Dear Shareholders,
I am delighted to present the Annual Report for FY2018, which was a
successful year for Prozone Intu in terms of our expectations and objectives. Most
significantly, we emerged as a multi retail asset company with the launch of our
Coimbatore Mall, and at the same time showcased our ability to grow across sectoral
cycles.
India's real estate sector saw two major radical reforms come into
force - the Real Estate Regulatory Authority (RERA) and the Goods and Services Tax (GST).
The landmark GST tax is expected to have far-reaching implications for the real estate
sector and the complete impact is likely to unfold over the coming years. Undoubtedly in
the long term, it is likely that the benefits of efficient supply chains and lower
compliance costs will eventually positively aid businesses in India. We are now observing
signs of recovery as the triple effects of demonetisation, RERA and GST have begun to
shape up the sector with new standards of delivery, accountability and transparency.
With these measures and progressive intent in place, the real estate
industry is estimated to grow at a healthy pace, providing various growth opportunities
for your Company. In addition to this, rapid urbanisation, growing personal income and the
Government's focus on infrastructure should further drive the sector positively, going
forward.
The retail real estate industry in India is also gradually maturing and
moving towards its next phase of evolution. With the tastes of Indian consumers rapidly
maturing, coupled with the in_ux of international brands, we sense a growing confidence in
the future trends of Indian retail real estate. At Prozone Intu, we have always been
sensitive to consumer sentiments. Through our continuous brand churning and upgrading, we
have ensured that we are aligned to the important emerging retail trends. This has
reflected well on our performance metrics, meaningfully improving our KPIs. For FY2018, I
am pleased to inform you that we reported the highest ever annual revenue with a growth of
46% from
RS 73.92 crore in the previous fiscal to
RS 107.71 crore in FY2018. We also produced record high EBITDA at RS
49.19 crore with EBITDA margin of 46%. We have delivered EBITDA growth of 214% over
previous year during the year. Our numbers also reflect our tight control on costs and
improved operational efficiencies introduced during the year.
Our Strategic Reinforcements
As a highly focused developer, owner and operator of mixed-use
properties, we are always looking for better ways of delivering sustainable growth in
shareholder value.
Firstly, we are increasingly convinced that our strategy for developing
transformational mixed-use projects primarily in Tier 1 and Tier 2 geographies is the
right one. With this strategy, we have created projects which we believe have the
necessary scale, mix of uses and favourable locations, to become key destinations that can
transform the areas in which they operate.
Furthermore, we are maximising the earnings and value out of our
completed properties through active asset management, and by reinforcing these assets
through enhancements, re-layouts and new additions. During the year, our Aurangabad Mall
underwent strategic alterations in brand mix and mall layout. As a result, this property
continues to enjoy its preeminent position as the most attractive and relevant retail
destination in the city.
Additionally, we concentrated on management of our completed properties
actively. We achieved this by optimising the mix of retail occupiers at both our malls.
With a long term view, we consistently maintained high levels of consumer service at our
malls to enhance and reinforce our brand. In doing so, we hope to maximise the
consumption, occupancy and earnings potential of each of our properties.
We also aim to be at the forefront of sustainable development by
designing energy efficient buildings through the innovative use of design, materials and
new technology. With this view, we installed solar panels on our Aurangabad Mall to
increase energy efficiency, reduce our carbon footprint, and simultaneously reduce our
total energy bills.
Our measured approach for land purchases in the past also gives us a
competitive edge. Having potential of developing 17.79 mn sq. ft., 88% is still available
for future monetisation. We intend to do this at appropriate junctures in time by
leveraging the benefits that come from developing large-scale mixed-use projects.
In following all these strategies, we continue to manage our capital
base conservatively and prudently. We intend to maintain a strong balance sheet with a
view to invest and finance our projects in a disciplined manner. This has helped us in
maintaining our debt equity ratio at 0.40x, which is one of the lowest in the sector. As
we look at new opportunities in the future, our balance sheet strength provides us a good
headroom to raise capital as and when we need it.
Way Forward
With strong strategies already in place to create long-term value, our
emphasis will be on project execution and asset monetisation. Looking ahead, we also see
the horizon of our opportunities expanding at fast pace. With the launch of our Coimbatore
Mall, we expect strong revenue traction from the asset going forward. We also have a
strong pipeline of residential properties under development. We have progressed well on
our residential projects in Nagpur, Coimbatore and Indore; and they are in the different
stages of execution. We expect to see consistent free cash flow generation over the next
few years from these projects. Our future growth will be backed by our fiscal prudence;
strong balance sheet with low debt; and ample liquidity in form of cash and cash
equivalents.
Over the years, we have created a legacy of trust - and we will
continue to build on it. We will continue to create spaces that are aspirational and set
benchmark for the industry. The foundation of our core existence is composed of many
enablers, such as our strong investors, supporting bankers, focused employees and
supportive retail partners. I take this opportunity to thank each of you for being highly
supportive pillars of this organisation. With your constant backing, we are sure to
witness further growth in customer delight and shareholder value in the years to come.
Sincerely,
Nikhil Chaturvedi
Managing Director