KAMAIMWALA HOUSING CONSTRUCTION LIMITED
ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting their Twenty Eighth Annual
Report on the business and operations of the Company along with the audited
Financial Statements of Account for the year ended 31st March, 2012.
The Summarized Financial Highlights of the Company are as follows:
For the Year For the Year
In Lacs) In Lacs)
Sales and Other Income 7,797.51 4,736.53
Gross Profit 587.29 394.85
Less: Depreciation. 19.41 16.52
Miscellaneous Expenditure written off. 1.40 1.40
Profit before Taxation. 566.48 376.93
Provision for Taxation 172.48 140.00
Provision for Taxation for earlier years. 2.52 2.33
Provision for Deferred Tax.. 1.68 0.89
Net Profit/(Loss) for the year 389.80 233.71
Balance brought forward from previous year 3,886.08 3,652.37
Profits available for Appropriations 4,275.88 3,886.08
Balance carried to Balance Sheet 4,275.88 3,886.08
With a view to conserve and plough back the resources of the Company, the
Board of Directors has decided not to recommend any dividend for the
Financial Year 2011-12.
REVIEW OF OPERATIONS:
During the year under review, the Company recorded the turnover of
Rs.7,797.51 Lacs as compared to Rs. 4,736.53 Lacs for the previous year.
The Company earned profit after tax of Rs. 389.80 Lacs for the year as
compared to Rs. 233.71 Lacs in the previous year.
Amid the deteriorating macroeconomic fundamentals and sagging business
confidence, your Company has performed better as compared to last year`s
performance. But due to increased input costs, strains on cash flows and
pressure on margins continued adversely affecting the financial performance
of the Company. During the year under review, a residential project known
as "SAVOY RESIDENCY" and a joint venture commercial project named as "SAVOY
CHAMBERS" situated at Santacruz (West), Mumbai, were completely executed
and the sale of entire space of both projects has been accounted for
Construction work at the Company`s Residential project at Malad (West),
Mumbai, is well in progress and is expected to be completed as per
scheduled time. Construction activity is also well in progress at
residential joint venture project known as "Simmering Heights", at Mahim
(West), Mumbai, and is expected to be executed within the scheduled time.
Execution plans have been laid for other projects. Necessary approvals from
the concerned authorities are being awaited. In the prevailing uncertain
and unfavourable economic, financial and business climate in the global
economy in general and in India in particular, it is very difficult to lay
down capital expenditure (Capex) plans. As soon as clouds of uncertainties
are drifted away, your Directors will lay down well conceptualized thought
out expansion and diversification plans. The Company has the strong balance
sheet position with reasonable level of leveraging. Your Directors hope
that the Company will register a better performance in the current year
with improved cash flows.
REPORT ON CORPORATE GOVERNANCE:
The Report on Corporate Governance is attached herewith as Annexure-I and
forms part of this Report. The Certificate from Practicing Company
Secretary, Mr. Upendra C. Shukla, on compliance with Corporate Governance
requirements by the Company is attached to the Report on Corporate
MANAGEMENT DISCUSSION & ANALYSIS REPORT:
Management Discussion & Analysis Report is attached herewith as Annexure-II
and forms part of this Report.
Pursuant to the provisions of the Companies Act, 1956 and relevant Article
of the Articles of Association of the Company, Mr. Atul Jain, Mr.
Bhanwarlal D. Jogani, Mrs. Pushpa Jain and Mr. Amit Jain retire by rotation
at the forthcoming 28th Annual General Meeting and being eligible they
offer themselves for re-appointment. As per Item No.7 of the Notice for
convening the 28th Annual General Meeting, Mr. Jaipal Jain is being
proposed to be re-appointed as a Whole-time Director of the Company w.e.f.
24th April, 2012.
The Members are requested to approve their reappointments.
DIRECTORS` RESPONSIBILITY STATEMENT:
Pursuant to Section 217 (2AA) of the Companies Act 1956, your Directors,
based on the representations received from operating management and after
due enquiry, confirm that:
(i) In the preparation of the annual accounts, the applicable Accounting
Standards have been followed;
(ii) They have, in the selection of the accounting policies, consulted the
Statutory Auditors and those have been applied consistently. Reasonable and
prudent judgments and estimates have been made so as to give a true and
fair view of the state of affairs of the Company as at 31st March, 2012 and
of the profit of the Company for the year ended on that date;
(iii) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
detecting and preventing the fraud and other irregularities; and
(iv) The annual accounts have been prepared on a going concern basis.
Your Company has not accepted any Deposits from the public or its employees
during the year under review. There was no outstanding Deposit repayable as
on 31st March, 2012.
PARTICULARS OF EMPLOYEES:
The Company did not have any employee who was in receipt of remuneration
exceeding Rs. 60,00,000/- per annum and if employed for a part of the year
exceeding remuneration at the rate which in aggregate was Rs.5,00,000/- per
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
In view of the nature of activities which are being carried on by the
Company, Provisions of Section 217(1)(e) of the Company`s Act, 1956
relating to the Companies (Disclosure of Particulars in the Report of the
Board of Directors) Rules, 1988, regarding conservation of energy and
technology absorption, are not applicable to the Company.
There was no foreign exchange earnings and expenses during the year under
As regards Auditors` remarks, your Directors wish to state as under:
(i) Regarding interest amount of Rs. 11,25,506/- on delayed payments of
Service Tax, the said interest liability has accrued as the purchasers of
flats/office premises did not make the payments of Service Tax to the
Company in time. Hence, there was delay in making payments of Service Tax
to the Government Treasury.
(ii) Regarding Income Tax demand of Rs.1,69,763/- for A.Y. 2007-08 and
Rs.2,32,724/- for A.Y. 2008-09-these demands raised by the Assessing
Officer are subject to rectification. The rectification applications are
pending for both the Assessment Years. The Orders of rectifications are
being awaited from the Income Tax Department.
M/s. Mittal & Associates, Chartered Accountants, the Auditors of your
Company, retire at the forthcoming 28th Annual General Meeting. They are
eligible for reappointment. The Members are requested to appoint the
Auditors of the Company for the current year and fix their remuneration.
Your Directors would like to express their appreciation for the co-
operation and assistance received from Banks, Government authorities,
customers, suppliers and shareholders during the year under review. Your
Directors also wish to place on record their deep sense of appreciation for
the committed services rendered by all the employees of the Company.
For and on behalf of the Board
Dated: 11th August, 2012.
MANAGEMENT DISCUSSION AND ANALYSIS
I. World Economic Review:
During the year 2011-12, the world economy witnessed a slowdown and
recessionary trends. The geopolitical and socio-economic turbulence in the
Middle East and North Africa, Tsunami in Japan, the sovereign debt crisis
in the peripheral countries of the Euro-Zone and fragile growth recovery in
the United States of America have played a great role in shaking the
economic landscape of the world economy. In the developed markets, debt
crisis and slow economic recovery remain unresolved, while emerging markets
are grappling with persistent inflation and high energy prices. As
technology advances, competition increases and the balance of economic
power to some extent has shifted to high-growth emerging markets of Brazil,
Russia, India and China, so called BRIC countries. The world economy is
seemingly entering a new phase of development with continued uncertainty.
At present the world economy is facing structural economic problems.
Therefore, structural reforms are urgently required to be made to bring it
back on growth track.
II. Indian Economic Review:
Against the backdrop of a turbulent world economic events, the India
economy is facing its own share of pains: persistent inflation, ballooning
fiscal and current account deficits, depreciating Rupee value against the
US Dollar mediocre industrial performance, sluggish exports and spiraling
fuel prices. The Reserve Bank of India was prompted to hike interest rates
13 times since March, 2010 to tame inflation. The combined impact of all
these adverse factors is evident in the Gross Domestic Product (GDP)
figures. The country`s GDP growth rate has slumped from 8.4% in 2010-11 to
6.5% in 2011-12 which is the lowest in nine years.
Almost all the sectors of the economy declined to a dismal level. The
government is optimistic about managing around 6.5-7% GDP growth in the
year 2012-13. What is particularly worth noting is that the economy in the
world that has seen the sharpest downward revision in growth is India of 70
basis points. Another way of putting it is that India has seen the sharpest
deterioration in its macro-economic fundamentals since April, 2012. India`s
economic problems are partly due to external factors and partly due to
internal factors. Currently India faces very uncertain economic outlook. To
drift away the clouds of uncertainties, it will require the uphill tasks of
implementation of pending economic and financial reforms. By doing so the
confidence of the business community will be regained and then business
enterprises will make their investment decisions effective.
III. Real Estate Sector Review:
From the lows of 2009 to a rise in 2010 to an almost stable 2011 and now
almost a cautious 2012, the real estate sector in the country has become a
full circle today. Stepping into 2013 would not be a challenge if a
vigilant stance is adopted. Year 2011 was a landmark year with record
construction and growth in the residential space. Absorption rate was
strong and upward swing was in process. With economic downturn 2012 became
a sort of reality check and supply has been going up but absorption has
come down. The scenario is less predictable and there is a great challenge.
This challenge however is also an opportunity. It is the time to conserve,
consolidate and grow individually and as an industry. The need is to
increase transparency to improve confidence of investors and buyers, work
towards easing out of regulatory framework and increasing and developing
skilled manpower. Though the construction business is the second largest
employer of manpower in the nation after agriculture and accounts for 10%
of the nation`s GDP, it has not been accorded industry status, thus keeping
benefits from financial institutions, lower interest rates and easy
approval process away from the industry. To keep up its growth, India need
to urbanize quicker, build more cities and reduce graft and corruption
because they channelize money away from productive investment. Although the
realty sector is simple, it is made complicated due to high inter-
dependence of authorities granting necessary approvals. However, with more
transparency and international practices being followed, the sector has to
move towards more efficiency.
It is encouraging to note that the RBI has asked banks not to levy
prepayment penalties on home loans, especially on loans under floating
interest rate plans. This will bring a positive move in the buyer`s
sentiments. It is a well known fact that infrastructure enhancement and
real estate development go hand-in-hand. In the light of Prime Minister`s
recent statement on government`s intentions to accord top priority for the
infrastructure development, reality experts feel that the said announcement
augurs well for real estate growth across the country. However, what India
needs today is to not only to sustain its economic growth, but to ensure
its competitiveness and undertake an aggressive approach to development. It
is estimated that in the next five years the investment required in
infrastructure projects would be around $ 1 trillion and this can be
achieved with the implementation of public private partnership (PPP) models
as neither the government nor the private sector can make the required
investments all by themselves. Focused and timely implementation of various
infrastructure projects will not only rebuild investor`s confidence, but
also create mass employment opportunities nationwide providing avenues for
betterment to even the poorer and deprived sections of the country.
IV. Business Prospects and Outlook:
With the demand-supply ratio of the reality sector being a highly skewed
one, there is a need for revision in policies to make housing supply faster
and better. The real estate sector plays a significant role in India`s
economic development. Almost 10% of the country`s Gross Domestic Product
(GDP) is contributed by the real estate sector and an unit increase in
expenditure in this sector has a multiplier effect and the capacity to
generate income as high as five times the increase in expenditure. Real
estate in India has been characterized by an increased presence of large
number of public companies along with the opening up of this sector to
foreign direct investment (FDI) and private equity firms. This has
increased the discipline and accountability of businesses undertaking
large-scale real esate developments. On demand, Indians have an innate
propensity to own homes. This with rising income levels following India`s
rapid growth has resulted in a phenomenal increase in the demand for homes.
Moreover, the people have started viewing property as a preferred
investment option, given that return are pegged between 15% and 20%
compared with bank deposits which seldom offer returns over 10% a year. The
risk involved is also much less as compared to other asset classes, such as
stock market, mutual funds, debentures, bonds, bank deposits, etc. In the
case of other investments one has to act with great caution looking into
various parameters affecting the return as well as the safety of capital
invested. The increased foreign investments in India have increased
employment opportunities and consequently the disposable income in the
hands of middle class, which has fuelled the growth of the housing sector.
One should realize that without healthy growth of the real estate sector,
it is hard to imagine the growth of other sectors of any economy of the
world. Today, look at the American economy, where recovery is fragile
because housing sector is still not recovered, Chinese government tried to
control booming real estate sector and as consequence sign of slowdown in
the Chinese economy have started to appear and its GDP growth rate has
dropped to 7.5% from above 9% in the year 2010-11, similarly, Spanish
economy is not properly working because of housing burst. Therefore,
healthy growth of real estate sector is a must for healthy growth of other
sectors of the economy. India`s favourable demography, low mortgage
penetration, reasonable level of interest rates and ongoing infrastructure
development will prevent real estate downturn from happening in the near
future. The fundamentals of the sector are strong and its growth should
continue in the foreseeable future.
India is among the world`s fastest growing real estate markets,
globalization and India`s economic growth prospects present a whole new
world of opportunities for today`s real estate developers.
V. Opportunities, Threats, Risks and Concern:
In a country like India, with a population around 1.20 billion and that too
consisting of large middle class, the demand for real estate would continue
to grow. Since land available for real estate development is limited, the
prices would continue to increase in the long run. Therefore, investment in
real estate is likely to fetch good returns in the long run. Today, the
Indian economy is growing at a reasonable pace and the real estate sector
is growing even faster. Eventually, more and more money will chase a
limited quantity of high-quality property. A look at the demographic and
economic development indices suggest that residential and commercial demand
can be expected to remain high. Increasing disposable incomes, easily
available home loans, increased urbanisation and the emergence of a younger
earning age group (aged 25 - 45 years) as the largest constituent will
sustain demand for housing. Going by both fundamentals and technical
dynamics, it would be a wrong move to write a real estate investing off
your investment portfolios. The real estate market is fairly nascent. And
opportunities are fairly large and the prices of real estate (depending on
locations and other parameters) are temporarily high, mostly due to heavy
land cost, high interest rates, increased input costs, etc. While they will
rationalize in some areas, the real estate market is far from being heated.
In fact, taking into account the way dynamics have changed in the sector,
the optimism could even be justified, the reason being the presence and
emergence of cogent factors in the sector.
Threats, Risks and Concerns:
Though the investment is in appreciative proposition for long-term
benefits, Indian real estate sector faces several threats, risks and
concerns. The rising interest rates and scanty land availability in India,
the problems in the US economy due sub-prime crisis and the subsequent
global turmoil are creating pressure on the Indian real estate sector.
Every individual in his life time dreams of owning a house but some times,
they are reluctant due to complexity of various laws, rules and
regulations. Analysts believe that change in product mix to more affordable
homes and stricter funding norms may lead to some bumps on the road to real
estate development. Imposition of Service Tax and VAT has added to the
price pressure and ultimately it has adversely affected the dreams of poor
and middle class people of the country to have their own homes and
correspondingly it has adversely affected the real estate sector. Further,
those who thought of saving time by buying a home close to an
infrastructure project in the city of Mumbai, there is a likelihood that
they would have to spent more money. This is because MMRDA has proposed a
development fee of 10% on the ready reckoner rates for properties close to
various infrastructure projects in the city. If the proposed Bill is
passed, the cost of residential spaces in those areas is likely to shoot
up. Currently, the developers are in a confused state of mind as they have
to run from pillar to post to get clearances from various government
departments for a single project. This not only delays the implementation
of the projects, but also increases the cost in a substantial manner. This
sole factor is ultimately responsible for imbalances between demand and
supply. Therefore, it is important that demand and supply of property in
Mumbai remain balanced as it affects the city`s overall financial growth.
Mumbai faces a lot of chaos as regards to regulations at state and central
level. The slowdown in Mumbai`s real estate supply is also caused by
inappropriate policy measures. At times, the supply bottleneck is due to
varied reasons like policy issues, scams, delay in providing necessary
permissions and approval at the right time, etc. To ensure that to maintain
an equilibrium in the demand-supply ratio, the decisions to be taken by the
regulatory bodies should be prompt and effective. With the year 2012
already being a challenging environment and customers looking for absolute
clarity while purchasing homes, real estate players need to be innovative
and quicker in their decision making process. Moreover, macroeconomic
factors such as the high interest rates, high level or persistence
inflation, burgeoning fiscal and current account deficits and adverse
external economic environment which are beyond the control of an individual
company, will dampen the financial performance of the real estate sector.
The cyclical nature of real estate business poses a threat to the whole
industry. Any real estate developer that does not formulate adequate risk
mitigation measures would be adversely affected by such cyclical downturn.
With a view to mitigate such risks, all the required documents are required
to be prepared meticulously. Prevailing intense competition could also
adversely affect performances of medium and small-size real estate
VI. Internal Control and Audit:
(a) Internal Control:
The Company has a proper and adequate system of internal control,
commensurate with the size and nature of its business. The internal control
system is integral to the Company`s corporate governance. Some key features
of the internal control system comprise of the following:
> Adequate documentation of policies, guidelines, authorities and approval
procedures, encompassing important functions of the Company.
> Ensuring complete compliance with laws, regulations, standards, internal
procedures and systems.
> De-risking the Company`s assets / resources from any loss, attrition and
> Ensuring the integrity of the accounting system, the proper and
authorized recording and reporting of all transactions.
> Ensuring reliability of all financial and operational information.
> The Audit Committee, comprising independent Directors, regularly review
audit plans, significant audit findings, adequacy of internal controls,
compliance with Accounting Standards, among others.
(b) Internal Audit:
The internal audit team is responsible for assessing and improving
effectiveness of internal controls and governance. The internal audit
activity is conducted by the Company`s Internal Auditors, who undertake the
internal audit programme in accordance with the guidance of the Audit
Committee of the Board of Directors. The reports of the Internal Auditors
are extensively reviewed by the Audit Committee along with the Managing
Director periodically and the corrective actions have been taken wherever
and whenever needed. The Internal Auditors also extensively interact with
the external auditors.
VII. Human Resources Development:
Your Company firmly believes that motivated employees are the key for a
competitive advantage. The Company has always reviewed its human resources
in an integrated manner aligning all the facets of its human capital with
business and organizational transformation in realizing its objectives.
Your Company`s employee value proposition is based on employee development,
an exciting work culture, performance evaluation and empowerment. The
Company has created a conducive working environment with prudent knowledge
management leading to enhanced skills and capabilities.
Your Company provides challenging career development opportunities and
encourages innovative thinking. It monitors employees` performance to
enhance individual and organizational performance.
During the year under review, employees` relations remained cordial and
there was nil turnover of the employees. As at 31st March, 2012 the Company
had 41 employees on record.
VIII. Forward Looking and Cautionary Statements:
In this Annual Report we have disclosed forward looking information to
enable investors to comprehend our prospects and take well informed and
calculated investment decisions. This report and other statements written
and oral that we periodically make contain forward-looking statements that
set out anticipated results based on management`s plans, projections and
assumptions. We have tried wherever possible to identify such statements by
using words such as "anticipates", "estimates", "expects", "projects",
"intends", "plans", and words of similar substance in connection with any
discussion of future performance.
We cannot guarantee that these forward looking statements will be realized,
although we believe that we have been prudent in our assumptions. The
achievement of results is subject to risks, uncertainties and inaccurate
assumptions. Should known or unknown risks or uncertainties materialize, or
should underlying assumptions prove accurate, our actual results could vary
materially from those anticipated, estimated or projected, the readers
should bear this in mind. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
For and on behalf of the Board
Dated: 11th August, 2012.