations of the Company can be divided into three principal business
lines:
* Real Estate - Residential, Retail, Entertainment, Hospitality, Commercial
and SEZs
* Property Management and Consultancy Services
* Construction
Clearly, real estate development is by far the largest business in
Unitech's portfolio. The other two segments supplement the core business.
REAL ESTATE SEGMENT
With a share of 83.6% in the Company's total revenues, real estate remains
the Company's core business. Revenues from this segment reduced from
Rs.3,602 crore in 2007-08 to Rs.2,416 crore in 2008-09. The Companys
activities in the real estate sector include identification of projects,
land acquisition, architectural and engineering design, project management
and marketing of projects. The focus has been on mixed use development and
extended from residential to commercial, retail, hospitality and
entertainment hubs. As has been discussed earlier, demand for different
real estate has been subdued through 2008-09.
However, towards the end of 2008-09 there has been an improvement. Much of
this has been driven by higher demand for low cost residential housing.
Stimulus packages by Central Government, coupled with RBI's monetary policy
interventions, have had a positive impact on the real estate sector in
India. Demand has also increased with a reduction in interest rates and
greater availability of housing loans.
Having successfully tided over the adversities in 2008-09, particularly on
the financing front, Unitech is well poised to make the most of the
resurgence in demand in the housing sector. On the operations front, too,
it has adopted a changed business strategy.
Unitech continues to enjoy a competitive edge in the market. There are some
intrinsic factors that differentiate Unitech from its competition. The
factors include:
* Ability to identify new projects and successfully implement existing
projects: The Company believes that its experience in the real estate
sector, established market position and industry knowledge allow it to
identify and acquire new projects effectively. This experience also gives
it an advantage in managing third-party contractors and thereby completing
projects in a timely and efficient manner. The Company is also able to
assess the potential risks and returns of its projects because of its
experience in the development of diverse projects. The Company believes
that it has earned a reputation for reliability among its customers by
completing projects on schedule.
* Track record of profitability and a successful business model: The
Company was one of the early participants in the Indian real estate
industry and has grown to become a leading player with a track record of
profitability. Throughout its 22-year history as a listed company, the
Company has not recorded a loss in earnings before interest, tax and
extraordinary items for any financial year.
* Strong relationships with leading financial institutions, contractors and
consultants: The Company believes that it has developed strong
relationships with leading national and international financial
institutions, thirdparty contractors and consultants. The relationships
with financial institutions enhance the Companys ability to raise funding
for large, capital-intensive projects. The Companys strong working
relationships with third-party contractors provides it with an edge in the
Indian industry. In the past the Company has worked with
internationallyrenowned consultants such as Callison Inc. (USA), FORREC
(Canada), SWA and HOK (USA) for its projects which has enabled it to
provide products with a superior quality and design.
* Well-recognised brand name: The Unitech brand is well recognised in India
and was given the title of Superbrand' by Superbrand India in October
2007. The Company is also the recipient of the CW Architect and Builders
Award, 2008 for being one of Indias Top Ten Builders. The Company believes
that the distinctive design, construction and innovative nature of its
projects are responsible for its brand recognition. Further, the Company
has a dedicated Customer Relations Management (CRM) department to address
any customer concerns. The Company believes that its widely recognised
brand name facilitates a higher level of trust and acceptance among
customers.
Unitech intends to utilise these strengths and implement a new business
strategy. Given market conditions, the focus of the Company's operations
will be on three fundamental pillars.
FOCUSING ON THE RESIDENTIAL SEGMENT WITH THRUST ON AFFORDABLE HOUSING
The Company's focus is now on the residential segment with a thrust on
affordable housing, a segment where a demandsupply mis-match exists and it
is relatively less affected by the recent economic downturn. The Company
will concentrate on offering products, primarily in the price range of Rs.
10 to 50 lakhs. Unitech believes that there is strong growth potential in
this price range as the demand for such properties will continue to
increase with the growth in the Indian economy, especially of the middle
income group (see table 1). Differential lower interest rates introduced by
banks for loans below Rs. 20 lakh will also boost demand in the affordable
housing segment.
Table 1 Income-wise household distribution in India
Number of households
(Million)
2005 2015 2025
High Income Group 1.2 3.3 9.5
Middle Income Group 13.3 60.6 128.0
Low Income Group 192.4 180.1 143.0
Total 206.9 244.0 280.5
Source: McKinsey Global Institute
To enable it to provide housing at affordable prices, the Company will
strive to reduce its costs of development in order to keep its cost
structure low, maintain reasonable profit margins and decrease the area of
the units in each project. Through a combination of reduction in costs,
decrease in unit sizes and reduction in margins, Unitech has been able to
offer housing at prices affordable to a wider cross section of customers.
And, the initial response has been very positive.
Uniworld Gardens II, a recently launched project in the affordable housing
segment, in Gurgaon, has received overwhelming response and the entire
project comprising nearly 800 units was sold out within 7 weeks of launch.
The company also launched affordable housing projects - Ananda (504 units)
and Brahma (672 units) - in Chennai. These projects also have been sold
out. This bears testimony to the widespread demand for such affordable
housing.
The company also plans to offer products priced in the range of Rs. 10 to
25 lakhs. This new low cost housing will be under the 'Unihomes' brand.
The company has plans in place to launch projects totalling an area of 30
million square feet across 15 cities during 2009- 10. Ninety per cent of
these projects will be residential. It already has land for these projects
and the projects are going to be financed through pre-sales.
The Company believes that its low cost land bank and strong in-house design
and development capabilities will provide it with a competitive advantage
in this segment of the housing market.
IMPLEMENTATION OF VALUE ENGINEERING
The Company has commenced implementation of value engineering' across all
its ongoing and future projects with the objective of reducing expenditure
and optimising space usage while maintaining the high quality standards of
the Company. The Company has undertaken rigorous data analysis of past
projects to set up internal benchmarks for evaluating ongoing and new
projects. Implementation of these techniques have already resulted in
reducing costs of various inputs including steel and civil works,
electrical, water supply and plumbing works amongst others. The Company
expects that these savings will reduce its costs and enable it to offer its
projects more competitively, especially in the affordable housing segment.
REDUCING CAPITAL-INTENSIVE PROJECTS
The Company has a large, low cost and well diversified land bank which is
sufficient to meet its development plans for the next seven to eight years.
The Company intends to focus on exploiting its existing land bank to
develop its future projects in order to improve the cash realisation from
its projects. In addition, the Company plans to acquire new land very
selectively and only when it considers that the acquisition affords an
exceptional value proposition for it.
Over the last few years, the company has been investing in developing a
large pan-India land bank. The Company has extensive land reserves, which
are geographically well spread across India (see Map 1). As of 31 March
2009, these land reserves amounted to 11,178.52 acres. Of these,
approximately 6,406.18 acres of land have been allotted or agreed to be
allotted to the Group by State Governments and their agencies, and
approximately 4,772.34 acres of land have been acquired or agreed to be
acquired by the Group from private parties. The Companys land reserves
consist of land legally and validly owned by the Group, land over which the
Group has sole development rights, land awarded to the Group by State
Governments and their agencies pursuant to letters of allotment that have
yet to be transferred to the Company, and land that is subject to memoranda
of understanding, agreements to acquire or letters of acceptance executed
by the Group with private parties. Additionally, the Company has entered
into a number of joint development agreements for land. As of 31 March
2009, land available to the Company was 7,466.78 acres.
Much of this land has been strategically purchased at low costs and is
amenable to generating profits from even low cost affordable housing. The
Company's stress on low cost of land is further seen in its projects in
Mumbai, where thefocus is on slum rehabilitation - a low cost method of
gaining access to land.
The Company intends to concentrate its future construction and development
activities towards projects that are pre-sold or pre-leased. Further, the
Company is planning to adopt a strata sale model rather than a lease model
for its commercial properties. This will ensure that the Company does not
need to raise capital extensively from external sources for developing each
project.
SLUM REHABILITATION: PENETRATING THE MUMBAI MARKET
Unitech has managed to create a significant presence in Mumbai. The
developments here are in line with the Company's model of obtaining low
cost land and developing projects with low capital intensity. This has been
achieved by tapping opportunities in slum rehabilitation. The Company has
adopted a model of partnering local developers who have experience and
knowledge about local issues, which are essential for any slum
rehabilitation project. On this front, Unitech has formed Joint Ventures
with two local developers. Unitech has already built a sizable professional
team of projects managers, architects and legal officials that are
dedicated to this form of project development.
The JV partners have good relationships, goodwill and trust amongst slum
dwellers and excellent relations with local Governments and Slum
Rehabilitation Authority (SRA). They also have good prior experience in
such projects. Unitech brings to the table its strong corporate governance
and organizational systems, execution capability for 'large scale' projects
and township development, high quality standards in design and
construction, strong branding and sales network, and ability for
institutionalised fund raising. The complementing skills of Unitech and its
JV partners are being channelized in a structured manner.
The low land acquisition costs have enabled superior returns for investors
and private equity (PE) players have already started showing interest on
many of the slum development projects. Unitech has already successfully
managed PE fund infusion in the 1st phase of its Golibar project. Project
finance has also been arranged from banks to support these projects.
There are already 15 projects, which are at an advanced stage. The total
land size of these projects is 163 acres, of which 80 acres is private
land. The number of slum dwellers that have to be rehabilitated is 30,714.
Consent has been obtained from over 85% of the slum dwellers and over 2,200
of them have been evacuated. Construction has started in 3 projects.
Another 10 projects are in the preliminary stage of development. The total
land size is 145 acres of which 60 acres is private land. These projects
cover around 30,000 slum dwellers. So far, consent has been obtained from
over 30% of the slum dwellers.
The Company has recently launched its first project, The Chambers, in
Mumbai. It is a commercial project under the strata sales model targeted at
the small and medium enterprises and professionals. This project has
received good response and is nearly sold out.
The company believes that its projects in Mumbai will create immense value
in the coming years.
COMMERCIAL REAL ESTATE
The Companys commercial space offerings are a mix of built to suit'
offices, customised facilities and pure multi-tenanted facilities. The
Company has been developing large projects in multiple phases. These
projects attract tenants who, in turn, have significant growth plans. As
the business operations of these tenants grow, they tend to take up
additional space in the same project at different phases of its
development.
The commercial business model has also witnessed a change in focus. Earlier
it involved either the leasing or the outright sale of its developed
properties, determined on a case by case basis. Now with depressed demand
the focus is on aggressively getting tenants for older projects and only
developing properties that will be sold such as office suites or build to
suit' projects.
RETAIL SPACE
The Companys retail business model involves the leasing or the outright
sale of its developed properties, determined on a case-by-case basis. This
is one of the worst affected segments in the real estate space
characterised by over supply and sharp fall in rentals.
The Company has developed two malls, which form an integral part of its
amusement park projects situated in Noida and Rohini, New Delhi. The Great
India Place, located in Noida, is built over 14 acres of land and has
approximately one million square feet of retail space. The entire retail
space has been leased out to retailers such as Pantaloon, Shoppers Stop,
Lifestyle, Globus, Levis Strauss & Co, Benetton, Adlabs, Marks & Spencer,
Home Centre and Home Town.
In 2008, the Company completed the construction of Gurgaon Central, a
retail mall spread over an area of 100,000 square feet. Gurgaon Central is
completely leased to the Future Group. The Company has recently launched
another retail mall in Lucknow under the brand name Garden Galleria with an
approximate area of over 180,000 square feet. This retail mall is expected
to be completed by 2010. Developments in this business will remain slow and
focus will be on developing projects that are less capital intensive and
have a market.
ENTERTAINMENT SPACE
The Company started developing amusement parks in 2006. The first two
amusement parks are being developed in a phased manner through two joint
venture companies, IRPPL and UAPL. IRPPL is developing a large-scale, high-
tech amusement park spread over 148 acres in Noida called the
Entertainment City'. All the rides in the amusement park have been
imported from other countries. The first phase of development, which
includes the development of an amusement park with 20 rides and a retail
mall spread over an area of one million square feet, is already
operational. The other phases are currently under development.
UAPL is developing the second amusement park called the Adventure Island',
which is located in Rohini, New Delhi over 61.7 acres of land. The project
is being developed in a phased manner. Phase I of the project, which
includes the development of an amusement park with 22 rides and a retail
mall spread over an area of 200,000 square feet, is already operational.
Phase II of the project is underway and is expected to be completed by
2011.
All the rides installed in both parks have been certified for safety by
TUV, a certifying agency. TUV-NORD Systems Gmbh is an agency involved in
the certification of amusement park rides. The focus in this segment is on
operating the existing hubs and increasing footfalls and revenues of these
projects
HOSPITALITY PROJECTS
The Companys strategy in the hospitality segment is to build hotels, clubs
and serviced apartments as an integral part of its mixed-use development
projects. The Company intends to principally build and sell its hotel
properties. In some cases however, the Company may build and operate the
hotel property for a short term with the aim of selling the property
subsequently. In such cases the Company will outsource themanagement of its
hotels to global operators such as Marriott and Carlson. The Company has
signed an agreement with Marriott for the management of four of its hotel
properties. The Company plans to develop different types of
hospitalityproperties such as luxury or business hotels, serviced
apartments, resorts, clubs and limited service budget hotels. The Company
completed the development of Nirvana Club at Nirvana, Gurgaon in 2008.
SPECIAL ECONOMIC ZONES
Company is currently developing five notified IT SEZs. These SEZs are
jointly owned with Unitech Corporate Parks Plc (UCP) which holds 60% stake
in these projects.
PROPERTY MANAGEMENT AND CONSULTING SEGMENT
The Company provides property management services through its property
management subsidiary, Unising Projects Private Limited (UPPL). A few
examples of the maintenance and management services include power
distribution, backup power generation, central air conditioning, water
supply, drainage pumping, janitorial services, security services, parking
management, pest control, fire detection and solid waste disposal and
management. UPPL outsources most of these operations to qualified and
experienced vendors, although it takes responsibility for 117 developing
standard operating procedures, maintenance schedules and addressing
complaints. The fees are typically on a cost-plus basis. UPPL is ISO
9001:2000 certified, which is an international quality standard that
appeals to multi-national clients who expect superior quality standards.
UPPL works closely with the Companys CRM department to identify potential
problem areas and to provide solutions. Company also provides project
management services. Revenues from the Consultancy segment dropped
marginally from Rs.123 crore in 2007-08 to Rs.116 crore in 2008-09.
CONSTRUCTION SEGMENT
The Companys construction business has a proven track record in civil
construction and infrastructure projects. The construction business
includes operations in integrated engineering, procurement and services for
civil construction and infrastructure projects. The Company believes that
its expertise and proven track record in executing construction contracts
for various government, quasi-government and private sector enterprises and
pan-Indian location gives it an advantage when bidding for new contracts
and helps to prequalify it for large build-operate-transfer projects. In
the past, the Company has bid for build-operate-transfer projects along
with third parties. With the company increasingly focussing on its real
estate business, revenues from construction segment reduced significantly
from Rs.213 crore in 2007-08 to Rs.101 crore in 2008-09.
HUMAN RESOURCE
Preserving and developing the human resource base is a very important
element of Unitech's business. In 2007-08, focus was laid in reorganising
the Company to develop internal leaders. During 2008-09, much of this was
put to practice and the strength of the internal team has played a major
role in assisting Unitech to overcome the difficult business environment in
2008-09.
Due to subdued business, there has also been a reduction in the Company's
human resource base. As of 31 March 2009, the Company had approximately 967
permanent employees. The Company regularly organises in-house and external
training programmes for employees to improve operational efficiency. As
part of the Companys strategy, it aims to recruit qualified and talented
employees. The Companys employees are not covered by any collective
bargaining agreements and it has not experienced any material strikes, work
stoppages or labour disputes by its employees. The Company believes that it
has good working relationships with its employees. With over 20 years of
experience of property development in India, the Companys management team
has extensive knowledge and understanding of the property market in India.
This enables the Company to understand market trends and the preferences of
its target clientele.
FINANCIAL REVIEW
Table 2 lists the abridged financial performance of Unitech, as a
consolidated entity
Table 3 Abridged profit and loss Statement;
(Rs.crore)
2008-09 2007-08
Income from operations 2889.74 4140.42
Income from sale of investments 4.72 45.49
Other income 421.18 94.20
Total Revenues 3315.64 4280.11
Operating Expenditure 1300.95 1911.39
PBDIT 2014.69 2368.72
Depreciation 20.92 20.53
PBIT 1993.77 2348.19
Interest 554.57 280.41
PBT 1439.2 2067.78
Tax 242.39 398.59
PAT 1196.81 1669.19
Minority Interests 2.14 -12.87
Profit / (Loss) of associates -1.24 5.54
PAT 1197.71 1661.86
* Income from operations decreased by 30% from Rs.4,140 crore in 2007-08 to
Rs.2,890 crore in 2008-09. Income from sale of investments decreased by
89.6% from Rs.45.5 crore in 2007-08 to Rs.4 crore in 2008-09, while other
income increased significantly to Rs. 421.18 crore in 2007-08. Overall,
total revenues decreased by 22.5%.
* The major fall in revenues contributed to Profits before interest, tax,
depreciation and amortisation (PBDIT) decreasing by 14.9% to Rs.2,015 crore
in 2008-09.
* With the financing crisis, interest outgo increased by over 97% to Rs.555
crore in 2008-09.
* After adjusting for minority interest and profits from associates, the
Company's net Profit after tax (PAT) decreased by 27.9% to Rs.1,198 crore
in 2008-09
* EPS was Rs.7.37 in 2008-09
* The Board of the company has recommended payment of a dividend of 5% on
the Rs.2 face value of the shares for the year ended March 2009
INTERNAL CONTROLS AND THEIR ADEQUACY
Unitech has a proper and adequate system of internal controls to ensure
that all assets are safeguarded and protected against loss from
unauthorised use or disposition, and to ensure that all transactions are
authorised, recorded and reported correctly and adequately.
The Company's internal controls are supplemented by an extensive programme
of internal audits, review by management and documented policies,
guidelines and procedures. The internal control is designed to ensure that
financial and other records are reliable for preparing financial
information and for maintaining accountability of assets. All financial and
audit control systems are also reviewed by the Audit Committee of the Board
of Directors of the company.
RISKS AND CONCERNS
The Company is exposed to different types of risks such as credit risk,
market risk (including liquidity risk, interest rate risk and foreign
exchange risk), operational risk and legal risk. The Company monitors
credit and market risks, as well as portfolio and operational risk through
the oversight of senior management personnel in each of its business
segments. Legal risk is subject to the review of the Companys legal
department and external advisers. The Company is exposed to specific risks
in connection with the management of investments and the environment within
which it operates.
The Company aims to understand, measure and monitor the various risks to
which it is exposed and to ensure that it adheres, as far as reasonably and
practically possible, to the policies and procedures established by it to
mitigate these risks
CAUTIONARY STATEMENT
Statements in this Management Discussion and Analysis describing the
company's objectives, projections, estimates and expectations may be
forward looking statements' within the meaning of applicable laws and
regulations. Actual results might differ substantially or materially from
those expressed or implied. Important developments that could affect the
company's operations include a downtrend in the real estate sector,
significant changes in political and economic environment in India or key
financial markets abroad, tax laws, litigation, labour relations, exchange
rate fluctuations, interest and other costs.