1 SHELF INFORMATION MEMORANDUM FOR ISSUE OF DEBENTURES ON A PRIVATE PLACEMENT BASIS HOUSING DEVELOPMENT AND INFRASTRUCTURE LIMITED (We were incorporated as Housing Development and Improvement India Private Limited on July 25, 1996. Our status was subsequently changed to a public limited company by a special resolution of the members passed at the extraordinary general meeting on January 12, 2005. The fresh certificate of incorporation consequent to the change of name was granted to us on February 3, 2005 by the Registrar of Companies, Maharashtra, Mumbai. Our name was further changed to Housing Development and Infrastructure Limited by a special resolution of the members passed at the extraordinary general meeting on August 7, 2006. The fresh certificate of incorporation consequent to the change of name was granted on August 29, 2006, by the Registrar of Companies, Maharashtra, Mumbai.) Registered and Corporate Office: 9-01, Dheeraj Arma, Anant Kanekar Marg, Bandra (East), Mumbai 400 051, Maharashtra, India Tel: (91 22) 2658 3500, Fax: (91 22) 2658 3535, Email: [email protected], Website: HTUwww.hdil.in UTH Issue of Secured Redeemable Non-Convertible Debentures of for cash, aggregating Rs. 11,500,000,000 /- (Rupees Eleven Thousand and Five Hundred Million Only) on a Private Placement Basis, in one or more tranches. Credit Rating: ‘CARE A+’ [Single ‘A+’] GENERAL RISKS General Risks: Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Issue and the shelf Information Memorandum including the risks involved. The Issue has not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this Shelf Information Memorandum. Specific attention of investors is invited to the statement of Risk of this Shelf Information Memorandum. The company is not required to file this document with SEBI/ROC as the NCDS will be placed privately. ISSUER’S ABSOLUTE RESPONSIBILITY Issuer’s Absolute Responsibility: The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Shelf Information Memorandum contains all information with regard to the Company and the Issue which is material in the context of the issue, that the information contained in the Shelf Information Memorandum is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts the omission of which makes this Shelf Information Memorandum as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.
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SHELF INFORMATION MEMORANDUM FOR ISSUE OF DEBENTURES ON A
PRIVATE PLACEMENT BASIS
HOUSING DEVELOPMENT AND INFRASTRUCTURE LIMITED
(We were incorporated as Housing Development and Improvement India Private Limited on July 25, 1996. Our status was subsequently changed to a public limited company by a special resolution of the members passed at the extraordinary general meeting on January 12, 2005. The fresh certificate of incorporation consequent to the change of name was granted to us on February 3, 2005 by the Registrar of Companies, Maharashtra, Mumbai. Our name was further changed to Housing Development and Infrastructure Limited by a special resolution of the members passed at the extraordinary general meeting on August 7, 2006. The fresh certificate of incorporation consequent to the change of name was granted on August 29, 2006, by the Registrar of Companies, Maharashtra, Mumbai.)
Registered and Corporate Office: 9-01, Dheeraj Arma, Anant Kanekar Marg, Bandra (East), Mumbai 400 051, Maharashtra, India
Issue of Secured Redeemable Non-Convertible Debentures of for cash, aggregating Rs. 11,500,000,000 /- (Rupees Eleven Thousand and Five Hundred Million Only) on a Private Placement Basis, in one or more tranches.
Credit Rating: ‘CARE A+’ [Single ‘A+’] GENERAL RISKS General Risks: Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Issue and the shelf Information Memorandum including the risks involved. The Issue has not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this Shelf Information Memorandum. Specific attention of investors is invited to the statement of Risk of this Shelf Information Memorandum. The company is not required to file this document with SEBI/ROC as the NCDS will be placed privately. ISSUER’S ABSOLUTE RESPONSIBILITY Issuer’s Absolute Responsibility: The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Shelf Information Memorandum contains all information with regard to the Company and the Issue which is material in the context of the issue, that the information contained in the Shelf Information Memorandum is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts the omission of which makes this Shelf Information Memorandum as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.
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ISSUE SCHEDULE Issue Opening Date: will be decided at with each tranche and informed with the term sheet. Issue Closing Date:
CREDIT RATING Credit Rating: CARE, the rating agency has given a rating of ‘A+’ [Single ‘A+’] to Debentures. Instruments with this ratings are considered to offer high safety for timely servicing of debt obligation. Such instruments carry very low credit risk. However, changes in circumstances or economic conditions may affect the capacity for timely repayment of these financial commitments to a greater degree than for financial commitments denoted by a higher rated category. The rating for this Issue is not a recommendation to buy, sell or hold securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the rating agency on the basis of new information and each rating should be evaluated independently of any other rating. The ratings are subject to revision at any point of time in the future. The rating agency has a right to suspend, withdraw the rating at any time on the basis of new information etc. LISTING Listing: The Debentures shall be listed on the Wholesale Debt Market (WDM) segment of Bombay Stock Exchange Limited (BSE). The Company has obtained in principal approval from the BSE for listing of the debentures.
This Shelf Information Memorandum is dated 14 P
thP December 2009.
DEBENTURE TRUSTEE REGISTRAR TO THE ISSUE IDBI Trusteeship Services limited Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate,
ABBREVIATIONS/TERMS USED 4 DISCLAIMER 10 FORWARD-LOOKING STATEMENTS AND MARKET DATA 14
RISK FACTORS 16 SUMMARY 42 1) GENERAL INFORMATION 53 2) CAPITAL STRUCTURE 58 3) OBJECTS AND TERMS OF THE ISSUE 64 4) ABOUT OUR COMPANY 79 5) HISTORY AND CORPORATE STRUCTURE OF THE COMPANY 101 6) MANAGEMENT OF THE COMPANY 113 7) FINANCIAL INFORMATION 131 8) INDUSTRY OVERVIEW 135 9) LEGAL PROCEEDINGS 152 10) GOVERNMENT APPROVALS AND LICENSING ARR ANGEMENTS 155
11) OTHER REGULATORY AND STATUTORY DISCLOSURES 156
12) OFFERING INFORMATION 162 13) MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 164
14) AUDITORS REPORT 165 15) DECLARATION 194 Note: This Shelf Information Memorandum of private placement is neither a prospectus nor a statement in lieu of a prospectus. This is only an information brochure intended for private use and should not be construed to be a prospectus and/or an invitation to the public for subscription to the Debentures under any law for the time being in force. The Company can, at its sole and absolute discretion change the terms of the Issue. For more details, please refer to the Disclaimer on Page 10 of this Shelf Information Memorandum.
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UABBREVIATIONS/TERMS USED
Conventional / General Terms Act The Companies Act, 1956
AS Accounting Standards issued by the Institute of Chartered Accountants of India.
AY Assessment Year
Directors/Board/ Board of Directors
The directors of our Company, unless the context otherwise requires.
Indian GAAP Generally accepted accounting principles in India. Insurance Act Insurance Act, 1938, as amended from time to time. IT Act The Income Tax Act, 1961, as amended from time to time. Memorandum/ Memorandum of Association
The Memorandum of Association of Housing Development and Infrastructure Limited.
NRI/Non-Resident Indian
A person resident outside India, as defined under FEMA and who is a citizen of India or a Person of Indian Origin under FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.
SEBI Act Securities and Exchange Board of India Act, 1992 as amended from time to time.
SEBI (DIP) Guidelines
SEBI (Disclosure and Investor Protection) Guidelines, 2000 as amended from time to time.
SEBI Private Placement Circulars
SEBI circular no. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 and SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003 .
Stock Exchange Bombay Stock Exchange Limited or BSE. Issue related terms
Term Description
Beneficiary / Beneficiaries
Those persons whose names appear as the beneficiaries as per details provided by the Depositories (NSDL and/or CDSL) as on the record date.
Events of Default The Events of Default as may be agreed upon between the Company and the Debenture Trustee and set out in the Debenture Trust Deed.
“Housing Development & Infrastructure limited” or “HDIL” or “the Company” or “our Company” or “we” or “us” or “our”
Housing Development & Infrastructure limited, a public limited company incorporated under the Companies Act, 1956, with its registered office at 9-01, Dheeraj Arma, Anant Kanekar Marg, Station Road, Bandra (East), Mumbai 400 051.
Allotment/ Allotment of Debentures
Unless the context otherwise requires, issue of Debentures pursuant to this Issue.
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Term Description
Debentures or NCD’s
Secured Redeemable Non-Convertible Debentures of Rs.1,000,000/- (Rupees Ten Lac Only) each of the Company, being issued under this Issue.
Debenture Trustee or Trustee
IDBI Trusteeship Services Limited.
Debenture Holder(s)/ Debentureholder(s)
The holder of the Debenture whose name appears as a beneficiary as per details provided by the Depositories (NSDL and/or CDSL).
Depository A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time.
Depositories Act The Depositories Act, 1996, as amended from time to time. Depository Participant A depository participant as defined under the Depositories Act.
Information Memorandum/Sheld Information Memorandum
This Shelf Information Memorandum dated 14P
thP December 2009
issued in relation to the Issue.
Investors
Those institutions/corporations to whom a copy of the Information Memorandum may be sent, specifically addressed to such person, with a view to offering the Debentures for sale (being offered on a private placement basis) under this Information Memorandum.
Issue
Issue, by the Company, of 1150 Debentures for cash, aggregating to Rs. 11,500,000,000/- (Rupees Eleven Thousand and Five Hundred Million Only) on a private placement basis, in one or more trenches.
Issue Management Team
The team managing this Issue as set out in the section titled “General Information” in this Information Memorandum.
Promoters
1. Mr. Rakesh Kumar Wadhawan. 2. Mr. Sarang Wadhawan. 3. Mr. Kapil Wadhawan. 4. Mr. Dheeraj Wadhawan.
Registrar/ Registrar to this Issue
Karvy Computershare Private Limited.
Total Obligations
Total Obligations means the total amount of interest on Debentures and the principal amount of the Debentures due from the Company under this Issue in terms of this Information Memorandum.
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Company/ Industry-related Terms
Term Description
Auditors Refers to the statutory auditors of the Company, M/s. Thar and Co., Chartered Accountants.
Articles/ Articles of Association
The Articles of Association of Housing Development and infrastructure limited.
AAI The Airport Authority of India.
AGM Annual General Meeting.
Acre Equals 43,560 sq.ft.
BMC Bombay Municipal Corporation.
Board / Board of Directors
Board of Directors of our company unless otherwise specified.
FSI/FSA Floor Space Index, which means the quotient of the ratio of the combined gross floor area of all floors, excepting areas specifically exempted, to the total area of the plot.
IOD Intimation of Disapproval.
LOI Letter of Intent.
MCGM Municipal Corporation of Greater Mumbai.
MHADA Maharashtra Housing Area Development Authority.
MMRDA Mumbai Metropolitan Region Development Authority.
MMR/Mumbai Metropolitan Region
An area of 4,355 square kilometres and comprising Municipal Corporations of Greater Mumbai, Thane, Kalyan, Navi Mumbai and Ulhasnagar; 15 municipal towns; seven non-municipal urban centres and 995 villages. It covers Mumbai City and Mumbai Suburban districts, and parts of Thane and Raigad district.
MIAL Mumbai International Airport Private Limited.
MIAL AAI OMDA
The operation, management and development agreement dated April 4, 2006 entered into between the MIAL and the AAI.
MIAL Slum Rehabilitation Agreement
The slum rehabilitation project agreement dated October 15, 2007 entered into between the Company and the MIAL.
MIAL Slum Rehabilitation Project.
The slum rehabilitation project being undertaken by the company pursuant to the MIAL Slum Rehabilitation Agreement.
Mumbai Airport The Chhatrapati Shivaji International Airport, Mumbai.
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Term Description
Land Reserves The total amount of saleable area to be developed through Ongoing Projects or Planned Projects.
Ongoing Projects Projects that are currently under construction and development.
Planned Projects Projects planned for construction and development in the future.
PPIPL Privilege Power and Infrastructure Private Limited, a company incorporated under the Companies Act and having its registered office at 3rd Floor, Dheeraj Arma, Anant Kanekar Marg, Bandra (E), Mumbai 400 051.
Financial Year / Fiscal Year
The 12 months ended March 31, of a particular year unless otherwise specified
RoC The Registrar of Companies, Maharashtra located at Everest, 100 Marine Drive, Mumbai 400 002.
Subsidiaries 1. Privilege Power and Infrastructure Private Limited;
2. HDIL Entertainment Private Limited;
3. Excel Arcade Private Limited;
4. Blue Star Realtors Private Limited;
5. Ravijyot Finance & Leasing Private Limited;
6. HDIL Oil & Gas Private Limited;
7. Mazda Estate Private Limited;
8. HDIL Leisure Private Limited; and
9. Guruashish Construction Private Limited.
TDR Transferable Development Rights, which means when in certain circumstances, the development potential of land may be separated from the land itself and may be made available to the owner of the land in the form of transferable development rights.
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Abbreviations
Abbreviation Full Form
BSE The Bombay Stock Exchange Limited earlier known as The Stock Exchange, Mumbai.
CDSL Central Depository Services Limited.
CEO Chief Executive Officer.
DP Depository Participant.
FEMA The Foreign Exchange Management Act, 1999, as amended from time to time, and the regulations framed thereunder.
FEMA Regulations FEMA (Transfer and Issue of Security by a Person Resident Outside India) Regulations, 2000
FII Foreign Institutional Investor (as defined under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995) registered with SEBI under applicable laws in India.
FIPB Foreign Investment Promotion Board, Ministry of Finance, Government of India.
CARE Credit Analysis and Research limited FY/ Fiscal Financial year/ Fiscal.
This Private Placement Information Memorandum (hereinafter referred to as the “Shelf Information Memorandum” or “Information Memorandum” is neither a Prospectus nor a Statement in lieu of Prospectus. The issue of secured redeemable non-convertible debentures (hereinafter referred to as “Debentures”) to be listed on the Wholesale Debt Market (WDM) segment of the BSE being made strictly on a private placement basis. It is not intended to be circulated to more than 49 (forty-nine) persons. Multiple copies hereof given to the same entity shall be deemed to be given to the same person and shall be treated as such. It does not constitute and shall not be deemed to constitute an offer or an invitation to the public in general to subscribe to the Debentures. Apart from this Information Memorandum, no offer document or prospectus has been prepared in connection with the offering of this Issue or in relation to the Issuer nor is such a prospectus required to be registered under applicable laws. Accordingly, this Memorandum has neither been delivered for registration nor it is intended to be registered.
This Information Memorandum has been prepared to provide general information about the Issuer to potential investors to whom it is addressed and who are willing and eligible to subscribe to the Debentures. This Information Memorandum does not purport to contain all the information that any potential investor may require. Neither this Information Memorandum nor any other information supplied in connection with the Debentures is intended to provide the basis of any credit or other evaluation and any recipient of this Information Memorandum should not consider such receipt a recommendation to purchase any Debentures. Each investor contemplating purchasing any Debentures should make its own independent investigation of the financial condition and affairs of the Issuer, and its own appraisal of the creditworthiness of the Issuer. Potential investors should consult their own financial, legal, tax and other professional advisors as to the risks and investment considerations arising from an investment in the Debentures and should possess the appropriate resources to analyze such investment and the suitability of such investment to such investor's particular circumstances. It is the responsibility of potential investors to also ensure that they will sell these Debentures in strict accordance with this Information Memorandum and other applicable laws, so that the sale does not constitute an offer to the public, within the meaning of the Companies Act, 1956. Neither the intermediary or their agents or advisors associated with this Issue undertake to review the financial condition or affairs of the Issuer during the life of the arrangements contemplated by this Information Memorandum or have any responsibility to advise any investor or potential investor in the Debentures of any information coming to the attention of any other intermediary.
The Issuer confirms that, as of the date hereof, this Information Memorandum (including the documents incorporated by reference herein, if any) contains all information that is material in the context of the Issue and sale of the Debentures, is accurate in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements herein, in the light of the circumstances under which
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they are made, not misleading. No person has been authorized to give any information or to make any representation not contained or incorporated by in this Information Memorandum or in any material made available by the Issuer to any potential investor pursuant hereto and, if given or made, such information or representation must not be relied upon as having been authorized by the Issuer. The Legal Advisors to the Company, and any other intermediaries and their agents or advisors associated with this Issue have not separately verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility is accepted by any such intermediary as to the accuracy or completeness of the information contained in this Information Memorandum or any other information provided by the Issuer. Accordingly, the Legal Advisors to the Company and other intermediaries associated with this Issue shall have no liability in relation to the information contained in this Information Memorandum or any other information provided by the Issuer in connection with the Issue. The contents of this Information Memorandum are intended to be used only by those investors to whom it is distributed. It is not intended for distribution to any other person and should not be reproduced by the recipient.
Each copy of this Information Memorandum is serially numbered and the person, to whom a copy of the Information Memorandum is sent, is alone entitled to apply for the Debentures. No invitation is being made to any persons other than those to whom application forms along with this Information Memorandum have been sent. Any application by a person to whom the Information Memorandum and/or the application form has not been sent by the Issuer shall be rejected without assigning any reason. The person who is in receipt of this Information Memorandum shall maintain utmost confidentiality regarding the contents of this Information Memorandum and shall not reproduce or distribute in whole or part or make any announcement in public or to a third party regarding the contents without the consent of the Issuer.
Each person receiving this Information Memorandum acknowledges that:
Such person has been afforded an opportunity to request and to review and has received all additional information considered by it to be necessary to verify the accuracy of or to supplement the information herein; and
Such person has not relied on any intermediary associated with this Issue in connection with its investigation of the accuracy of such information or its investment decision.
The Issuer does not undertake to update the Information Memorandum to reflect subsequent events after the date of the Information Memorandum and thus it should not be relied upon with respect to such subsequent events without first confirming its accuracy with the Issuer. Neither the delivery of this Information Memorandum nor any sale of the Debentures made hereunder shall, under any circumstances, constitute a representation or create any
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implication that there has been no change in the affairs of the Issuer since the date hereof.
This Information Memorandum does not constitute, nor may it be used for or in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. No action is being taken to permit an offering of the Debentures or the distribution of this Information Memorandum in any jurisdiction where such action is required. The distribution of this Information Memorandum and the offering and sale of the Debentures may be restricted by law in certain jurisdictions. Persons into whose possession this Information Memorandum comes are required to inform themselves about and to observe any such restrictions. The Information Memorandum is made available to Investors to the Issue on the strict understanding that it is confidential.
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FORCE MAJEURE The Company reserves the right to withdraw the offer prior to the earliest closing date in the event of any unforeseen development adversely affecting the economic and regulatory environment or otherwise. In such an event, the company will refund the application money, if any, along with interest payable on such application money, if any, without assigning any reason.
This Information Memorandum is issued by the company and signed by its authorized Signatory.
For and on behalf of Board of Directors
Date: 14P
thP December 2009 Name: Sarang Wadhawan
Designation: Managing Director
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FORWARD-LOOKING STATEMENTS AND MARKET DATA
This Information Memorandum contains certain “forward-looking statements”. These forward-looking statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”, “objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or goals are also forward looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant statement.
Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, the following regulatory changes pertaining to the industries in India in which we have our businesses and our ability to respond to them, our ability to successfully implement our strategy, our ability to manage our growth and expansion, technological changes, our exposure to market risks, general economic and political conditions in India and which have an impact on our business activities or investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in our industry. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following:
• The fluctuations in and the overall performance of the real estate market in the Mumbai Metropolitan Region;
• Changes in the Slum Rehabilitation Scheme currently in effect in the Mumbai Metropolitan Region;
• The potential for impairment of our title to land and unavailability of title insurance;
• Our ability to acquire approvals or permits in the anticipated time frames or at all;
• Our ability to identify suitable projects or to execute such projects successfully;
• Changes in government policies and regulatory actions that apply to or affect our business;
• Our ability to compete effectively, particularly in new markets and business lines;
• Conflicts of interest with affiliated companies, our Promoter Group and other related parties;
• Our ability to finance our business and growth and obtain financing on favorable terms or at all;
• Our ability to anticipate market trends in and tailor our business lines accordingly; and Volatility in the Indian economy.
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These statements are primarily meant to give Investors an overview of the Company’s future plans, as they currently stand, which may not come to fruition. The Company cannot be held liable by estoppel or otherwise for any forward- looking statement contained herein. The Company and all intermediaries associated with this Information Memorandum do not undertake to inform Investors of any changes in any matter in respect of which any forward-looking statements are made.
Data contained throughout the Information Memorandum has been supplied by the Company, and the same has not been verified from any independent sources (including the original source documents). This data is the responsibility of the Company alone. Its accuracy and completeness cannot be guaranteed, and its reliability cannot be assured. Although the Company and all intermediaries associated with this Information Memorandum believe that the data used herein is correct, complete and reliable, but in absence of independent verification, neither any other intermediary associated with this Information Memorandum can be held responsible for the correctness, completeness or the adequacy of the data contained herein.
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RISK FACTORS
Like any other business in today’s context the operations are subject to some risks that can affect its business performance. The risks as envisaged by the management, and the management perception in relation to those risks, are stated hereunder: RISKS RELATING TO OUR BUSINESS The real estate industry is undergoing a significant downturn which has, and could continue to, adversely affect our business, liquidity and results of operations. Economic developments outside India have adversely affected the property market in India and our overall business. Since the second half of 2007, the global credit markets have experienced, and may continue to experience, significant volatility which have originated from the adverse developments in the United States and the European Union credit and sub-prime residential mortgage markets. These and other related events, such as the recent collapse of a number of financial institutions, have had and continue to have a significant adverse effect on the availability of credit and the confidence of the financial markets, globally as well as in India. In light of such recent events, the real estate industry is experiencing a sign ``downturn. An industry-wide softening of demand for property has resulted from a lack of consumer confidence, decreased affordability, decreased availability of mortgage financing, and large supplies of resale and new inventories. Industry conditions had an adverse effect on our business and results of operations during the fiscal year 2009. Our turnover decreased by 27.40% from Rs. 23,804.50 million in the fiscal year 2008 to Rs. 17,284.25 million in the fiscal year 2009. Further, we substantially increased our inventory through the fiscal year 2009, which required significant cash outlays and which has increased our price and margin exposure as we continue to work through this inventory. In addition, market volatility has been unprecedented in recent months, and the resulting economic turmoil may continue to exacerbate industry conditions or have other unforeseen consequences, leading to uncertainty about future conditions in the real estate industry. These effects include, but are not limited to, decreases in the sales of, or market rates for, the residential development projects; delays in the release of certain of the residential projects in order to take advantage of future periods of more robust real estate demand; inability of customers and key contractors to obtain credit to finance purchase of our properties or obtain working capital. We cannot assure you that Government responses to the disruptions in the financial markets will restore consumer confidence, stabilize the markets or increase liquidity and the availability of credit. Continuation or worsening of this downturn or general economic conditions would continue to have an adverse effect on our business, liquidity and results of operations.
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Our business is heavily dependent on the availability of real estate financing in India. Difficult conditions in the global capital markets and the economy may cause us to experience limited availability of funds. Our operations typically require large amounts of financing to fund the capital expenditure relating to our projects future. Changes in the global and Indian credit and financial markets have recently significantly diminished the availability of credit and led to an increase in the cost of financing. In many cases, the markets have exerted downward pressure on the availability of liquidity and credit capacity. We may need liquidity for future growth and development of our business and may have difficulty accessing the financial markets, which could make it more difficult or expensive to obtain financing in the future. Without sufficient liquidity, we may not be able to purchase additional land or develop additional projects, which would adversely affect our results of operations. We have entered into the MIAL Slum Rehabilitation Agreement and any breach of or failure to comply with, the terms and conditions of such agreement by us or the termination of such agreement, directly or indirectly, may have a material adverse effect on our business, financial conditions and results of operations. We have entered into the MIAL Slum Rehabilitation Agreement where we are required to remove encroachments, hutments and unauthorized structures from 276 acres of land leased to MIAL by the AAI and which has been encroached by slum dwellers, to rehabilitate certain eligible slum dwellers on land purchased by us at other locations in the MMR and to evict and remove the other slum dwellers from the encroached land. We are also required to procure all necessary approvals and certificates from regulatory authorities with respect to the slum rehabilitation project. In addition to constructing buildings to house the rehabilitated slum dwellers on land purchased by us, we are responsible for developing and constructing temporary transit camps for use by the slum dwellers until they are rehabilitated. Upon completion of the rehabilitation buildings, we are required to form cooperative housing societies of the rehabilitated slum dwellers and cause the transfer the land on which such buildings are built to the societies. In addition, it is our responsibility to repair and maintain the rehabilitation buildings for a period of 12 months from the handing over and possession of the respective building. For each of the locations that we rehabilitate the slum dwellers, we shall be required to purchase land and transfer such land parcels to the SRA and submit a scheme for redevelopment. Out of the 276 acres which we are required to clear, upon the rehabilitation of a minimum of 28,000 hutments in order to complete Phase I, we shall be awarded development rights over approximately 65.2 acres of land, subject to certain specified end-use limitations of such land. Under this agreement, all costs and expenses, relating to the entire slum rehabilitation project have to be borne by us. These include cost of procuring land, cost of construction of tenements for rehabilitation, charges to be paid to the MMRDA, payments to SRA and infrastructure development charges. While we have internal estimates of these costs, any escalation of any of these costs and expenses may have an adverse effect on our results of operations.
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In the event of any delay by us in handing over vacant and peaceful occupation of any parcel of the identified encroached Mumbai Airport land to MIAL, under this agreement, we shall be liable to pay to MIAL, specified liquidated damages till the date of actual handover of vacant and peaceful occupation of such land to MIAL. Payment of any liquidated damages under this agreement shall have an adverse effect on our financial conditions and results of operations. Under this agreement, MIAL is also entitled to terminate the agreement in the event of any delay exceeding 180 days in handing over vacant and peaceful occupation of specified land parcels. As a result of the nature of this development, it may be difficult for us to comply with the specified completion schedules from time to time. We work with MIAL to extend specified completion schedules. MIAL has been granted the exclusive right to operate, maintain, develop, design, construct, upgrade, modernize, finance and manage the Mumbai Airport pursuant to the Operation, Management and Development Agreement dated April 4, 2006 between MIAL and AAI. Under the MIAL Slum Rehabilitation Agreement, the developmental rights and TDRs granted to us as consideration for the work undertaken by us, expire one day before the date of expiration or termination of the MIAL AAI OMDA. Thus, a prior termination of the MIAL AAI OMDA for any reason whatsoever may result in the MIAL Slum Rehabilitation Agreement being terminated, and as a result, the loss to us of the development rights and TDRs expected to be provided to us as consideration under the MIAL Slum Rehabilitation Agreement. Additionally, under the terms of the MIAL Slum Rehabilitation Agreement, we have undertaken to abide by all the terms and conditions that MIAL is subject to under the MIAL AAI OMDA. Any non-compliance by us, of the terms and conditions established under the MIAL AAI OMDA, may be considered a breach of the terms of the MIAL Slum Rehabilitation Agreement, pursuant to which MIAL may decide to terminate the MIAL Slum Rehabilitation Agreement. We believe that a termination of the MIAL Slum Rehabilitation Agreement, either as a result of an event of default resulting from a failure on our part to fulfill our obligations and complete our scope of work as provided in the agreement or as a result of the termination of the MIAL AAI OMDA, may have an adverse effect on our business, financial condition and results of operations. Fluctuations in market conditions between the time we acquire land and sell developed projects on such land may affect our ability to sell our projects at expected prices, which could adversely affect our revenues and profit margins. We may be subject to significant fluctuations in the market value of our land and inventories. We could be adversely affected if market conditions deteriorate further as we have been purchasing land during stronger economic periods. Moreover, real estate investments are relatively illiquid, which may limit our ability to vary our exposure in certain investments in order to respond to changes in economic or other conditions. Recently, real estate prices in India have declined after experiencing a period of significant increases. We cannot assure you that prices will increase or that the price of real estate in the
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Mumbai Metropolitan Region or India as a whole will not continue to experience declines. These factors can negatively affect the demand for and pricing of our developed and undeveloped properties and, as a result, may negatively affect our business, financial condition and results of operations. Sales of our projects will be affected by the ability of our prospective customers to purchase property and availability of financing to potential customers, particularly buyers of residential properties. On account of the prevailing conditions of the global and Indian credit markets, it is expected that the buyers of property will remain cautious, rentals of commercial properties are expected to continue to face downward pressure and consumer sentiment and market spending may turn more cautious in the near-term. Further, changes in interest rates affect the ability and willingness of prospective real estate customers, particularly the customers of residential properties, to obtain financing for the purchase of our completed projects. The interest rate at which our real estate customers may borrow funds for the purchase of our properties affects the affordability of our real estate projects. In particular, a large number of our residential buyers finance their purchases through third-party mortgage financing. The recent economic downturn led to an increase in the interest rates and a decrease in the availability of home loans, making them less attractive to our customers. These factors may adversely affect our business, future growth and results of operations. In order to finance our projects, we have incurred and may continue to incur debt financing, which entails certain risks. Our real estate development projects typically require a large amount of capital. We finance our land acquisitions and development construction mainly through internal funds, equity contributions from shareholders and bank borrowings. As of September 30, 2009, we had Rs.32,711.38 million of total principal amount of indebtedness outstanding, most of which was floating rate indebtedness. We incurred finance charges of approximately Rs. 5,949.21 million during the fiscal year 2009. Some of our borrowing agreements contain restrictive covenants which limit our ability to operate our business. We cannot assure you that we will be able to comply with these covenants or that we will be able to obtain any lender consents necessary to take the actions we believe are necessary to operate and grow our business. Similarly, any breach under our financing agreements could result in an acceleration of our repayments, cross-defaults or force us to sell our assets. In light of the recent economic downturn, we continue to undertake a restructuring of our existing indebtedness to extend maturity of near term maturities, replace our short-term loans with long-term loans and to change the interest payable on our borrowings. We cannot assure you that any such restructuring will be completed on terms acceptable to us, or at all.
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Our ability to borrow funds for the development of our projects is affected in part by the prevailing interest rates available to us from banks in India. Changes in prevailing interest rates affect our interest expense with respect to our borrowings. Therefore, the interest rate at which we may borrow funds, and the availability of capital to us for development purposes, affects our results of operations by limiting or facilitating the number of projects we may undertake and determining the return which we must obtain from each project to meet our obligations under our borrowings The selling prices of development rights and TDRs is very volatile. Adverse changes in such selling prices affects our results of operations. Under the Slum Rehabilitation Scheme, we receive development rights which can be used to develop real estate projects. Depending on market conditions and our commercial considerations, we decide to sell such development rights. We derive significant income from the sale of development rights to third parties. Income derived from the sale of development rights represented approximately 79.3% of total income for the fiscal year 2009. We also may purchase development rights from third parties. The selling prices of development rights and TDRs is very volatile. Adverse changes in such selling prices affects our results of operations. Title insurance is not commercially available in India and our title and development rights over land may be subject to significant legal uncertainties and defects. Our business depends upon our ability to obtain good title to land from landowners or good development rights over land from landowners. Our title and development rights over land can be subject to various title–related legal defects that we may not be able to fully identify, assess or resolve. While we always seek to ensure through various means good title to land or development rights purchased from third parties, our rights in respect of these lands or development rights may be compromised by improperly executed, unregistered or insufficiently stamped conveyance instruments in the land’s chain of title, unregistered encumbrances in favour of third parties, rights of adverse possessors, ownership claims of spouses or other family members of prior owners, or other title defects. As each transfer in a chain of title may be subject to these and other various defects, our title and development rights over land which we acquire through a conveyance of deed, agreement to sell, development agreement, joint development agreement, memorandum of understanding (“MoU”), letter of intent or other contractual arrangement, may be subject to various defects. Title defects may result in the loss of title or development rights over such land as well as the cancellation of our development plans in respect of such land, thus negatively impacting our business and financial condition. For further details of our Land Reserves, see “Our Business - Land Reserves” Additionally, title insurance is not commercially available in India to guarantee title or development rights in respect of land. The absence of title insurance in India means that title records provide only for presumptive rather than guaranteed title, and we face a risk of loss of lands we believe we own or have
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development rights over, which would have an adverse effect on our business, financial condition and results of operations. We sometimes enter into MoUs, Agreements to Sell and similar agreements with third parties to acquire land or land development rights, which entails certain risks. We sometimes enter into MoUs, agreements to sell and similar agreements with third parties to acquire title or land development rights with respect to certain land. Since we do not acquire ownership or land development rights with respect to land upon the execution of such agreements, formal transfer of title or land development rights with respect to such land is completed only after all requisite governmental consents and approvals have been obtained and all conditions precedent to such agreements have been complied with. As a result, we are subject to the risk that pending such consents and approvals sellers may transfer the land to other purchasers or that we may never acquire formal title or land development rights with respect to such land, which could have an adverse impact on our business. For further details of our Land Reserves, see “Our Business – Land Reserves” We also make partial payments to third parties to acquire certain land or land development rights which we may be unable to recover under certain circumstances. We cannot assure you that the acquisition of such land or land development rights will be completed in a timely manner or at all. In the event that we are unable to acquire such land or land development rights, we may be unable to recover the partial payment made by us with respect to that land. Our inability to acquire such land or land development rights, or if we fail to recover the partial payment made by us with respect to such land, may adversely affect our business, financial condition and results of operation. Further, certain third parties with whom we have entered into such agreements may have litigation pending with respect to such lands or may have to comply with certain conditions before the title to such land or land development rights may be conveyed to us. Until such litigation is settled, such conditions have been complied with or a judgment has been obtained by a court of competent jurisdiction, we may be unable to utilize such lands according to the terms of such agreements which could adversely affect our business, financial condition and results of operations. Limited supply of land, increasing competition and applicable regulations may result in an increase in the price of land and shortages of land available for development. Due to the increased demand for land in connection with the development of residential, commercial and retail properties and SEZs, we are experiencing and may continue to experience increased competition in our attempt to acquire land in the various geographic areas in which we operate and the areas in which we anticipate operating in the future. This increased competition may result in a shortage of suitable land that can be used for development and can increase the price of land. Any such increase in the price of land that can be used for development could materially and adversely affect our business,
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prospects, financial condition and results of operations. Additionally, the availability of land, as well as its use and development, is subject to regulations by various local authorities. For example, if a specific parcel of land has been deemed as agricultural land, no commercial or residential development is permitted without the prior approval of the local authorities. Such restrictions could lead to further shortage of developable land.
We may be unable to successfully identify and acquire suitable parcels of land for development, which may impede our growth. Our ability to identify suitable parcels of land for development is a vital element of our business and involves certain risks, including identifying and acquiring appropriate land, appealing to the tastes of residential customers, understanding and responding to the requirements of commercial clients and anticipating the changing retail shopping trends in India. We have an internal assessment process for land selection and acquisition which includes a due diligence exercise to assess the title of the land and its suitability for development and marketability. Our internal assessment process is based on information that is available or accessible to us. There can be no assurance that such information is accurate, complete or current. Any decision based on inaccurate, incomplete or outdated information may result in certain risks and liabilities associated with the acquisition of such land, which could adversely affect our business, financial condition and results of operations. In addition, our inability to acquire contiguous parcels of land may affect some of our existing and future development activities. We acquire parcels of land at various locations, which can be subsequently consolidated to form a contiguous land area, upon which we can undertake development. For example, our success in the development of an SEZ will depend on our ability to assemble contiguous parcels of land to create areas large enough for a viable SEZ that can be used for manufacturing or other commercial purposes. Whilst in the last three years we have identified nearly all our Land Reserves, we may not be able to acquire such parcels of land in the future or may not be able to acquire such parcels of land on terms that are acceptable to us, which may affect our ability to consolidate these parcels of land into a contiguous land area. Failure to acquire such parcels of land may cause delay or force us to abandon or modify the development of land that we have acquired at a certain location, which may result in a failure to realise profit on our initial investment. Accordingly, our inability to acquire contiguous parcels of land may adversely affect our business prospects, financial conditions and results of operations. Our ability to obtain suitable development sites and generate revenue could be adversely affected by any changes to the slum rehabilitation schemes or the FSI/TDR regulatory regime currently in effect in the Mumbai Metropolitan Region. Of the nearly 34.04 million square feet of saleable area that we have developed as of September 30, 2009, approximately 24.38 million square feet, or 71.62 %, has been developed on land over which we obtained land development rights through our participation in slum rehabilitation projects in the Mumbai Metropolitan Region.
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Our ability to obtain suitable development sites for our slum rehabilitation projects in the Mumbai Metropolitan Region in the future, and our cost to acquire land development rights over such sites or other sites, could be adversely affected by any changes to the Slum Rehabilitation Scheme, the DCR, the Town Planning Act or any changes in their interpretation or implementation. If the slum rehabilitation schemes in effect in the Mumbai Metropolitan Region were to significantly change or be terminated, we may be required to purchase developable land from third parties at significantly increased cost and we may not be able to acquire land development rights over sufficiently suitable land at an acceptable cost for our future development projects. If the regulations change to preclude the sale or utilisation of FSI/TDRs or the planning and land use regulations in the Mumbai Metropolitan Region are significantly altered or terminated so as to permit additional construction on existing lots, our development rights may lose value and we may not ultimately derive revenue from their sale, which would adversely affect our financial condition and results of operations. We may be unable to execute slum rehabilitation or redevelopment projects or follow our business model with respect to slum rehabilitation projects in other geographic areas outside of the Mumbai Metropolitan Region. Completing slum rehabilitation projects requires efficient management of such projects and infrastructure capabilities. We are currently developing 5 slum rehabilitation and redevelopment projects, including the MAIL Slum Rehabilitation Project, which are expected to generate approximately 50,990,035 million square feet of saleable area upon their completion. In order to execute our slum rehabilitation projects, we also must apply for and obtain timely approvals from the relevant authorities. We must construct the rehabilitated buildings according to the conditions set forth under the slum rehabilitation schemes. We cannot assure you that we will be able to effectively complete projects under the SRA scheme, which may adversely impact the business and result of operations. Additionally, we do not have experience implementing slum rehabilitation projects outside of the Mumbai Metropolitan Region and we cannot assure you that we will have the necessary capabilities to undertake and complete such projects. We may experience difficulties in expanding our business into additional geographic markets within India. We have limited experience in conducting business outside the Mumbai Metropolitan Region and may not be able to leverage our experience in the Mumbai Metropolitan Region to expand into other cities. Factors such as competition, culture, regulatory regimes, business practices and customs, customer tastes, behavior and preferences in these cities where we plan to expand our operations may differ from those in the Mumbai
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Metropolitan Region and our experience in the Mumbai Metropolitan Region may not be applicable to these cities. In addition, as we enter new markets and geographical areas, we are likely to compete not only with national developers, but also local developers who have an established local presence, are more familiar with local regulations, business practices and customs, have stronger relationships with local contractors, suppliers, relevant government authorities, and who have access to existing land reserves or are in a stronger financial position than us, all of which may give them a competitive advantage over us. In expanding our geographic footprint, our business will be exposed to various additional challenges, including adjusting our construction methods to different terrains; obtaining necessary governmental approvals and building permits under unfamiliar regulatory regimes; identifying and collaborating with local business partners, construction contractors and suppliers with whom we may have no previous working relationship; successfully gauging market conditions in local real estate markets with which we have no previous familiarity; attracting potential customers in a market in which we do not have significant experience or visibility; being susceptible to local taxation in additional geographic areas of India; and adapting our marketing strategy and operations to different regions of India in which other languages are spoken. We can provide no assurance that we will be successful in expanding our business to include other geographic markets in India. Any failure by us to successfully carry out our plan to geographically diversify our business could have a material adverse effect on our revenues, earnings and financial condition and may result in the Company remaining almost exclusively dependent on the Mumbai Metropolitan Region real estate market for our business. This could have the effect of constraining our long term growth and prospects. Foreign direct investment in the real estate sector in India under the automatic route is governed by a policy statement which may be ambiguous in its terms. FDI Regulations impose certain conditions on investments in the real estate sector in India. Government policy in respect of FDI in the real estate sector in India is regulated by Press Note 2 issued by the Government of India, Ministry of Commerce and Industry, which permits foreign direct investment of up to 100% subject to the project fulfilling certain specified conditions. The FDI Regulations and Press Note 2, however, are subject to differing interpretations. For example, foreign direct investment is subject to the condition that for joint ventures with Indian partners the “minimum capitalization” should be US$5 million. However, there is some ambiguity on what is meant by “minimum capitalization”. In addition, although the FDI Regulations and Press Note 2 stipulate that funds have to be brought in within six months of “commencement of business of the Company”, the term “commencement of business of the Company” has not been defined or explained and may also be subject to different interpretations. Further, the Government of India has issued Press Notes 2, 3 and 4 (2009 Series) in February 2009 which among other guidelines, prescribe guidelines in relation to the calculation of total foreign investment in Indian companies. The Press Notes of 2009 Series are subject to different interpretations and may be subject to amendments as reported in various news
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articles. There can be no assurance as to the position the Government of India will take in interpreting Press Note 2, Press Notes (2009 Series) as mentioned above and the FDI Regulations. Restrictions on foreign direct investment in the real estate sector may limit our ability to raise additional capital. While the Government of India has permitted FDI of up to 100% without prior regulatory approval in townships, housing, built-up infrastructure and construction and development projects, it has issued Press Note No. 2, which subjects such investment to certain restrictions. Some of our projects are not in compliance with Press Note No. 2, which restricts our ability to raise FDI. Our inability to raise additional capital as a result of these and other restrictions could adversely affect our business and prospects. It is difficult to compare our performance between periods, as our revenue fluctuates significantly from period to period. We derive income from the sale of land, development rights and TDRs and residential, commercial and retail units we have developed, including in connection with slum rehabilitation. Our income from these activities may fluctuate significantly due to a variety of factors. For example, under our revenue recognition policy, we recognise income with respect to a project only when such project is substantially complete. Moreover, due to occasional lags in development timetables caused by unforeseen circumstances, we cannot predict with certainty when our real estate developments will be completed or when we may acquire and sell development rights related to completed projects. Our results of operations may also fluctuate from period to period due to a combination of other factors beyond our control, including volatility in expenses such as costs to acquire land or development rights and construction costs. Depending upon our operating results in one or more periods, we may experience cash flow problems and difficulties in covering our operating costs, which may adversely affect our business, financial condition and results of operations. Such fluctuations may also adversely affect our ability to fund future projects. As a result of one or more of these factors, we may record significant turnover or profits during one accounting period and significantly lower turnover or profits during prior or subsequent accounting periods. Furthermore, the periods discussed in our financial statements included in this Placement Document may not be comparable to each other or to other future periods, and our results of operations and cash flows may vary significantly from period to period, year to year, and over time. Therefore, we believe that period–to–period comparisons of our results of operations should not be relied upon as indicative of our future performance.
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We may not be able to successfully develop and market developments in our proposed new lines of business. Our business strategy includes our undertaking projects in lines of real estate development which are new to us, such as the development of hotels, mega-structure complexes, which are large-scale mixed-use retail, commercial and residential developments, and SEZs. Our ability to successfully develop and market developments in these new lines of business has not yet been proven. In developing such new lines of business we face certain risks, including identifying and acquiring appropriately located property, appealing to the tastes of new customers, responding to changing trends in the real estate market in India, and marketing our developed real estate concepts to our customers in competition with more experienced developers. In particular, our success in the development of hotels will also depend on our ability to forecast and respond to demand in an industry in which we have no experience to date and depends upon our ability to select appropriate locations and joint venture partners or management companies to operate the hotels profitably. If we fail to successfully develop and market projects in our proposed new lines of business, we may be unable to fully develop all of our land or fully utilize development rights over such land. Our success in the development of SEZs depends on our ability to attract manufacturing or industrial units to conduct business within the SEZs and the continued availability of financial incentives and financing under the SEZ regime. Since the SEZ regulations have been in force for only a relatively short period of time, they may not be interpreted in a consistent manner and there may be instances of diverging opinions among local, regional, national and judicial authorities as to their application. We have received in-principle approval from the Ministry of Commerce & Industry to develop, operate and maintain a “multi-services” SEZ in our name. The uncertainty of application, the evolution of SEZ laws and the possibility of the withdrawal of certain benefits and concessions create a risk for our current and planned investment in SEZ developments. Any change in the present regulatory framework or our inability to obtain final approval for our proposed SEZ development plan may adversely affect such plan. We may not be able to sustain our growth or manage it effectively. Our turnover increased from Rs. 12,041.92 million for the fiscal year 2007 to Rs.23,804.50 million for the fiscal year 2008, representing an increase of 197.7%. Our turnover reduced to Rs. 17284.41 million for the fiscal year 2009. As we grow and diversify, we may not be able to execute our projects as efficiently, which could result in delays, increased costs, lower profitability and diminished quality of business, which may adversely affect our reputation. Continued rapid future growth effectively, our business, financial condition and results of operations may be adversely affected. Such expansion also may make it more difficult to preserve our culture, values and work environment across projects; develop and improve our internal administrative infrastructure; recruit, train and retain sufficiently skilled management, technical and marketing personnel; maintain high levels of client
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satisfaction; and adhere to health, safety, and environment standards. Any inability to manage our growth may have an adverse effect on our business and results of operations. We may not be able to develop all of our Land reserves. In addition to MMR, we have Land reserves in Hyderabad and Cochin. As of September 30, 2009 our land reserves amounted to 197.18 million square feet of saleable area. Our ability to develop our land Reserves is subject to a number of risks and contingencies, such as the possibility of defect in title of the lands and the expiry of MoUs and agreements to purchase land. If any of these risks materialize, we may not be able to develop our Land reserves and generate the saleable area in the manner we currently contemplate, which could have an adverse effect on our business, results of operations and financial conditions. The success of our residential development business is dependent on our ability to anticipate and respond to consumer requirements. We depend on our ability to understand the preferences of our customers and to accordingly develop projects that suit their tastes and preferences. The growing disposable income of India’s middle and upper income classes has led to a change in popular lifestyle resulting in substantial changes in the nature of their demands. As customers continue to seek better housing and better amenities as part of their residential needs, we must continue our focus on the development of quality residential accommodation with various amenities. Our inability to provide customers with certain amenities or our failure to continually anticipate and respond to customer needs will affect our business and prospects and could lead to some of our customers switching to competitors. The expansion of our commercial real estate business is dependent on our ability to provide our customers with high quality commercial space and the willingness and ability of corporate customers to pay purchase prices at suitable levels. Our commercial real estate business is focused on development of commercial space, primarily offices, and selling such commercial space, rather than renting it to business tenants. Our growth and success will depend on the provision of high quality commercial space to attract and retain clients who are willing and able to pay purchase prices at suitable levels, and on our ability to anticipate the future needs and expansion plans of such clients. We will incur significant costs for the integration of modern fittings, contemporary architecture and landscaping, as well as the telecommunications, broadband and wireless systems expected by our customers. Our ability to pass these costs on to commercial customers will depend upon a variety of market factors beyond our control. For example, our commercial customers may choose to acquire or develop their own commercial facilities, which may reduce the demand for our commercial properties. Our inability to provide customers with properties that correspond to their needs could adversely affect our business.
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The success of our retail strategy depends on our ability to build malls in appropriate locations and attract suitable retailers and customers. The success of our retail real estate business depends on our ability to identify suitable locations for shopping malls and design retail space that can be successfully sold to department stores, smaller retailers, restaurant operators, cinema chains and other commercial customers. Our business is not designed to own and operate malls, so our ability to develop and sell retail space in malls we construct is critical to our retail business. The practices of Indian consumers are changing, with a trend away from traditional shopping environments such as small local retail stores or markets to larger retail environments such as malls. The speed of this trend and the nature of the changes in consumer preferences and tastes are evolving and can be difficult to predict correctly. To help ensure our success in selling retail properties such as malls, we must secure suitable anchor purchasers and other retailers to ensure the successful sale of all units in the mall. With the likely entry of major international retail companies into India and their establishment of competing retail operations, the need to attract and retain anchor tenants and other retailers who can successfully compete with large international retailers will increase. A decline in retail spending or a decrease in the popularity of the retailers’ businesses could cause retailers to cease operations or experience significant financial difficulties that could harm our ability to continue to sell our retail properties to successful retailers. Our strategy to venture into affordable housing segment may not be successful: We are currently engaged in the development of real estate properties (commercial and residential) primarily in the MMR. We propose to venture into and develop residential projects which are affordable. We have launched Premier Residences and galaxy which caters to the mid-income customers. We cannot assure you that we will be successful in this venture or will be able to generate positive returns on over investments in such projects which may have an adverse effect on our business, financial conditions and results of operations. We are heavily dependent on the performance of, and prevailing conditions affecting, the real estate market, especially in the Mumbai Metropolitan Region. Historically, we have focused our real estate and land development activities in the Mumbai Metropolitan Region. Our 35 Ongoing and Planned projects are comprised of a total 197.18 million square feet of saleable area, approximately 171.14 million square feet or 86.70% of in the Mumbai Metropolitan Region. As a result, our business, financial condition and results of operations have been and will continue to be heavily dependent on the performance of, and prevailing conditions affecting, the Mumbai Metropolitan Region real estate market.
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The real estate market in the Mumbai Metropolitan Region may be affected by various factors outside our control, including prevailing local and economic conditions, changes in the supply and demand for properties comparable to those we develop, and changes in the applicable governmental regulations relating to slum rehabilitation in the Mumbai Metropolitan Region. These and other factors may contribute to fluctuations in real estate prices and the availability of land in the Mumbai Metropolitan Region and may adversely affect our business, financial condition and results of operations. In the event that market conditions produce a drop in real estate prices in the Mumbai Metropolitan Region, our business, financial condition and results of operations could be materially and adversely affected. We face significant risks with respect to the length of time needed to complete each project. It may take several years following the acquisition of land before income or positive cash flows can be generated through the sale of a completed real estate development project. The time it takes to complete a project generally ranges from nine to thirty months. Changes to the business environment during such time may affect the costs and revenues associated with the project and can ultimately affect the profitability of the project. For example, during this time there can be changes to the national, state and local business climate and regulatory environment, local real estate market conditions, perceptions of prospective customers with respect to the convenience and attractiveness of the project, and changes with respect to competition from other property developments. We have also recently had delays in completing our projects and consequent cost overruns. If such changes occur during the time it takes to complete a certain project, our returns on such project may be lower than expected and our financial performance may be adversely affected. Certain information contained herein, including the measurements with respect to the total saleable area of our projects, is based on management estimates which may change for various reasons. Certain statistical and financial data from third parties contained herein may be incomplete or unreliable. Some of the information contained in this Information Memorandum with respect to our projects such as the amount of land or land development rights owned by us, the location and type of development of such land and the amount of total saleable area used for development is based on management estimates and has not been independently appraised. The total area of property that is ultimately developed may differ from the descriptions of the property presented herein depending on various factors such as market conditions, title defects, modification of architect estimates, and any inability to obtain necessary regulatory approvals. Therefore, management’s estimates with respect to our Ongoing and Planned projects are subject to uncertainty. We have not independently verified data from certain government and industry publications and other sources contained herein and therefore cannot assure you that they are complete or reliable. Also, data with respect to other countries may be produced on a different basis than the data that relates to India.
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We currently undertake and in the future will undertake certain projects jointly with third parties, which may entail certain risks. We engage in certain projects by collaborating with third parties that own title to land and we, by virtue of a development agreement, acquire development rights to such land. In exchange for these development rights, we may be required to pay advances to the owner of the land. If we are unable to complete the construction and development of the agreed project, we may be unable to recover the advances paid by us through sale of a completed project. Although we are generally empowered to make all operating decisions for the development of these projects, we are also required to make certain decisions in consultation with such parties which may limit our flexibility in making such decisions (including those pertaining to development and marketing). Also, we cannot assure you that such persons hold valid title to such land or that they have obtained all necessary approvals and licenses with respect to such land. Further, such parties may have business interests or goals that are inconsistent with ours, such that disputes may arise which could cause delays in completion, or the complete abandonment, of the project. We also sometimes collaborate, and may collaborate in the future, as a joint venture partner or enter into joint development agreements with our Promoters, Promoter Group companies, directors of our Company and other real estate development companies in developing projects. If a joint venture partner or joint developer fails to perform its obligations in a satisfactory manner, the joint venture or partnership may be unable to successfully complete the intended project on the intended timetable, at the intended cost, or at all. Under such circumstances, we may be required to make additional investments in the joint venture or partnership or become liable for its obligations, which could result in reduced profits and significant losses. Further, the inability of a partner to continue with a project due to financial or legal difficulties could result in our having increased or sole responsibility for the relevant projects. We have not obtained certain approvals for some of our projects and some of our projects are in the preliminary stages of planning. We must obtain certain statutory and regulatory approvals or permits at various stages in the development of our projects. For example, if a specific parcel of land has been deemed as agricultural land by certain regulatory bodies, we cannot develop such land without obtaining prior approval. Also, our slum rehabilitation projects depend substantially upon approvals, such as letters of intent, or occupancy certificates, from certain governmental agencies for the replacement of permanent housing for former slum dwellers. Some of our current projects are in the preliminary stages of planning and development and we have not yet applied for or obtained approvals for such projects. It is vital to obtain these approvals in order to commence and ultimately complete many of our projects. We may encounter delays in obtaining these approvals, or may not be able to obtain such approvals at all. Moreover, there can be no assurance that we will
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not encounter material difficulties in fulfilling any conditions precedent to the approvals described above or any approvals we require in the future, or that we will be able to adapt to new laws, regulations or policies that may come into effect from time to time with respect to the property industry in general or the particular processes with respect to the granting of the approvals. If we fail to obtain, or experience material delays in obtaining, approvals, the schedule of development could be substantially disrupted, which could have a material adverse effect on our business, prospects, financial condition and results of operations. Increased costs of raw materials may adversely affect our results of operations. Our ability to develop projects profitably is dependent upon our ability to obtain adequate building supplies for use in the construction of our real estate development projects. We procure all building materials for our projects directly from third party suppliers and are exposed to certain risks relating to the quality of such products. The prices and supply of raw materials depend on factors not under our control including general economic conditions, competition, production levels, transportation costs and import duties. During periods of shortages in building materials, such as cement and steel, we may not be able to obtain necessary materials to complete our projects according to our previously established timelines, at our previously estimate project costs, or at all, which could adversely affect our results of operations and financial condition. During periods of significant increases in the price of building materials, we may not be able to pass on price increases to our customers, which could have the effect of reducing or eliminating our profits. Also, if our primary suppliers curtail or discontinue their delivery of such materials to us in the necessary quantities or at reasonable prices, our ability to obtain necessary materials for our projects could be impaired, our construction schedules could be disrupted and we may be unable to complete our projects. We utilize independent professionals for certain services in developing and constructing our projects which entails certain risks if they fail to perform. We contract with independent professionals to provide services such as architecture and engineering services in connection with the development and construction of our projects. As we do not control these service providers, we face the risk that they may not perform their obligations as agreed. If a service provider fails to perform its obligations satisfactorily, we may be unable to develop the project or complete the project on the intended timetable. In such circumstances, we may be required to incur additional time and costs to develop a property in a manner consistent with our development objectives, which could result in reduced profits or in some cases, significant losses. We cannot assure investors that the services rendered by any of our service providers will always be satisfactory or match our requirements for quality.
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We rely on third parties for our construction labour requirements, which entails certain risks. The real estate industry is labour intensive and continuous access to labour is critical to our business. We rely on external agencies and certain sub–contractors to meet our labour requirements. Accordingly, the time and quality of construction of our properties depends on the availability and skill of those sub–contractors. Currently, we have good relations with these third parties, but we cannot assure investors that this will continue in the future. Any strained relations with these agencies will severely affect our business requirements, as we may not be able to compensate for labour shortages. We also cannot assure you that these agencies will always meet our labour requirements. Additionally, our operations may also be affected by circumstances beyond our control which may be due to work stoppages, labour disputes, shortage of qualified skilled labour and lack of adequate infrastructure services. These factors could adversely affect our business, financial position, results of operations and cash flows. Our staffing model subjects us to a number of risks, which may affect our profitability and competitiveness. We maintain our own substantial staff of professionals, including engineers, architects, lawyers, accountants, and marketing and sales experts. Our ability to compete is dependent upon whether we can maintain the quality of our in–house capabilities at or above the levels available from third party contractors. In addition, if our costs of maintaining our in–house capabilities increase substantially, our profitability and price competitiveness could be adversely affected. In the event of a slow down in the Indian economy or a slow down in the real estate or construction industry, our in–house resources may cause us to incur significant costs that cannot be easily mitigated. Our inability to reduce our costs during such periods may adversely impact our results of operations and financial condition. We are dependent upon the experience and skills of our senior management team and skilled employees. We believe that our senior management team has contributed significantly to the development of our business. However, we cannot assure you that we will be able to retain any or all of the key members of our management team. If one or more of our senior executives or other personnel are unable or unwilling to continue in their present positions, we may be unable to replace them, our business may be disrupted, and our financial condition and results of operations may be materially and adversely affected. The loss of such key personnel, or our failure to attract additional skilled management personnel, may adversely affect our business and results of operations. We also believe that the success of our real estate development activities is dependent on our ability to attract, train, motivate, and retain highly skilled professional employees in a competitive market. Our professional staff includes
33
engineers, design consultants, marketing specialists, treasury experts, costing consultants, procurement officers, human resource managers and accountants. In the event we are unable to maintain or recruit a sufficient number of skilled employees, our business and results of operations may be adversely affected. If our customers do not identify with “HDIL” brand name, we may be required to incur substantial efforts to market our brand. In the past, we have extensively used the “Dheeraj” brand name in marketing our real estate projects to customers. However, we recently commenced using the “HDIL” brand name in our marketing and sales efforts. If the customers do not identify with the “HDIL” brand name, this could lead to a loss of customers and hence revenues. Additionally, we may need to put forth substantial efforts and funds to market the “HDIL” brand name. We avail ourselves of certain tax benefits which, if withdrawn, may adversely affect our financial condition and results of operations. Modifications to the tax benefits currently in place for real estate developers under Indian law may adversely affect our financial condition and results of operations. For example, we currently benefit from an income tax exemption for profits derived from the development and construction of housing projects if certain conditions are met. In the event that we become ineligible to avail ourselves of these benefits due to any change in law or the scope of our projects, the effective tax rates payable by us may increase and our financial condition and results of operations may be adversely affected. Our contingent liabilities could adversely affect our financial conditions. Our contingent liabilities as of September 30, 2009 was Rs. 4103.934 million, which include claims against us under legal proceedings and other claims of Rs. 3799 million, guarantee provided by banks of Rs. 294.365 million and letter of credit provided by the bank of Rs 10.569 million. If our contingent liabilities materialize, our profitability could be adversely affected. We may be involved in legal and administrative proceedings arising from our operations from time to time to which we are, or may become, a party. We may be involved from time to time in disputes with various parties involved in the development and sale of our properties, such as slum dwellers, contractors, suppliers, constructors, joint venture or joint development partners, occupants and claimants of title over land, and governmental authorities. These disputes may result in legal and/or administrative proceedings, and may cause us to suffer litigation costs and project delays. We may, for example, have disagreements over the application of law with regulatory bodies or third parties in the ordinary course of our business, which may subject us to administrative proceedings and unfavorable decisions, resulting in financial losses and the delay of commencement or completion of our projects. For example, local courts from time to time have temporarily enjoined us from carrying out slum rehabilitation projects pending
34
determination of claims brought by persons claiming to be eligible to receive permanent housing in connection with our slum rehabilitation activities. There are a number of legal proceedings pending against us or in relation to some of our lands or land development rights forming part of our Ongoing and Planned Projects that, if adversely determined, could impact our business and financial condition. There are number of legal proceedings that, if determined against us in relation to some of our land parcels or our development rights forming part of our Ongoing and Planned Projects. 52 such proceedings are pending against us before various judicial authorities. These proceedings include disputes in relation to ownership of properties, evacuation of slum dwellers, acquisition of TDRs and slum rehabilitation projects. We cannot assure you that these legal proceedings will be decided in our favour. Decisions in such proceedings adverse to our interest may have and adverse effect on us, our results of operations and business prospects. There are a number of legal proceedings in relation to our land parcels or our developmental rights forming of our ct has been issued to the Company in this matter. In such cases where we are not a party to the proceedings, we may not have adequate standing before the courts adjudicating such litigations to defend our interests with respect to the lands at issue. For further details please refer to “Legal Proceedings”. We cannot provide any assurances regarding the outcome of these litigations. Any adverse outcome may affect our ability to develop the properties which are the subject matter of these litigations, and therefore, adversely affect our business, financial condition and results of operations. We have unlimited liability with respect to matters concerning our partnership firms. We are partners with Fine Developers, D.S. Corporation, Mahul construction Corporation. Certain of the Promoters and executives affiliated with such partners are also Promoters and executives of our Company. We may bear liability for certain matters affecting such partnership firms. Our liability with respect to such partnership firms, according to the terms of the respective partnership deeds and laws governing partnerships in India, is unlimited. If we incur liability with respect to such partnerships, it may have a significant impact on our business, financial condition and results of operations. Our Promoters are actively involved in the management of other business operations in our Promoter Group, which may cause conflicts of interest and cause them to spend less time and dilute their attention on matters pertaining to us. Our Promoters are actively involved in the management of both our business and the business operations of other affiliated entities, including in related line of business. Attention to the other entities within the Promoter Group, including those in related lines of business, may distract or dilute management
35
attention from our business, which could adversely affect our results of operations and financial condition. We enter into certain related party transactions. We have entered into, and may in the future enter into, certain related party transactions with Promoters and entities within the promoter group, including companies engaged in same or related lines of business. We also enter into certain agreements with Promoters and entities affiliated with our promoter group, whereby such promoters or affiliates hold land on our behalf. A conflict could arise if such an affiliated entity challenges title or claims ownership of the land. Additionally, as our promoters will retain control of the Company after this Issue, we can provide no assurance that our transactions with such related parties will in all circumstances be made on an arms’ length or commercial basis. For more information regarding our related party transactions, see the disclosure on related party transactions contained in our audited consolidated financial statements. Our business may be adversely affected by losses from uninsured projects or losses exceeding our insurance limits. We face risk of losses in our operations arising from a variety of sources, including, but not limited to, risks related to construction, catastrophic events, terrorist risk, intentional vandalism, and theft of construction supplies. We maintain contractor risk and general liability insurance with New India Assurance Company but cannot assure investors that the level of insurance maintained by us with respect to such risks is adequate. If we suffer any losses, damages and liabilities in the course of our operations and real estate development, we may not have sufficient insurance or funds to cover any such losses. In addition, any payment we make to cover any uninsured losses, damages or liabilities could have a material adverse effect on our business, financial condition and results of operations. We do not carry coverage for contractor’s liability, timely project completion, loss of rent or profit, construction defects or consequential damages for a tenant’s lost profits. Any damage suffered by us in excess of such limited coverage amounts, or in respect of uninsured events, would not be covered by such insurance policies and we would bear the impact of such losses. We cannot assure investors that any claim under the insurance policies maintained by us will be honored fully or on time. Our operations and our work force are exposed to various hazards and we are exposed to risks arising from construction related activities that could result in material liabilities, increased expenses and diminished revenues. We conduct various site studies prior to the acquisition of any parcel of land and its construction and development. However, there are certain unanticipated or unforeseen risks that may arise in the course of property development due to adverse weather and geological conditions such as such as storm, hurricane, lightning, flood, landslide and earthquake. Additionally, our operations are
36
subject to hazards inherent in providing architectural and construction services, such as risk of equipment failure, impact from falling objects, collision, work accidents, fire or explosion, including hazards that may cause injury and loss of life, severe damage to and destruction of property and equipment, and environmental damage. Although we believe that we maintain sufficient insurance coverage to reduce losses (if any) from such risks, we cannot assure you that we will not bear any liability as a result of these hazards. Any failure in our information technology systems could adversely impact our business. We utilize a customised enterprise resource planning (“ERP”) system which integrates our core and back–end information technology with respect to architecture and engineering matters, costing, inventory, finance, sales, CRM, invoice billing, estimation, purchases, payments, tax calculations and employee salaries. Any disruption to our ERP system and other information technology systems could disrupt our ability to track, record and analyse our work in progress, process financial information, engage in normal business activities or manage our creditors and debtors, and could cause certain data loss. This could have an adverse effect on our business. RISKS RELATED TO INVESTMENT IN INDIA AND INDIAN COMPANIES: The performance of our real estate development business may be adversely affected by changes in, or the regulatory policies of, the Indian national, state and local governments. Our real estate development business is significantly affected by the regulatory policies of various Indian central, state and local governmental bodies, including but not limited to the following:: • We currently receive favourable tax treatment with respect to our
developments, which affects our results of operations. If the government were to curtail this favourable tax treatment, it could increase our taxable income;
• Residential property owners in India can deduct principal payments (subject
to a limit) and mortgage interest from taxable income. If the government were to curtail such favourable tax treatment, it could reduce the affordability of residential housing for Indian families and diminish demand for our developments;
• Our participation in these schemes enables us to obtain rights to develop
land in the Mumbai Metropolitan Region in exchange for construction of replacement housing for slum dwellers. Any change in the regulatory regime relating to such schemes could adversely affect our ability to develop land in the Mumbai Metropolitan Region for our real estate projects;
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• We are required to obtain certain environmental and land use approvals for each of our real estate projects from local authorities. Delays in or our failure to obtain such approvals may delay or prevent development of specific real estate development projects;
• In MMR, we are subject to certain municipal land use regulations which
limit the amount of square footage of a completed building to specified amounts.
• The uncertainty of application and the evolution of SEZ laws and the
possibility of withdrawal of or modifications to the fiscal incentives for SEZs create a risk for our current and planned investment in SEZ developments.
• These and other governmental policies affecting our business may change
from time to time at the local, state and national level in India. Any such changes may require us to modify the manner in which we do business, or may result in our not being able to carry out specific planned or future projects.
We face competition from other real estate development firms in India, which may adversely affect our profitability. The real estate development industry in India, while fragmented, is highly competitive and we face competition in the MMR (where currently our business activities are primarily focused) from other large Indian real estate development and construction companies. We presently compete in the MMR with various national, regional and local companies. Given our strategy of expanding our business activities to include real estate development in other regions of India, we may experience competition in the future from potential competitors with significant operations elsewhere in India. Compliance with, and changes in, environmental, health and safety regulations may adversely affect our financial condition and results of operations. We are subject to environmental and health and safety regulations in the ordinary course of our business, including Governmental inspections, licenses and approvals of our project plans and projects during construction. Government bodies in India, at the national, state or local level, may take steps towards the adoption of more stringent environmental and health and safety regulations and we can not assure you that we will be at all times in full compliance with these regulatory requirements. Due to the possibility of unanticipated regulatory developments, the amount and timing of future expenditure to comply with these regulatory requirements may vary substantially from those currently in effect. The costs of complying with current and future environmental, health and safety laws and regulations or any potential liabilities arising from any failure to comply therewith could adversely affect our business, financial condition and results of operations.
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Force majeure events, terrorist attacks or war or conflicts involving India, the United States or other countries could adversely affect the financial markets and adversely affect our business. Any major hostilities involving India, or other acts of violence including civil unrest or terrorist attacks, or events that are beyond our control, could have an adverse effect on the operations of services provided in India. Incidents such as the Mumbai terrorist attacks on November 26, 2008, the September 11, 2001 terrorist attacks, other recent incidents such as in Mumbai, India, Bali, Indonesia, Madrid, Spain and London, U.K., and other acts of violence may adversely affect global equity markets as well as the Indian economy and stock markets where our Shares will trade. Such acts will negatively affect business sentiment as well as trade between countries, which could adversely affect our business and profitability. Also, India may enter into armed conflict or war with other countries. The consequences of any armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business. South Asia has, from time to time experienced instances of civil unrest and hostilities among neighbouring countries. Military activity or terrorist attacks could adversely affect the Indian economy by disrupting communications and making travel more difficult. Such events could also create a perception that investments in Indian companies involve a higher degree of risk. This, in turn, could have an adverse effect on the market for securities of Indian companies, including the Shares, and on the market for our services. Indian corporate and other disclosure and accounting standards differ from those in the United States, countries in the European Union and other jurisdictions. Our financial statements are prepared in accordance with Indian GAAP, which differ in significant respects from both IFRS and U.S. GAAP. As a result, our financial statements and reported earnings could be significantly different from those which would be reported under IFRS or U.S. GAAP, which may be material to your consideration of the financial information prepared and presented in accordance with Indian GAAP contained in this Placement Document. In particular, greater reliance may be placed by the auditors on representations made by our management and there may be less independent verification of information than would be the case in certain other countries. In making an investment decision, investors must rely upon their own examination of us, the terms of this Issue and the financial information contained in this Placement Document. This Placement Document does not contain any reconciliation of our financial statements to IFRS or U.S. GAAP or any summary of differences between Indian GAAP, IFRS and U.S. GAAP. Governmental agencies in India may exercise rights of eminent domain in respect of our lands. We, along with other real estate development firms in India, are subject to the risk that Governmental agencies in India may exercise rights of eminent domain, or compulsory purchase, of our lands. The Land Acquisition Act, 1894
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authorises the national, state and local Governments in India to exercise rights of eminent domain, which could require us to relinquish our properties to the Government with minimal compensation. The likelihood of such actions may increase in the event that the Government seeks to acquire substantial blocks of land for the development of large infrastructure projects, such as roads, airports and railways. If we must relinquish any of our planned or ongoing development projects, it could adversely affect our business. The regulatory framework for development of SEZs in India is evolving and regulatory changes could have an adverse effect on our business, results of operations and financial condition. We intend to develop SEZs in various parts of the country and have obtained in–principle approval from the Government of India for the development, operation and maintenance of a SEZ project. We are required to obtain the concurrence of the respective state Governments and the final approval of the Government of India in relation to the development of any SEZ. The SEZs will be eligible for the concessions and benefits under the SEZ legislation only after receipt of such approvals. However, we cannot guarantee that we will receive such approvals. In the event we are not granted the necessary approval(s), it may result in an adverse effect on our business, results of operations and financial condition. Any change in the present regulatory framework or our inability to obtain final approval may adversely affect our proposed SEZ development plan. For further details in relation to our SEZ plans, see “Our Business-Proposed Expansion Opportunities-Special Economic Zones”. The Government of India’s SEZ policy is relatively new and has attracted political opposition and may be restricted or withdrawn. The Government of India’s policy in respect of SEZs has been a politically sensitive issue in India. In addition, the Finance Ministry of India has expressed concern in respect of tax revenues lost as a result of commercial activities enjoying fiscal exemptions under the SEZ regime. The Government of India’s policy has been criticised on economic grounds by the International Monetary Fund and it has been suggested that the fiscal exemptions may be challenged by the World Trade Organization. Further, as the policy framework is evolving, there could be changes in norms for land acquisition and the associated compensation mechanisms. As the laws and regulations relating to SEZs have been in force for a relatively short period of time, there may be some uncertainty with respect to the interpretation and application of such laws and regulations. Additionally, it is possible that the regulatory authorities may allege non-compliance and may subject the real estate affiliates to regulatory action in the future. Any such changes to the SEZ regime may have an adverse financial effect on the success of our plans to be involved in SEZ projects. The State government may impose additional conditions and obligations. It is also possible that, as a result of political pressures, the procedure for obtaining SEZ status may become more onerous or that the types of land that are eligible for SEZ status will be restricted or that the SEZ regime will be withdrawn.
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It may not be possible for you to enforce any judgment obtained outside India against us, our management or any of our respective affiliates in India, except by way of a suit in India on such judgment.
We are incorporated under the laws of India and all of our Directors and executive officers reside in India. Nearly all of our assets, and the assets of our Directors and officers, are located in India. As a result, you may be unable to: • effect service of process outside of India upon us and such other persons or
entities; or • enforce in courts outside of India judgments obtained in such courts against
us and such other persons or entities. Section 44A of the CPC, as amended, provides that where a foreign judgment has been rendered by a court in any country or territory outside India, which the Government has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. The United Kingdom has been declared by the Government to be a reciprocating territory for the purposes of Section 44A. However, the United States has not been declared by the Government to be a reciprocating territory for the purposes of Section 44A. A judgment of a court in the United States may be enforced in India only by a suit upon the judgment, subject to Section 13 of the CPC and not by proceedings in execution. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. Generally, there are considerable delays in the disposal of suits by Indian courts. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice. A party seeking to enforce a foreign judgment in India is required to obtain prior approval from the RBI under Foreign Exchange Management Act, 1999 to repatriate any amount recovered. A significant change in the Government’s economic liberalisation and deregulation policies could adversely affect our business and its future financial performance Our assets and customers are predominantly located in India. The Government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy, specifically real estate and infrastructure development. The Government’s economic policies have had and could continue to have a significant effect on real estate companies, including us, and on market conditions and prices of Indian securities, including securities issued by the Company. The most recent parliamentary elections completed in May 2009. The present Government is a coalition led by the Indian National Congress. In the event, the
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Government introduces significant changes to its economic liberalisation and deregulation policies as well as implementation of policies already in effect, it could adversely affect business and economic conditions in India and could also adversely affect the our business and future financial performance. The financials provided are as on 30 P
thP September and should be read as
standalone and unaudited.
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SUMMARY
We are a real estate development company in India, with our significant operations in the Mumbai Metropolitan Region. Our business focuses on Real Estate Development, including construction and development of residential projects and, more recently, commercial and retail projects, Slum Rehabilitation and Development, including clearing slum land and rehousing slum dwellers, and Land Development, including development of infrastructure on land which we then sell to other property developers. We have an integrated in-house development team which covers all aspects of property development from project identification and inception through construction to completion and sale. We were recognized as the fastest growing real estate company in India by Construction World-NICMAR in October 2007. Since our incorporation in 1996, we have developed 34 projects covering approximately 34.04 million square feet of saleable area. Under a State of Maharashtra Government scheme administered by the Slum Rehabilitation Authority, in return for clearing slum land and rehousing slum dwellers, we obtain either the right to develop a portion of such slum land for our own purposes, or obtain TDRs, which permit us to develop land in certain parts of the MMR that are north of the relevant slum area. Additionally, we may also sell TDRs to other developers. Our residential projects generally comprise apartments buildings, towers or larger multi-purpose “township” projects in which individual housing units are sold to customers. While our commercial projects include the office buildings, our retail projects focus on shopping malls and multiplexes. We also own and operate two multiplexes. We were awarded the Mumbai International Airport slum rehabilitation project (the “MIAL Rehabilitation Slum Project”) in October 2007 as part of the Mumbai airport expansion and modernization plan. This project has been categorized as a vital public project by the Government of Maharashtra. The MIAL Slum Rehabilitation Project involves clearing 276 acres of land leased to Mumbai International Airport Private Limited, which has been encroached upon by slum dwellers and the rehabilitation of such slum dwellers on land purchased by us at other locations in the MMR. We have started the construction of Phase I of the MIAL Slum Rehabilitation Project in three different locations. Our residential projects generally are comprised of groups of apartments, towers or larger multi-purpose “township” projects in which individual housing units are sold to customers. Our commercial projects are a mix of office space and multiplex cinemas. Our retail projects focus on shopping malls. We usually follow a “build and sell” model for the properties we develop. We also undertake slum rehabilitation projects under a Government scheme administered by the Slum Rehabilitation Authority (SRA), whereby developers are granted development rights in exchange for clearing and redeveloping slum lands, including providing replacement housing for the dislocated slum dwellers.
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Although historically we have focused on real estate development in the Mumbai Metropolitan Region, as part of our growth strategy we are considering projects in other locations, including Kochi and Hyderabad. We also are considering expanding into hotel projects, special economic zone developments and “mega-structure” complexes, which are large-scale mixed-use retail, commercial and residential developments. As of September 30, 2009, our total land reserves comprise approximately 197.18 million square feet of saleable area to be developed through 35 Ongoing and Planned projects. As of September 30, 2009, we have 17 Ongoing Projects, which are projects under construction and development, aggregating approximately 64.40 million square feet of saleable area, and we have an additional 18 Planned Projects, which are projects planned for construction and development in the future, aggregating approximately 132.78 million square feet of saleable area. Our total income for the fiscal year 2009 was Rs. 17,824. 25 million and our net profit for the fiscal year 2009 was Rs. 6,772.06 million.
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1) BRIEF ISSUE DETAILS:
ISSUER Housing Development & Infrastructure Ltd INSTRUMENT SECURED REDEEMABLE NCDs CREDIT RATING ‘CARE A+’ [Single ‘A+’ ] FACE VALUE Rs. 10,00,000/- (Rupees One Million only) ISSUE SIZE Rs. 11,500 Million TENOR 60 Months COUPON 12% p.a. INTEREST PAYMENT Quarterly Redemption 33% at the end of 3 P
rdP year
33% at the end of 4P
thP year
34% at the end of 5P
thP year
SECURITY Primary: Registered Mortgage and Charge on pari-passu basis in favour of Investors through Debenture Trustees on the land parcel in Vasai-Virar extent of 1.5x of the issue size subscribed.
Collateral: Personal Guarantee of Promoter Directors
1) Mr. Rakesh Wadhawan 2) Mr. Sarang Wadhawan
DEEMED DATE OF ALLOTMENT On the Date of Allotment within 90 days from date of subscription and tie up of entire issue of Rs.11,500 Million.
MODE DEMAT DEPOSITORY NSDL & CDSL MINIMUM SUBCRIPTION 1000 Debentures & in multiples of 100 debentures
thereafter. STOCK EXCHANGE PROPOSED FOR LISTING OF THE NCDs
B.S.E.
ISSUANCE AND TRADING Demat form only. ISSUE SCHEDULE Opening Date:
Closing Date :
CALL OPTION The company will have the right to make Prepayment/Redeem the Debentures at any given point of time after 365 days, giving 15 days notice and No Prepayment penalty will be charged by the subscriber.
INTEREST ON APPLICATION MONEY
At a rate equal to Coupon for the first interest period will be paid from the date of realization of application money upto one day prior to the date of allotment to the successful allotees.
PAYMENT OF INTERST ON APPLICATION MONEY
Within 7 business days of deemed date of allotment.
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Company proposes to raise further money by issuance of Debentures for redeeming the existing NCDs worth Rs.11,550 Million. The specific objects, terms and conditions pertaining to every tranche shall be informed in the term sheet/addendum forming part of this document. 2) SUMMARY CONSOLIDATED, FINANCIAL, OPERATING AND OTHER DATA The following summary of financial data has been prepared in accordance with extant requirements of the Companies Act and SEBI DIP Guidelines and may be read in conjunction with the Company’s financial statements and Auditors Report attached as Annexure –II to this Information Memorandum CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES, AS RESTATED
Fixed assets Gross block 951.99 653.83 575.53 266.68 Less : Depreciation 65.87 56.20 31.51 15.93 Net block 886.12 597.63 544.02 250.75 Capital work-in-progress 122.61 151.71 52.25 3.46
1008.74 749.34 596.27 254.21
Goodwill on consolidation - 478.47 91.11 22.98 Investments 5,077.67 2,490.88 1,914.52 1577.55 Deferred tax assets - 6.49 0.24 0.61 Current assets, loans and advances
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Particulars
*Sept 30, 2009
(unaudited) March 31,
2009 March 31,
2008 March 31,
2007 Inventories 71,795.40 69,128.00 55,228.71 13244.79 Sundry debtors 3,308.77 1,669.11 566.60 3113.12 Cash and bank balances 1,103.37 754.89 3,505.06 57.06 Loans and advances 23,430.76 17,097.37 13,107.63 1238.50
99,638.30
88,649.37 72,408.00 17,653.48
Less : Current liabilities and provisions
Current liabilities 6,531.97 6,509.04 5,763.18 7918.50 Provisions 9.87 183.82 1,713.22 669.92 6,541.84 6,692.86 7,476.40 8,588.42 Net current assets 93,096.46 81,956.51 64,931.60 9,065.06 Miscellaneous expenditure (to the extent not written off or adjusted)
- - 24.25 186.69
99,182.87 85,681.69 67,557.99 11,107.10 *Standalone Balance Sheet & Profit & Loss Account for the half year ended 30th September 2009. CONSOLIDATED SUMMARY STATEMENT OF PROFIT AND LOSS, AS RESTATED
Rs. in Million
Particulars
*Sept 30, 2009
(unaudited) March 31,
2009 March 31,
2008 March 31,
2007 INCOME Turnover 6,490.43 17,284.41 23,804.50 12,041.92 Other income 506.13 539.84 528.52 205.99
6,996.56 17,824.25 24,333.02 12,247.91 EXPENDITURE (Increase) / Decrease in stock in trade 283.68 (1,373.45) (124.60) (113.75)
(Increase) / Decrease in work-in-progress
(7,662.12) (12,525.84) (40,406.32) (8,361.94) Cost of premises capitalised as investment/fixed asset (215.80)
(61.87)
(180.00)
(240.62)
Cost of Construction, development and operating expenses
8,512.49
16,951.70
47,039.90
13,842.42
Project specific interest 2,227.32 5,367.47 1,364.37 506.41 Employees' remuneration and welfare expenses
2007 Operating profit before tax and Exceptional Items
3,092.48 7,714.58 16,020.54 6,251.11
Exceptional Items - - - Less :Provision for tax 525.60 920.78 1,906.00 768.24 Less:-Provision for fringe benefit tax 13.36 4.60 2.03 Less: Provision for wealth tax 0.23 0.33 0.14 0.10 Less :Deferred tax liability 6.03 8.96 8.49 3.85 Add : MAT Credit entitlement 0.82 - - Add :Deferred tax asset 0.04 0.98 0.71 Add:-Excess provision for taxation no longer required
-
- - 2.41
Add :Deferred tax asset of earlier year - - - - Profit after tax before minority interest 2,560.62 6,772.01 14,102.29 5480.01 Less : Minority interest - (5.46) - - Balance brought forward from previous year
6,054.24 5,723.88 4,901.12 1,036.72
Add /(less): Deffered tax asset/(liabilities) for earlier year
- 0.30 - -
Add : MAT Credit entitlement - 336.60 - - Add:-Excess provision for taxation no longer required
- 757.71 0.27 2.40
0.01 4.02 - Less : Preliminary expenses written off - 0.73 - - Less : Share issue expenses - 0.41 - - Adjustments for subsidiaries added - (0.11) 6.28 - Profit available for appropriation 8,614.85 13,594.72 19,005.94 6,516.74 Appropriations : Transferred to General Reserve - 5,736.71 4,876.32 629.88 Transferred to Capital Redemption Reserve - - 6.21 - Transferred to Debenture Redemption Reserve
- 2,250.00 7,125.00 -
Interim Dividend - - 420.00 - Proposed Dividend - - 642.81 - Dividend distribution tax - - 180.62 - Utilised for issue of Bonus Shares - - - 980.00 Profit before minority interest - 5,608.01 5,754.98 4,906.87 Less : Losses of minority adjusted against majority interest
- 5.41 (0.00) 0.00
Less : Preacquisition profit - (0.11) 6.88 - Less : Impairment of Goodwill - 58.27 24.22 5.75 Profit carried to Balance sheet 8,614.85 5,544.44 5,723.88 4,901.12 Earnings per share-Basic (Amount in Rs) 8.29 28.57 53.82 23.67 Diluted (Amount in Rs) Equity shares of per value Rs 10/- each. 8.17 28.57 53.82 23.67
Number of shares used in computing earnings per share Basic
308.94 275.49 262.06 231.43
48
*Standalone Balance Sheet & Profit & Loss Account for the half year ended 30th September 2009.
Cash Flows Consolidated Cash Flow Statement for the (Rs. In Millions)
*Sept 30,2009
(unaudited)
March 31, 2009
March 31, 2008
March 31, 2007
A Cash flow from operating activities
Net profit before tax 3,092.48 7,714.58 16,020.54 6,251.12
Adjustments for :
(1) Depreciation 17.87 25.43 14.89 7.58
(2) Expenses of increasing authorised share capital written off 15.38 7.46 5.70
(3) Interest expenses 353.82 581.74 43.37 39.92
(4) Investment Income
(395.58) (469.72)
(415.28)
(72.95)
(5) Profit on sale of investments (0.57) (1.77)
(111.69) -
(6) Loss on sale of asset 1.22 0.32 0.11 -
Operating profit before working capital changes 3,069.25 7,865.95 15,559.39 6,231.37
Movements in working capital :
Decrease / (Increase) in inventory (7,378.44) (13,899.29)
(41,983.93) (8,475.69)
Decrease / (Increase) in sundry debtors (1,654.79) (1,102.52) 2,546.53 (2,331.12)
Decrease / (Increase) in other receivables (1,580.62) (3,988.39)
(11,869.12) (566.60)
(Decrease) / Increase in trade and other payables 431.58 755.73
Less : Direct taxes paid (net of refunds) 710.29 628.64 1,636.51 199.68
Net cash from /(used in) operating activities (7,823.32) (10,997.15)
(39,526.07)
(1,510.15)
B Cash flows from investing activities
(1) Sale of fixed assets 0.45 0.25 0.05 -
(2) Purchase of Investments (net of Sales) (572.72)
(336.96) (420.40)
(3) Investment Income 395.58 469.72 415.28 3.34
(4) Profit on Sale of Investments 0.57 1.77 111.69 -
(5) (Increase)/ Decrease in investment (net) (2,048.48)
(6) (Increase) / Decrease in capital Work in Progress 24.55 (99.46)
(48.79) 6.89
49
(7) Purchase of fixed assets (including additional Goodwill) (325.31) (525.36)
(405.92) (203.74)
Net cash from/(used in) investing activities (1,952.65) (725.80)
(264.64)
(613.91) C Cash flows from financing activities
(1) Proceeds from issue of equity shares - 17,136.04 -
(2) Proceeds from borrowings 5,734.36 25,013.70 29,311.83 1,792.20
(3) Repayment of borrowings (14,457.22) (14,707.94)
(1,941.24) -
(4) Proceeds from share warrant 2570.00
(4) Interest paid (353.82) (581.74)
(43.37)
(39.92)
(5) Increase in share capital including share premium 16,884.00
(5) Dividend paid (including dividend distribution tax) - (751.32)
(491.05) -
(6) IPO expenses -
(726.40) -
(7) Preliminary Expenses (0.03) - -
(8) Expenses towards increase in share capital (249.63) -
(12.45)
(10.78)
(9) Proceeds from Share Application Money
Net cash from/(used in) financing activities 10,127.69 8,972.68
43,233.36
1,741.50
Net increase/(decrease) in cash and cash equivalents (A+B+C) 351.72 (2,750.27)
3,442.66
(382.55)
Cash and cash equivalents at the beginning of the year 751.65 3,505.06
57.06
439.61
Less : Delink of subsidiary (0.02) - -
Less : Upon addition of new subsidiaries 0.12 5.34 -
Cash and cash equivalents at the end of the year 1,103.37 754.89
3,505.06
57.06
Components of cash and cash equivalents as at
Cash on hand 25.42 10.11 12.21 12.11
With banks - on current account 413.46 217.16 191.95 44.95
- on deposit account 664.49 527.62 3,300.90 -
Cash and cash equivalents at the end of the year 1,103.37 754.89
3,505.06
57.06
Notes :
1) The above cash flow statement has been prepared under the "Indirect Method" as set out in Accounting Standard - 3 "Cash Flow Statement” issued by The Institute of Chartered Accountants of India.
50
2) Figures in the brackets indicate outflow.
3) * Standalone Cash Flow for the half year ended 30 P
th PSeptember 2009.
Transactions with Related Parties Our related party transactions for the fiscal year 2009 primarily consisted of sale of land to an affiliate of Rs. 1,230.07 million, an investment in a related party partnership firm of Rs. 747.31 million, loans and advances of Rs. 105.45 million from associates and interest income of Rs. 89.26 million received from associates. Contingent Liabilities Our contingent liabilities as of September 30, 2009 included the following:
Particulars Amount (Rs. In Millions)
Claims against us not acknowledged as debts represented in a suit filed in the High Court, Bombay and disputed by us a) Guarantees provided by banks 294.36 b) Letter of Credit provided by the bank 10.57 c) Other matters 3799.00 Total 4103.93 Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. We are a partner in three partnerships firms, D.S. Corporation, Fine Developers and Mahul Construction Corporation. We are entitled to a 45%, 90% and 85% % share of the profits for each of the partnerships, respectively. Under applicable Indian law, partners in such partnership firms are subject to unlimited liability. Quantitative and Qualitative Disclosure about Market Risk We are exposed to market risk from changes in interest rates and commodity prices. Interest Rate Risk Our results are subject to changes in interest rates, which may affect our debt service obligations. Our long-term rupee-denominated secured loans, most of which bear interest at floating rates, totalled Rs. 32.711.38 million in principal amounts as of September 30, 2009, with a weighted average rate of interest of approximately 13.5% as of September 30, 2009. Commodity Price Risk We are exposed to market risk with respect to the prices of TDRs, raw material and components used in our projects. These commodities include steel, tiles,
51
cement and wood. The costs for these raw materials and components are fluctuating based on commodity prices. The costs of components sourced from outside manufacturers may also fluctuate based on their availability from suppliers. In the normal course of business, we purchase these raw materials and components on a purchase order basis. We source materials from multiple suppliers and engage multiple contractors so that we are not dependent on any one supplier or contractor. Credit Risk We manage our residential, commercial and retail development customer credit through a combination of advances, milestone payments and delivery of units upon full payment. Development rights and TDRs are generally sold upon full payment. As a result we do not have any material credit risk.
52
Housing Development & infrastructure Limited A public limited company incorporated under the companies Act 1956.
Registration Number: 11- 101379 Company Identification Number:
U70100MH1996PLC101379
Address of Registrar of Companies
Our Company is registered with the Registrar of Companies, Maharashtra,
Mumbai situated at the following address:
Registrar of Companies Maharashtra Everest, 100 Marine Drive
Mumbai 400 002 Tel.: (91 22) 2281 2639
53
1. GENERAL INFORMATION 1.1 THE BOARD OF DIRECTORS Our Board comprises the following:
Sr. No. Name Designation
1 Mr. Rakesh Kumar Wadhawan Executive Chairman 2 Mr. Sarang Wadhawan Managing Director 3 Mr. Waryam Singh Director 4 Mr. Ashok Kumar Gupta Director 5 Mr. Satya Pal Talwar Independent Director 6 Mr. Shyam Sunder Dawra Independent Director 7 Mr. Lalit Mohan Mehta Independent Director 8 Mr. Sunil Behari Mathur Independent Director 9 Mr. Surinder Kumar Soni Independent Director 10 Mr. Ramesh Chander Kapoor Independent Director 11 Mr. Raj Kumar Aggarwal Independent Director
1.2 BRIEF PROFILE OF CHAIRMAN AND DIRECTORS: Mr. Rakesh Kumar Wadhawan is one of the Company’s Promoters and Whole-time Director and Executive Chairman. He is also one of our promoters and the founder of the Wadhawan Group. He has over 31 years of experience in the real estate and infrastructure industry. He is a member of various industry bodies and has actively participated in housing related seminars in various countries. He has been a guiding force behind our foray into building residential/commercial complexes and infrastructure projects. He is a commerce graduate from Mumbai University. He has been on the Board of the Company since 2004. Mr. Sarang Wadhawan is one of our Promoters and the Managing Director of our Company. He has a MBA from Clarks University, Worcester, U.S.A. and is a commerce graduate from Mumbai University. Mr. Sarang Wadhawan has significant exposure to the real estate and housing finance industry and is currently leading the management of the Company with his plans for growth and expansion. Mr. Sarang Wadhawan is involved in implementation and review of strategic objectives of the Company as envisaged by the management of the Company. He was appointed managing Director of the Company for a Period of Five years with effect from April 1, 2006. Mr. Waryam Singh is a non executive director of our Company. He has 26 years of experience in banking, finance, civil construction and land development. He was the chairman of Punjab and Maharashtra Co-operative Bank Limited from 2002 to 2006 and was instrumental in achieving the “Scheduled Status” for the bank. Mr. Singh is a commerce graduate from the Mumbai University. He has been on the Board of the Company since 2006.
54
Mr. Ashok Kumar Gupta is Non Executive director of our Company. He has 26 years of experience in framing investment schemes, restructuring and other corporate law matters. He is currently serving on the board of directors of various companies and is highly regarded for his experience in legal and accountancy matters. He is a qualified Chartered Accountant. He also has a LL.B degree from the Government Law College, Mumbai. He has been on the Board of the Company since 2006. Mr. Satya Pal Talwar is an independent director of our Company. He has 41 years of experience in fields such as banking, finance and planning. He was the Deputy Governor of the Reserve Bank of India from November 1994 to June 2001. Prior to that, he was also the Chairman and Managing Director of three public sector banks. Presently, he is on the board of directors of various companies. Mr. Talwar has a B.A. LL.B degree. He is also a Certified Associate Member from the Indian Institute of Bankers (“CAIIB”). He has been on the Board of the Company since 2006. Mr. Shyam Sunder Dawra is an independent director of our Company. He is a retired Indian Administrative Service officer and has served the Government of India and the Government of Punjab in various capacities. He retired as the Secretary (Department of Personnel and Training), Government of India. He is presently Chairman of the Punjab Revenue Commission and a Director of the Food Corporation of India. Mr. Dawra has a Masters in English from the Punjab University and a Masters in Business Administration from the University of Leeds, England. He has been on the Board of the Company since 2006. Mr. Lalit Mohan Mehta is an independent director of our Company. He is a retired Indian Administrative Service officer. In the past, he has served the Government of India and state governments in various capacities in matters concerning urban affairs, planning, fiscal matters, public and personnel relations. He retired as the Secretary (Urban Development), Government of India. He is a 1P
stP class arts graduate from Punjab University and has a post
graduate degree in development studies, a course comprising aspects of economics, political science and sociology, from the University of Bath in the United Kingdom. He has been on the Board of the Company since 2006. Mr. Sunil Behari Mathur is an independent director of our Company. He has 41 years of experience in the fields of insurance and housing finance. He was the chairman of Life Insurance Corporation of India from August 2002 to October 2004. He is currently on the board of directors of various companies and is also chairman of the National Stock Exchange. He is a qualified chartered accountant. He has also been sponsored by the United States Agency for International Development (“USAID”) for a training program on housing finance at the Wharton Business School of the University of Pennsylvania. He has been on the Board of the Company since 2006. Mr. Surinder Kumar Soni is an independent director of our Company and has 48 years of experience in the banking and finance industry. He was Chairman of the Oriental Bank of Commerce and upon his retirement, was appointed as the ombudsman for the banking industry by the Reserve Bank of India. He is presently serving on the board of directors of various companies. He has a
55
Bachelors degree in science and a LL.B from Delhi University. He is also a Certified Associate from the Indian Institute of Bankers (“CAIIB”). He has been on the Board of the Company since 2007. Mr. Ramesh Chander Kapoor is an independent director of our company. He is qualified Bachelor of Science and CAIIB and has been Ombudsman of Reserve Bank of India for three years from 1996 to 1999. His varied experience in the field of banking and finance including regulatory aspects has been significant contribution to the company. He was chairman and managing director of United Bank of India and executive director of Oriental Bank of Commerce. Mr. Raj Kumar Aggarwal is an independent director of the company. He is also a member of the audit committee of the company and has provided financial inputs and recommendations in respect of financial analysis to the members of the Audit Committee. He is qualified bachelor of Commerce, fellow member of the Institute of Chartered Accountants of India and fellow member of the Institute of company Secretaries of India and has been practicing as Chartered Accountant since 1980. He is presently on the Board of BOB Capital Market Limited, a subsidiary of Bank of Baroda and is also the member of the Audit committee of the Board. He is also a trustee with Canara Robeco Mutual fund. Mr Raj Kumar Aggarwal has been the President of the C.A welfare Association and also been the director of SEBI Gilts Limited up to Marck 31, 2004, a subsidiary of State Bank of India. 1.3 COMPANY SECRETARY Our Company Secretary is Mr. Darshan Majmudar. His contact details are as follows: Mr. Darshan Majmudar 9-01, Dheeraj Arma Anant Kanekar Marg Bandra (East) Mumbai 400 051 Tel: (91 22) 2658 3500 Fax: (91 22) 2658 3535 1.4 AUDITORS The Company’s statutory auditors are: M/s. Thar & Co., Chartered Accountants 201, Capri Anant Kanekar Marg Station Road, Bandra (East) Mumbai 400 051 Tel: (91 22) 28197676, 28146203, 04 Fax: (91 22) 2819 7676 Email: [email protected] Contact Person: Mr. Jayesh Thar
56
1.5 CREDIT RATING Credit rating for this Issue : December 2009
Received rating of ‘A +’ [Single ‘A+’] from CARE in relation to the Rs.11,500 Million long term debt program of Housing Development And Infrastructure Limited.
Instruments with this rating are considered to offer high safety for timely servicing of debt obligation. Such instruments carry very low credit risk. However, changes in circumstances or economic conditions may affect the capacity for timely repayment of these financial commitments to a greater degree than for financial commitments denoted by a higher rated category. The rating for this Issue is not a recommendation to buy, sell or hold securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the rating agency on the basis of new information and each rating should be evaluated independently of any other rating. The ratings are subject to revision at any point of time in the future. The rating agency has a right to suspend, withdraw the rating at any time on the basis of new information etc. 1.6 DEBENTURE TRUSTEE IDBI Trusteeship Services Limited Asian Building, Ground Floor, 17 R. Kamani Marg, Ballard Estate, Mumbai 400 001, Website: idbitrustee.co.in IDBI Trusteeship Services Ltd., in its capacity as a Debenture Trustee, is hereinafter referred to as ‘Debenture Trustee’ or ‘Trustee’. The Company will enter into a Trust Deed, inter-alia, specifying the powers, authorities and obligations of the Company and the Trustee in respect of the Debentures. All the rights and remedies of the Debenture Holders under the Issue shall vest in and shall be exercised by the appointed Debenture Trustee for that issue without having it referred to the Debentureholders. All Investors under this Issue are deemed to have irrevocably given their authority and consent to the Debenture Trustee so appointed by the Company for that issue to act as their trustees and for doing such acts and signing such documents to carry out their duty in such capacity. Any payment by the Company to the Trustee of any issue on behalf of the Debentureholders of that issue, shall completely and irrevocably from the time of making such payment discharge the Company pro tanto as regard its liability to the Debentureholders of that issue.
57
1.7 REGISTRAR TO THE ISSUE The Registrar to the Issue is: Karvy Computershare Private Limited Plot No. 17 to 24 Vittalrao Nagar, Madhapur Hyderabad 500 081 Tel: (91 40) 2343 1553 Fax: (91 40) 2343 1551 E-mail:[email protected] Website: www.karvy.com Contact Person: Mr. Shyam Singh 1.8 UNDERWRITING This Issue of Debentures has not been underwritten. 1.9 REGISTERED OFFICE: 9-01, Dheeraj Arma, Anant Kanekar Marg, Bandra (East), Mumbai – 400 051
58
2 CAPITAL STRUCTURE
2.1 DETAILS OF SHARE CAPITAL
a) Capital structure of the Company as on 30P
thP September 2009
A. Authorised Capital P
1P (Rs. In
Millions) 50,00,00,000 Equity Shares of Rs.10/- each
5,000.00
B. Issued, Subscribed and Paid-Up Capital 34,58,42,676 Equity Shares of Rs. 10 /-each fully paid up 3458.43
b) Since the present issue is of debt on a private placement basis, which is not
convertible into equity, there is no requirement for promoter’s contribution. There is no promoters’ contribution to this Issue, nor is there any reservation for any group company or any other class of persons.
c) The post-issue paid-up share capital shall be the same as pre-issue paid-up share capital. The Debentures being issued under this Issue are not convertible.
d) The company has made a preferential allotment of 2,60,00,000 convertible
warrants of Rs. 10 each to Shree Rakesh Kumar Wadhawan, promoter & Executive Chairman of the company at a price of Rs. 240 per warrant. This convertible warrant will be converted into equity share upon receipt of full subscription
2.2 NOTES TO CAPITAL STRUCTURE 1. Share Capital History of the Company.
Date of Allotme
nt
No. of Equity Shares
Face Value (Rs.)
Issue Price (Rs.)
Nature of
Consideration
Reasons for Allotment
Cumulative No. of Equity Shares
Cumulative Paid-up
Equity share capital (Rs.)
Cumulative Share
Premium (Rs.)
August 1,1996 30 10 10 Cash
Subscription to
Memorandum (three allottees)
30 300 Nil
March 31,1997 249,970 10 10 Cash
Further Allotment to Promoters, Promoter Group and others (11 allottees)
250,000 2,500,000 Nil
59
Date of Allotme
nt
No. of Equity Shares
Face Value (Rs.)
Issue Price (Rs.)
Nature of
Consideration
Reasons for Allotment
Cumulative No. of Equity Shares
Cumulative Paid-up
Equity share capital (Rs.)
Cumulative Share
Premium (Rs.)
May 26, 1998
1,750,000 10 10 Cash
Further Allotment to Promoters, the Promoter Group and others (14 allottees)
2,000,000 20,000,000 Nil
February 17, 2005
8,000,000 10 72.50 Cash
Further Allotment to Promoters, Promoter Group and others (10 allottees)
10,000,000 100,000,000 500,000,00
0
March 30, 2006
40,000,000 10 -
Capitalisation
of reserve P
1P
Bonus Issue in the ratio of 4:1
50,000,000 500,000,000 100,000,00
0
July 29, 2006
130,000,000 10 -
Capitalisation
of reserve P
2P
Bonus Issue in the ratio of 13:5
180,000,000
1,800,000,000 Nil
June 17, 2007
300,000 10 500 Cash Pre-IPO Placement to BCCLP
3P
180,300,000
1,803,000,000
147,000,000
July 17,2007
29,700,000 10 500 Cash IPO 210,000,0
00 210,000,000 15,000,000,000
August 25,2007
4,272,081 10 500 Cash GSO allotment 214,272,0
81 2,142,720,810
17,136,040,500
August 25,2008
6,12,20,595 10 -
Capitalisation
of reserve P
1P
Bonus Issue in the ratio of 2:7
275,492,676
2,754,926,760
16,523,834,550
July 6,2009
70,350,000 10 240 Cash e4 QIP allotment 345,842,6
76 3,458,426,760
32,704,334,550
1. These Equity Shares were issued through capitalisation of the share
premium account. 2. These Equity Shares were issued through capitalisation of the share
premium account, general reserves and the surplus in the profit and loss account of our Company.
60
3. These Equity Shares were issued to BCCL pursuant to the terms of a Share Subscription Agreement dated June 16, 2007.
4. QIP issue was made on July 6, 2009 issuing up to 70,350,000 equity shares of Rs. 10 each (“shares”) at a price of Rs.240 per share including a premium of Rs.230 per share, aggregating Rs. 16,884 million.
Note: No. of Warrants issued to Promoters: 2,60,00,000. Issue Price: Rs. 240 per Warrant. Proceeds to be received from Warrants: Rs.6,240 (Not yet fully subscribed). Proceeds received till date Rs.2,570 Million. They are yet to be converted into equity shares. 2. The list of our top 10 shareholders and the number of Equity Shares held
by them 10 days prior to the date of filing of this Information Memorandum is as follows:
S. No. Names of Shareholders Number of Equity Shares held
8. ICICI Prudential Life Insurance Company Ltd. 8711778 2.52%
9. Dheeraj Wadhawan 8760792 2.53%
10. Kapil Kumar Wadhawan 8760792 2.53%
Total 139983674 40.48%
61
3. The list of our top 10 shareholders and the number of Equity Shares held by them two years prior to the date of filing of this Information Memorandum is as follows:
S. No. Names of Shareholders Number of Equity Shares held
4. There are outstanding warrants, options or rights to convert debentures,
loans or other instruments into the Company’s Equity Shares. Further the Company is not in default of any of its loans.
5. The Company and its Directors have not entered into any buy-back and/or standby arrangements for purchase of Debentures of the Company from any person.
6. There is no reservation for any category of persons in this Issue. All persons eligible to apply can apply for all or any of the Debentures, subject to the minimum application size.
7. The Company intend to retain any over-subscription.
8. The Debentures are to be credited as fully paid-up.
62
9. List of Top Debenture Holders as on September 30, 2009.
Sr. No Name of Debenture Holders No. of Debenture Held
1 LIC 8500
2 Bank of India 2500
3 Punjab National Bank 400
4 General Insurance Corporation of India 150
10. Shareholding pattern as on September 30, 2009:
Category Number of Shares
% of Holding
A Promoter’s Holding 1 India Promoter 167,219,718 48.35 2 Foreign Promoter - 0.00 Sub Total (A) 167,219,718 48.35 B Non Promoter’s Holding Institutional Investors 1 Mutual Funds/UTI 9,134,869 2.64 2 Financial Institutions/ banks 205,195 0.06 3 Insurance Companies 147,857 0.04 4 Foreign Institutional Investors 89,940,870 26.01 Non Institutional Investors 1 Bodies Corporate 58,845,174 17.02 2 Individuals 16,697,229 4.83 3 Non-Resident Indians 570,558 0.16 4 Overseas Corporate Bodies 13 0.00 5 Trusts 3,347 0.00 6 Foreign Nationals - 0.00 7 Clearing members 1,288,588 0.37 8 Director’s and their Relatives 1,789,258 0.52 Sub Total (B) 178,622,958 51.65 Grand Total (A+B) 345,842,676 100.00
63
11. Debt- Equity Ratio: (Rs. In Million)
Particulars Prior to the Issue
(As on 30 P
thP Sep)
* Post the Issue
(Deemed Date of
Allotment) Secured Loans 32,711.38 32,661.38
Unsecured Loans - -
Total Debt 32,711.38 32,661.38 Share Capital 3,458.43 3,458.43
Share warrant 2570.00 2570.00
Reserves and Surplus 60413.02 60413.02
Less: Miscellaneous expenditure (to the extent not written off or adjusted)
- -
Total Shareholders Fund 66441.45 66441.45
Debt Equity Ratio (Gross) 0.49 0.49 Less: Investment in Mutual Fund 1616.04 1616.04
Debt Equity Issue (Net) 0.47 0.47 *Debt Equity Ratio post Issue is indicative of account of the assumed Inflow from the proposed Issue in the Secured Debt Category of Rs 11,500 Million out of which we are repaying the NCDs worth Rs.11,550/- Million in the same category. The actual Debt – Equity ratio post issue would depend on the actual position of Debt and Equity on Deemed Date of Allotment.
64
3. OBJECTS AND TERMS OF THE ISSUE 3.1 OBJECTS OF THE ISSUE (S) Company proposes to raise further money by issuance of Debentures for redeeming the Existing NCDs worth Rs. 11,550 Million.
3.2 TERMS OF THE ISSUE OF DEBENTURES:
The terms and conditions pertaining to the issue for private placement of Debentures aggregating Rs. 11,500,000,000/- (Rupees Eleven thousand Five Hundred Million Only) under this Information Memorandum is at the sole discretion of the Company. Participation and subscription is subject to the completion of the application form and submission of relevant documents along with the subscription money and allotment is at the discretion of the Company. A. BASIC TERMS OF ISSUE:
ISSUER Housing Development & Infrastructure Ltd INSTRUMENT SECURED REDEEMABLE NCDs CREDIT RATING ‘CARE A+’ [Single ‘A+’ ] FACE VALUE Rs. 10,00,000/- (Rupees One Million only) ISSUE SIZE Rs. 11,500 Million TENOR 60 Months COUPON 12% p.a. INTEREST PAYMENT Quarterly REDEMPTION 33% at the end of 3P
rdP year
33% at the end of 4P
thP year
34% at the end of 5P
thP year
SECURITY Primary: Registered Mortgage and Charge on parri-passu basis in favour of Investors through Debenture Trustees on the land parcel in Vasai-Virar extent of 1.5x of the issue size subscribed.
Collateral: Personal Guarantee of Promoter Directors 1 Mr. Rakesh Wadhawan 2 Mr. Sarang Wadhawan
DEEMED DATE OF ALLOTMENT On the Date of Allotment within 90 days from date of subscription and tie up of entire issue of Rs.11,500 Million.
MODE DEMAT DEPOSITORY NSDL & CDSL MINIMUM SUBCRIPTION 1000 Debentures & in multiples of 100 debentures
thereafter. STOCK EXCHANGE PROPOSED FOR LISTING OF THE NCDs
B.S.E.
ISSUANCE AND TRADING Demat form only.
65
ISSUE SCHEDULE Opening Date: Closing Date :
CALL OPTION The company will have the right to make Prepayment/Redeem the Debentures at any given point of time after 365 days, giving 15 days notice and No Prepayment penalty will be charged by the subscriber.
INTEREST ON APPLICATION MONEY
At a rate equal to Coupon for the first interest period will be paid from the date of realization of application money upto one day prior to the date of allotment to the successful allotees.
PAYMENT OF INTERST ON APPLICATION MONEY
Within 7 business days of deemed date of allotment.
B. SECURITY COVER AND MARGIN The Company shall agree to maintain a minimum FACR of 1.5 times throughout the currency of the debenture. The security will be created within 180 days from the date of allotment of debentures. Any security shortfall would be supplemented by equivalent security acceptable to the Debenture holder. In case of delay in complying with the above provisions for creation of security, the Company will pay penal interest of 1% p.a. till the above conditions are complied with. C. ISSUE OF DEBENTURES IN DEMATERIALISED FORM The Debentures under this Information Memorandum will be issued in dematerialised form. The Company has made arrangements with the Depositories for the issue of the Debentures in dematerialised form. Investors will hold the Debentures in dematerialised form as per the provisions of Depositories Act, 1996 and rules made there under as may be amended from time to time.
The Depository Participant’s name, DP-ID and Beneficiary Account Number must be mentioned at the appropriate place in the application form. The Company shall take necessary steps to credit the Debentures allotted to the Depository Account of the investor.
66
D. ISSUE SCHEDULE For the current tranche of Secured Redeemable Non Convertible Debentures. Issue Opening Date: Issue Closing Date : Deemed Date of Allotment: Within 90 days from the receipt of application
money
Note: The Company reserves the right to change the Issue Timetable and such change if any, will be communicated by the Company. Correspondingly, the Deemed Date of Allotment may also be changed. Company proposes to raise further money by issuance of Debentures for its other projects & general purposes. The specific objects, terms and conditions pertaining to every tranch shall be informed in the term sheet/addendum forming part of this document. E. INTEREST ON THE COUPON BEARING DEBENTURES:
E.1 TAX DEDUCTION AT SOURCE
Interest shall be subject to deduction of tax at source as required and at such rates prevailing from time to time under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof, for which a certificate as required will be issued by the Company. E.2 COMPUTATION OF INTEREST
Interest for each of the interest periods shall be computed on an actual-by-365 days a year basis on the principal outstanding on the Debentures at the Coupon rate. E.3 PAYMENT OF INTEREST
The interest will be payable to the Beneficiaries as per the Beneficiary list (in
respect of the Debentures) provided by the Depository as on the Record Date. Such interest will be paid quarterly/monthly except at the time of redemption when the interest shall be paid on the date of redemption. F. INTEREST ON APPLICATION MONEY Interest on application money will be the same as the coupon rate (subject to deduction of tax at source as required and at the rates prevailing from time to time under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof for which a certificate under the same will be issued by the Company) will be paid on the application money. Such interest shall be paid from the date of realisation of the cheque(s) / demand draft(s) upto but not including the deemed date of allotment. The respective interest
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payment instruments along with the letters of allotment/ refund orders, as the case may be, will be dispatched by registered post to the sole / first applicant, at the sole risk of the applicant. G. TAX DEDUCTION AT SOURCE (TDS) Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be deducted at source. For seeking TDS exemption/lower rate of TDS, relevant certificate / document must be lodged by the Debenture Holders at the office of the Company at least 30 days before the interest payment becoming due and if required, be submitted afresh annually and/or as and when called upon for the same by the Company. Tax exemption certificate / declaration of non-deduction of tax at source on interest on application money, should be submitted along with the application form. Failure to comply with the above shall entitle the Company to deduct tax at source as may be advised to it. H. REDEMPTION AND PAYMENT ON REDEMPTION The face value of the debenture s would be redeemed at par, as per the term sheet of each series of debentures from the deemed date of allotment. The Company will make payments towards repayment of principal or interest directly to the Debenture Holders as per the list of Beneficiaries provided by the Depositories to the Company as of the Record Date. The payment made will either be a bullet payment or in parts as per the specific objects, terms and conditions pertaining to every tranch which shall be informed in the term sheet/addendum forming part of this document. The Company's liability to the Debenture holder in respect of all their rights including for payment or otherwise shall cease and stand extinguished after maturity in all events save and except the Debenture holder’s right of redemption as stated above if any Debentures are not fully redeemed on maturity. In case of default in payment of the amounts due on account of interest payment and/or principal repayment on the Debentures, penal interest @ 1% p.a. over the Coupon shall be payable for the period of default. H1. PREMATURE REDEMPTION IN CASE OF DEFAULT In case the company defaults in the payment of interest/redemption instalments for the two successive quarters. The Debenture Holder shall have a right stated in the Companies Act 1956. H2. PREPAYMENT The company will have the right to make Prepayment/Redeem the Debentures at any given point of time after 365 days, giving 15 days notice and No Prepayment penalty will be charged by the subscriber.
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I. MODE OF TRANSFER
The Debentures issued under the Information Memorandum shall be transferable freely to all classes of investors. J. EFFECT OF HOLIDAYS Should any of the dates defined above or elsewhere in this Information Memorandum other than the Deemed Date of Allotment, fall on a Saturday, Sunday or a public holiday, the next Business Day shall be considered as the effective date(s). K. LETTERS OF ALLOTMENT, DEBENTURE CERTIFICATES IN DEMAT
MODE The Company will make allotment of Debentures to investors in due course after verification of the application form, the accompanying documents and on realisation of the application money. The allotted Debentures at the first instance will be credited in dematerialised form on Letter of Allotment ISIN (LOA ISIN) within seven days of the Deemed Date of Allotment. The Company will instruct the concerned Depository (NSDL) to convert the said LOA ISIN to Secured Debenture ISIN immediately after the receipt of confirmation of registration of charge created for this Issue from the Registrar of Companies. L. RIGHT TO ACCEPT OR REJECT APPLICATIONS The Company is entitled at its sole and absolute discretion to accept or reject an application, in part or in full, without assigning any reason thereof. The application form, which is not complete in all respects, shall be liable to be rejected. The rejection of any application would be intimated by the Company along with the refund warrant but without having to assign any reason for any rejection. M. RECORD DATE The record date will be 7 Business Days prior to each due date for interest payment/principal repayment. N. RIGHT OF COMPANY TO PURCHASE, RE-SELL & RE-ISSUE
DEBENTURES Purchase and Resale of Debentures The Company may, at any time and from time to time, purchase Debentures at discount, at par or premium in the open market or otherwise. Such Debentures may, at the option of the Company, be cancelled, held or resold. Reissue of Debentures Where the Company has redeemed any such Debentures subject to the provisions of Section 121 of the Companies Act, 1956 and other applicable legal provisions, the Company shall have and shall be deemed always to have had
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the right to keep such Debentures alive for the purpose of reissue and in exercising such right, the Company shall have and shall be deemed always to have had the power to re-issue such Debentures either by reissuing the same Debentures by issuing other Debentures in their place in either case, at such a price and on such terms and conditions (including any variations dropping of or additions to any terms and conditions originally stipulated) as the Company may deem fit. O. FUTURE BORROWINGS The Company shall with the approval of the Debenture holders, raise further loans and advances and / or avail further deferred payment guarantees or other financial facilities from time to time from such persons / banks / financial institutions or body corporate / any other agency. However, until the Debentures are fully redeemed the Company shall not create any mortgage or charge on any of the aforesaid properties or assets without the prior written approval of the Debenture Trustees. The Trustees may seek approval from the Debentureholders for ceding pari passu charge in cases where deem fit. P. RIGHTS OF DEBENTURE HOLDERS The Debenture Holder will not be entitled to any rights and privileges of shareholders other than those available to them under statutory requirements. The Debentures issued under this Information Memorandum shall not confer upon the Debenture Holder the right to receive notice, or to attend and vote at the general meetings of shareholders or the holders of Debentures issued other than under this Information Memorandum or of any other class of securities of the Company. Q. MODIFICATION OF RIGHTS The Debenture Holders’ rights, privileges, terms and conditions attached to the Debentures may be varied, modified or abrogated with the consent, in writing, of those holders of the Debentures (or through the Debenture Trustee) who hold at least three-fourth of the outstanding amount of the Debentures or with the sanction accorded pursuant to a special resolution passed at a meeting of the Debenture Holders, provided that nothing in such consent or resolution shall be operative against or bind the Company or (any third party security provider) in any manner where such consent or resolution modifies or varies the terms and conditions of the Debentures which are not acceptable to the Company. R. HOW TO APPLY Applications for the Debentures must be in the prescribed application form, and must be completed in block letters in English. Application forms must be accompanied by a demand draft or pay order or cheque, drawn or made payable in favour of “Housing Development & Infrastructure Limited” and crossed Account Payee only.
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S. FACILITY FOR ELECTRONIC FUND TRANSFER (EFT): Investors can opt for Electronic Fund Transfer (EFT) by indicating the same in the application form. In case of Debenture Holders opting for EFT, the interest and the principal amount would be directly credited by or on behalf of the Company in the specified account of the Debenture Holders on the due date. T. APPLICATIONS T.1 WHO CAN APPLY Only the persons who are specifically addressed through a communication by or on behalf of the Company directly are eligible to apply for the Debentures. An application made by any other person will be deemed as an invalid application and rejected. In order to subscribe to the Debenture a person must be either, (a) Commercial Bank, Financial Institution, Co-operative Bank, Regional
Rural Bank, (b) Provident Fund, Superannuation Fund or Gratuity Fund, (c) Mutual Fund, (d) Company, Body Corporate, Statutory Corporation or Registered Society, (e) Insurance Company, or (f) NBFC and Residuary NBFC. (a) Application by Scheduled Commercial Banks: Investment by scheduled commercial banks in preference shares, debentures and bonds of private corporates are excluded from the limit of investments in capital markets not exceeding 5 per cent of their incremental deposits in the previous year. The application must be accompanied by certified true copies of (i) Board Resolution authorising investments; (ii) Letter of Authorization or Power of Attorney and (iii) specimen signatures of authorized signatories. (b) Application by Co-operative Banks: The application must be accompanied by certified true copies of:
(i) Resolution authorising investment along with operating instructions/power of attorney; and
(ii) specimen signatures of authorised signatories. (c) Application by Regional Rural Banks (RRB’s): Regional Rural Banks are permitted by RBI, inter-alia, to invest in shares and debentures of Corporates up to 5% of their incremental deposits of the preceding financial year.
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The applications must be accompanied by certified true copies of (i) Government notification/ Certificate of incorporation/ Memorandum and Articles of Association/ other documents governing the constitution, (ii) resolution authorizing investment and containing operating instructions, (iii) specimen signature of authorized signatories and (iv)Form 15AA for claiming exemption from deduction of tax at source on the interest income. (d) Applications by Body Corporates / Companies / Financial institutions / NBFCs including Residuary NBFC’S/Statutory Corporations: The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Association/Constitution/Bye-laws, (ii) resolution authorizing investment and containing operating instructions, (iii) specimen signatures of authorized signatories and (iv) Form 15AA for claiming exemption from deduction of tax at source on the interest income. (e) Application by Mutual Funds: (i) a separate application can be made in respect of each scheme of an
Indian mutual fund registered with SEBI and that such applications shall not be treated as multiple applications.
(ii) the application made by the AMCs or custodians of a Mutual Fund shall clearly indicate the name of the concerned scheme for which application is being made.
The applications must be accompanied by certified true copies of (i) SEBI Registration Certificate and Trust Deed, (ii) resolution authorizing investment and containing operating instructions and (iii) specimen signatures of authorized signatories. (f) Application by Insurance Companies: The applications must be accompanied by certified copies of (i) Memorandum and Articles of Association, (ii) Power of Attorney, (iii) resolution authorizing investment, containing operating instructions and (iv) specimen signatures of authorised signatories. (g) Applications by Provident Funds, Superannuation Funds and Gratuity
Funds: The applications must be accompanied by certified true copies of: (i) Trust Deed/Bye laws/Regulations; (ii) Resolution authorising investment and (iii) Specimen signatures of authorised signatories. Those desirous of claiming tax exemption on interest on application money are compulsorily required to submit certificate issued by Income Tax Officer along
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with the Application Form. For subsequent interest payments, the certificate has to be submitted afresh periodically. (h) Application by Registered Societies: The application should be accompanied by certified true copies of: (i) Memorandum of Association/Deed/any other instrument regulating or
governing the constitution of the society, and Rules and Regulations/Bye-laws of the Society;
(ii) Resolution authorising investment along with operating instructions/power of attorney and
(iii) Specimen signatures of authorised signatories. T.2 Application under Power of Attorney A certified true copy of the power of attorney or the relevant authority, as the case may be, along with the names and specimen signature of all the authorised signatories must be lodged along with the completed application form. Further modifications / additions in the power of attorney or authority should be notified to the Company at its registered office. Disclaimer: Please note that only those persons to whom the Information Memorandum has been specifically addressed are eligible to apply. However, an application, even if complete in all respects, is liable to be rejected without assigning any reason for the same. The list of documents provided above is only indicative, and an Investor is required to provide all those documents/authorisations/ information, which are likely to be required by the Company. The Company may, but is not bound to revert to any Investor for any additional documents/information, and can accept or reject an application as it deems fit. THE REGULATIONS/NOTIFICATIONS REGARDING INVESTMENT MENTIONED ABOVE ARE MERELY IN THE FORM OF GUIDELINES AND THE COMPANY DOES NOT WARRANT THAT THEY ARE ACCURATE, OR HAVEN’T BEEN MODIFIED. EACH OF THE ABOVE CATEGORIES OF INVESTORS IS REQUIRED TO CHECK AND COMPLY WITH EXTANT RULES/REGULATIONS/ GUIDELINES, ETC. GOVERNING OR REGULATING THEIR INVESTMENTS AS ISSUED BY THEIR RESPECTIVE REGULATORY AUTHORITIES, AND THE COMPANY IS NOT, IN ANY WAY, DIRECTLY OR INDIRECTLY, RESPONSIBLE FOR ANY STATUTORY OR REGULATORY BREACHES BY ANY INVESTOR, NEITHER IS THE COMPANY REQUIRED TO CHECK OR CONFIRM THE SAME. U. GOVERNING LAW The Debentures are governed by and shall be construed in accordance with the existing Indian laws as applicable in the State of Maharashtra. Any dispute arising in respect thereof will be subject to the exclusive jurisdiction of the courts and tribunals in the city of Mumbai, Maharashtra.
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V. BASIS OF ALLOCATION / ALLOTMENT The basis of allocation / allotment of Debentures issued under this Information Memorandum will be decided by the Issuer.
W. REFUNDS For applicants whose applications have been rejected or allotted in part, refund orders will be dispatched within 7 days from the Deemed Date of Allotment of the Debentures. In case the Company has received moneys from applicants for Debentures in excess of the aggregate of the application moneys relating to the Debentures in respect of which allotments have been made, the Company shall repay the moneys to the extent of such excess forthwith without interest, and if such money is not repaid within eight days after the Company becomes liable to repay it, the Company and every director of the Company who is an officer in default shall, on and from the expiry of the eighth day be jointly and severally liable to repay that money with such rate of interest as specified in Section 73 of the Act, having regard to the length of the period of delay in making the repayment of such money. X. NOTICES The notices to the Debenture Holders required to be given by the Company or the Trustees shall be deemed to have been given if sent by registered post to the sole/first allotted or sole/first registered holder of the Debentures as the case may be. All notices to be given by Debenture Holders shall be sent by registered post or by hand delivery to the Company at its Registered Office or to such persons at such address as the company may notify from time to time. Y. FORCE MAJEURE The Issuer reserves the right to withdraw this Issue prior to the earliest closing date in the event of any unforeseen development adversely affecting the economic and regulatory environment in the opinion of and at the sole discretion of the Issuer. In such an event the Issuer will refund the application money, if any, along with interest payable on such application money, if any. Z. DEBENTURES SUBJECT TO DEBENTURE TRUST DEED, ETC. Over and above the aforesaid terms and conditions, the Debentures issued under this Information Memorandum, shall be subject to the terms and conditions incorporated elsewhere in this Information Memorandum, in the relevant Subscription Agreement/ Debenture Trust Deed / Any other document executed between the Issuer and the Debenture holder(s) also be subject to the provisions of the Memorandum and Articles of Association of the Company.
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AA. POWER OF COMPANY TO DEAL WITH ASSETS CHARGED AS SECURITY:
The security will be created by the Company as aforesaid in favor of the Trustee as per the provisions of the Debenture Trust Deed. AB. REPRESENTATIONS, WARRANTIES AND COVENANTS AB.1 REPRESENTATIONS AND WARRANTIES: The Company represents and warrants that: (a) The Company is a limited liability company duly organised and existing
under the Companies Act, 1956 and has the power to carry on its business as it is now being carried on and to own its property and assets;
(b) All corporate actions on the part of the Company, its directors or
shareholders, necessary for the authorization, and delivery of this Information Memorandum to BSE (and performances hereunder) and the documents enumerated under the head “Material Contracts and Documents” in this Information Memorandum have been duly taken; including the resolutions and necessary authorizations to be granted by the Board of Directors / General Body of the Company;
(c) This Information Memorandum constitutes valid and binding obligations
of the Company;
(d) The Company has not taken any corporate action for its winding-up, dissolution, administration, and reorganisation or for appointment of receiver, administrator of the Company or all or any of its assets or undertakings;
(e) Other than those which are mentioned in this Information Memorandum,
as of the date of this Information Memorandum, there is no litigation, proceeding or dispute pending or threatened against the Company in the knowledge of the Company, the adverse determination of which would substantially affect the Company’s ability to redeem the Debentures or have a materially adverse effect on the financial condition of the Company;
(f) The execution and delivery of this Information Memorandum and the
performance of its obligations hereunder does not (i) contravene any applicable law, statute or regulation or any judgment or decree to which the Company is subject, (ii) conflict or result in any material breach of any of the terms of or constitute default of any covenants, conditions and stipulations under any existing Information Memorandum to which the Company is a party, or (iii) conflict or contravene any provision of the Memorandum and Articles of Association of the Company;
(g) The Company has obtained all approvals, consents or sanctions,
required to be obtained by the Company, of the Government or any
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Government body or authority for issuance of the Debentures and undertakes to obtain such approvals as may be pending at the time of execution of this Information Memorandum;
The representation and warranties contained in this clause, except for sub-clauses (b), (d) and (e) above, shall be deemed to be repeated by the Company on and as of each day from the date of this Information Memorandum until all moneys due or owing hereunder by the Company to the Debentureholders have been repaid in full as if made with reference to the facts and circumstances existing on such day. AB.2 POSITIVE COVENANTS The Company covenants and undertakes that so long as the Debentures or any part thereof are outstanding and until full and final payment of all money owing hereunder, it will, unless the Trustee waives compliance in writing: (i) Conduct its business with due diligence and efficiency as is required to
be exercised by a person of ordinary prudence in similar circumstances and in accordance with sound engineering, technical, managerial and financial standards and business practices with qualified and experienced management personnel,
(ii) As may be required by the Debenture Trustee, procure and furnish to
them a certificate from the Company's statutory auditors in respect of the utilisation of the Issue Proceeds,
(iii) Maintain and keep in proper order and in good condition the Mortgaged
Properties. In case the Company fails to keep in proper order and in good condition the Mortgaged Properties or any part or parts thereof, then, in such case, the Debenture Trustee may, but shall not be bound to, maintain in proper order or condition the Mortgaged Properties,
(iv) Insure and keep insured upto the replacement value thereof or on such
other basis as decided by the Company (including surveyor's and architect's fees) the Mortgaged Properties against fire, theft, lightning, earthquake, strike, lock out, civil commotion, marine risk, erection risk, and/or other risks as may be agreed to between the Company and the Debenture Trustee from time to time and the Company shall duly pay all premia and other sums payable for that purpose. The insurance in respect of the Mortgaged Properties shall be taken in the joint names of the Company, the Debenture Trustee and any other person having a pari passu first charge on the Mortgaged Properties. In the event of failure on the part of the Company to insure the Mortgaged Properties or to pay the insurance premia or other sums referred to above, the Debenture Trustee may but shall not be bound to get the Mortgaged Properties insured or pay the insurance premia and other sums referred to above which shall be reimbursed by the Company,
(v) Keep proper books of account as required by the Act and make true and
proper entries therein of all dealings and transactions of and in relation
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to the Mortgaged Properties and the business of the Company and keep the said books of accounts and all other books, registers and other documents relating to the affairs of the Company at its registered office or, where permitted by law, at another place or places where the books of account and documents of a similar nature may be kept and the Company will ensure that all entries in the same relating to the Mortgaged Properties shall at reasonable times be open for inspection by the Debenture Trustee and such person or persons, as the Debenture Trustee shall, from time to time, in writing for that purpose appoint,
(vi) Subject to the provisions of the relevant clauses of the Debenture Trust
Deed, permit the Debenture Trustee to enter into or upon in order to view the state and condition of all the Mortgaged Properties; and shall pay all travelling, hotel and other expenses of any person or persons whom the Debenture Trustee may depute for the purpose of such inspection and if the Debenture Trustee shall, for any reason, decide that it is necessary to employ an expert, to pay the fees and all traveling, hotel and other expenses of such expert. Provided, that the Debenture Trustee shall not under any circumstances appoint any person as the agent, who has conflicting interest with that of the Company.
(vii) Punctually pay all rents, royalties, taxes, rates, levies, cesses,
assessments, impositions and outgoings, governmental, municipal or otherwise imposed upon or payable by the Company as and when the same shall become payable and when required by the Debenture Trustee produce the receipts of such payment and also punctually pay and discharge all debts and obligations and liabilities which may have priority over the Security created and observe, perform and comply with all covenants and obligations which ought to be observed and performed by the Company in respect of or any part or parts of the Mortgaged Properties,
(viii) Apply for and make a reasonable endeavour to obtain renewal of the
leases under which any of the leasehold land forming part of the Mortgaged Properties may, during the continuance of the Security, be held as and when the same may be due for renewal in accordance with the provisions thereof and duly vest in the Debenture Trustee as part of the Mortgaged Properties and in such manner as the Debenture Trustee may direct all such renewed leases,
(ix) Forthwith give notice in writing to the Debenture Trustee of the
commencement of any proceedings directly affecting the Mortgaged Properties,
(x) Duly cause the Debenture Trust Deed to be registered in all respects so
as to comply with the provisions of the Act and the Indian Registration Act, 1908 or any other Act, ordinance or regulation of or relating to any part of India, within which any portion of the Mortgaged Properties is or may be situated or otherwise by which the registration of deeds is required and generally do all other acts (if any) necessary for the purpose of assuring the legal validity of this Agreement and/or the Debenture
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Trust Deed and in accordance with the Company's Memorandum and Articles of Association,
(xi) Diligently preserve its corporate existence and status and all rights,
contracts, privileges, franchises and concessions now held or hereafter acquired by it in the conduct of its business and that it will comply with each and every one of the said franchises and concessions and all acts, rules, regulations, orders and directions of any legislative, executive, administrative or judicial body applicable to the Mortgaged Properties or any part thereof PROVIDED THAT the Company may contest in good faith the validity of any such acts, rules, regulations, orders and directions and pending the determination of such contest may postpone compliance therewith if the rights enforceable under the Debentures or the Security of the Debentures shall not thereby be materially endangered or impaired. The Company shall not do or voluntarily suffer or permit to be done any act or thing whereby its right to transact its business might or could be terminated or whereby payment of the principal and/or the interest due on the Debentures might or would be hindered or delayed,
(xii) Pay all such stamp duty (including any additional stamp duty), other
duties, taxes, charges and penalties, if and when the Company may be required to pay them according to the laws for the time being in force in the State in which its properties are or shall be situated or otherwise, and in the event of the Company failing to pay such stamp duty, other duties, taxes and penalties as aforesaid, the Debenture Trustee will be at liberty (but shall not be bound) to pay the same and the Company shall reimburse the same to the Debenture Trustee on demand,
(xiii) Promptly inform the Debenture Trustee if it has knowledge of any order
admitting the winding up petition filed against under the Act or otherwise of any suit or other legal process filed or initiated against the Company and affecting the title to the Company’s properties or if a Receiver is appointed of any of its properties or business or undertaking,
(xiv) Promptly inform the Debenture Trustee of the occurrence of any labour
strikes, lockouts, shut-downs, fires, or any event likely to have a substantial effect on the Company's profits,
(xv) Inform the Debenture Trustee of any material litigation, arbitration or
other proceedings which, in the opinion of the Company, if adversely determined, would have a material adverse effect on the Company, forthwith upon such proceedings being instituted or threatened ("material" for the purpose of this subsection shall mean any amount in excess of Rs.11,500,000,000.00/- (Rupees Eleven thousand Five Hundred Million Only)
(xvi) Promptly inform the Debenture Trustee of any loss or damage, which the
Company may suffer due to any force majeure circumstances or act of God, such as earthquake, flood, tempest or typhoon, etc., against which the Company may not have insured its properties.
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(xvii) Inform the Debenture Trustee if it undertakes any merger, consolidation,
reorganisation, scheme of arrangement or compromise with its creditors or shareholders or affect any scheme of amalgamation or reconstruction.
(xviii) Inform the Debenture Trustee if it makes any alteration in the provisions
of its Memorandum and Articles of Association which in the Company’s reasonable opinion detrimentally affects the interests of the Debenture holders;
AB.3 SPECIAL COVENANTS
a) Debenture Redemption Reserve The Company shall maintain a Debenture Redemption Reserve as per the guidelines issued from time to time by the Government of India or SEBI as may be applicable or made applicable to privately placed debentures. b) Special Covenants The Company agrees and undertakes that: (i) Working results The Company shall furnish half-yearly working results and other related information as and when required to do so to the Debenture Trustee; and (ii) Execution of documents and creation of security The Company shall execute the documents for creation of Security and create the Security for the Debentures in accordance with the Information Memorandum.
3.3 TAX BENEFITS Current tax is determined as the amount of tax payable in respect of taxable income for the year. There are no specific tax benefits available to the Investors on investing in the Company, which are not available in respect of other companies under current tax laws
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4. ABOUT OUR COMPANY
BRIEF OVERVIEW OF THE GROUP AND THE COMPANY’S BUSINESS We are a real estate development company in India, with our significant operations in the Mumbai Metropolitan Region. Our business focuses on Real Estate Development, including construction and development of residential projects and, more recently, commercial and retail projects, Slum Rehabilitation and Development, including clearing slum land and rehousing slum dwellers, and Land Development, including development of infrastructure on land which we then sell to other property developers. We have an integrated in-house development team which covers all aspects of property development from project identification and inception through construction to completion and sale. Since our incorporation in 1996, we have developed 34 projects covering approximately 34.04 million square feet of saleable area. Our residential projects generally are comprised of groups of apartments, towers or larger multi-purpose “township” projects in which individual housing units are sold to customers. Our commercial projects are a mix of office space and multiplex cinemas. Our retail projects focus on shopping malls. We usually follow a “build and sell” model for the properties we develop. We also undertake slum rehabilitation projects under a Government scheme administered by the Slum Rehabilitation Authority (SRA), whereby developers are granted development rights in exchange for clearing and redeveloping slum lands, including providing replacement housing for the dislocated slum dwellers. Although historically we have focused on real estate development in the Mumbai Metropolitan Region, as part of our growth strategy we are considering projects in other locations, including Kochi and Hyderabad. We also are considering expanding into hotel projects, special economic zone developments and “mega-structure” complexes, which are large-scale mixed-use retail, commercial and residential developments. As of September 30, 2009, Our total land reserves are comprised of approximately 197.18 million square feet of saleable area to be developed through 35 Ongoing or Planned projects. As on September 30, 2009 we have 17 ongoing Projects, which are projects under construction and development, aggregating to approximately 64.40 million square feet of saleable area, and we have an additional 18 Planned Projects, which are projects planned for construction and development in the future, aggregating approximately 132.78 million square feet of saleable area. Our total income for the fiscal year 2009 was Rs. 17,824.25 million and our net profit for the fiscal year 2009 was Rs. 6772.06 million. COMPETITIVE STRENGTHS We believe that the following are our primary competitive strengths:
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Land Reserves in the Mumbai Metropolitan Region We continually identify and acquire land or land development rights. Our Land Reserves consist of saleable areas of land to which we have, or are in the process of acquiring, title or development rights either directly, or through acquisition agreements or letters of intent, or through memoranda of understanding. As of September 30, 2009, we had approximately 171.14 million square feet of Land Reserves in MMR, which included approximately 64.40 million square feet of saleable area our Ongoing Projects and approximately 106.74 million square feet of saleable area for our Planned Projects. These reserves also include TDRs and FSI granted to us pursuant to the MIAL Slum Rehabilitation Projects. Approximately 86.7% of our Land Reserves are in the Mumbai Metropolitan Region, which is the commercial capital of India and an important real estate market. We believe that our experience in building up our Land Reserves at a competitive cost is a significant advantage to us as we seek to expand our business. In-House Development Capabilities and Project Execution Skills We have established a detailed internal system for project development, implementation and monitoring to ensure proper identification and acquisition of potential project sites, effective and organized design and planning procedures, and efficient procurement, construction and other execution processes in order to complete projects on time and within budget. We believe these systems facilitate efficient operations and ensure consistent quality across all of our projects, thereby shortening project timelines and allowing us to successfully execute complex projects. Our teams have developed relationships with, and have experience in working with regulatory authorities, as well as managing our external suppliers and third party contractors. We believe these systems also facilitate our ability to anticipate project requirements and to develop new types of structures. Experienced and Established Participant in Slum Rehabilitation Schemes We are an established developer in the market for slum rehabilitation, which primarily involves construction of residential buildings for slum dwellers and clearing public and private land for development of residential, commercial, retail and infrastructure purposes. Our team has extensive experience in identifying appropriate slum rehabilitation projects as well as working with the government authorities who regulate these projects, issue necessary permits and approvals and monitor the quality of replacement housing we build for slum dwellers. We believe we have established a reputation with slum dwellers for fair and efficient execution of such projects that has enhanced our ability to obtain their consent to our rehabilitation projects and successfully execute such projects, thereby facilitating our growth in this segment of the real estate market in the Mumbai Metropolitan Region.
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Established Reputation for Quality Projects and Construction Since our incorporation in 1996 and as of September 30 2009, we have successfully completed 34 projects covering approximately 34.04 million square feet of saleable area. Our brand Name “HDIL” is highly recognizable in the MMR due to its established reputation, superior quality of developments and Long term presence. We have not experienced any significant quality issues or have we ever been cited for any material deficiencies in construction of our projects. We believe customers identify our projects with quality construction and, as a result, we enjoy customer confidence, enhancing our ability to sell our projects. In addition, we believe being part of the Wadhawan Group, which has been involved in property development in the Mumbai Metropolitan Region for almost three decades, enhances buyers’ positive perceptions of our projects. As a result, we believe our projects appeal to a large cross section of the Indian population, including the growing middle class market for residential properties. Experienced Management and Employees Our management team has significant experience in the real estate sector and our staff of professionals cover a variety of disciplines, including architecture, engineering, project supervision, accounting, marketing and sales. Our management and professional personnel have extensive experience in anticipating market trends, identifying new markets and potential sites for development and acquiring land and development rights, as well as in the design, engineering, construction, supervision and marketing of projects. Their experience includes relationships with the suppliers from whom we source construction materials and the contractors we engage for construction services, allowing us to better manage the quality, schedule and cost of the materials and construction in our projects. We believe our record in constructing and developing projects in the Mumbai Metropolitan Region gives us special expertise with respect to developing projects in and around the region, particularly with respect to working with relevant regulatory authorities and managing legal and regulatory requirements and processes. We believe that this experience and expertise will enable us to replicate our business model in other geographic areas of India and for other types of projects. OUR STRATEGY The key elements of our business strategy are as follows: Focus on Performance and Project Execution We believe that we have developed a good reputation for quality construction projects and completing projects ahead of schedule. Although we believe it is important to acquire additional Land and development rights in strategic locations at a competitive cost built on our Land Reserves, we also intend to focus on exploiting our existing land bank to develop our Ongoing and Planned projects aggregating approximately 64.40 million square feet of saleable area.
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We intent to continue to focus on performance and project execution in order to maximize client satisfaction. We will continue to leverage advanced technologies, designs and project management tools to increase productivity and maximize asset utilization in capital intensive construction activities. Our integrated in-house project development and execution process and term focuses on effective supervision of development activities resulting in efficient and timely project execution. Manage Emerging Market trends and focus on residential Projects that meet customer Requirement. As consumers’ aspirations have risen, so has the demand for high-quality residential developments that integrate recreational facilities. We recently launched Metropolis Residences which caters to high- income customers. We will continue to focus on emerging trends in customer requirements that provide us with an insight into the type, location and price of our product offering and guide us to plan our projects to suit such requirements. We have also focused on affordable housing, a segment where a demand-supply mismatch exists currently in our markets. We believe that the residential segment, as the demand for such properties will continue to increase with the growth in the Indian economy and the corresponding increase in urbanization. Continued Expansion of Land Reserves We believe that continuing to acquire additional land and land development rights in strategic locations at a competitive cost is critical to our ability to develop successful projects. We focus our acquisition efforts on lands where we can develop large saleable areas and maximise our returns in relation to the cost and time required to develop and sell a project. We intend to enhance our Land Reserves through executing slum rehabilitation projects, entering into joint development agreements or partnerships for the development of properties and through the acquisition of land, not only in the Mumbai Metropolitan Region, but also in other geographic areas of India, such as Palghar, Kochi and Hyderabad. Portfolio Diversification In addition to our core strengths in developing residential, commercial and retail projects, and projects under slum rehabilitation schemes and in land development, we intend to expand the types of projects we undertake to include hotels, special economic zone developments and “mega-structure” complexes, which are large-scale mixed-use retail, commercial and residential developments like our “Dreams” development in Bhandup, north of the central Mumbai Metropolitan Region. We believe that such diversification will allow us to take advantage of new trends and opportunities in the Indian market whilst simultaneously helping to mitigate the risks of being too concentrated in certain segments of the real estate sector.
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Geographic Expansion Although we are primarily focused on the real estate market in the Mumbai Metropolitan Region, India’s growing economy and population present real estate development opportunities throughout the country. We are developing multi-use residential/retail projects in Palghar, Kochi and Hyderabad. We will continue to seek strategic development opportunities either on our own or jointly with third parties as they arise and believe that our experience in the Mumbai Metropolitan Region will translate well in other parts of the country. Geographic expansion also will enable us to grow the overall size of our operations. Enhance Our Slum Rehabilitation Business We engage, and have established a market presence, in slum rehabilitation projects that involve clearing slum lands owned by the Government or private parties, rehousing affected slum dwellers and redeveloping the cleared land for projects or for other infrastructure purposes such as roadway expansions. Land occupied by slum dwellers constitutes a significant portion of developable land in the Mumbai Metropolitan Region and rehabilitation projects therefore provide significant opportunities for real estate development in attractive locations. Rehabilitation projects give developers access to these areas for, in effect, the cost of clearing the slum and providing replacement housing for the affected slum dwellers. The developer is compensated with land development rights that can be used for construction and development of projects either at the cleared area or otherwise anywhere in the Mumbai Metropolitan Region north of the area being rehabilitated. These transferable development rights (TDRs) can represent significant value to a developer because they permit construction of additional amounts of square footage of saleable area in areas of the Mumbai Metropolitan Region where the developer otherwise would not be permitted to build beyond a certain amount of saleable area. Alternatively, the developer can sell TDRs in the real estate market, which can improve the liquidity position of the developer. OUR BUSINESS LINES Our business can be divided into three general categories as follows: Real Estate Development, including construction and development of residential, commercial and retail projects; Slum Rehabilitation and Development, including clearing slum land, owned by the Government or private parties and rehousing affected slum dwellers; and Land Development, including development of infrastructure on land and sale to other developers. Completed Projects We have developed properties predominantly in the Mumbai Metropolitan Region and traditionally have focused on development of residential projects,
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slum rehabilitation. As of September 30, 2009, we had completed a total of 34 projects, aggregating approximately 34.04 million square feet of salable area. A summary of these projects by type is included in the following table:
Project Type Salable Area
(Sq.ft in million) % of Total Residential 5.31 15.60 Commercial 3.77 11.08 Retail 0.58 1.70 Land Development 24.38 71.62
Total 34.04 100.00
Type of contracts through which we acquire Land: Memorandum of Understanding A Memorandum of Understanding (MOU) describes a bilateral arrangement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action, rather than a legal commitment. It generally lacks the binding power of a contract. An MOU may be defined as “a written statement detailing the preliminary understanding of parties who plan to enter into a contract or some other agreement”. An MOU is not meant to be binding except in cases where it is considered to be a concluded contract and does not hinder the parties from bargaining with a third party. Parties entering into an MOU typically do not intend to be bound by it, and the courts ordinarily do not enforce an MOU but the courts may sometimes conclude from the language in an MOU that a commitment has been made. Agreement for Sale An agreement for sale is a contract that a sale of the property mentioned therein shall take place on the terms agreed by the parties. It is an executory contract whereby the title to the property continues to be vested with the vendor thereof. An agreement for sale need not be registered. Letter of Intent (LOI) It is a letter expressing an intention to take (or not take) an action, sometimes subject to other action being taken and is primarily concerned with delineating only the major terms of the transaction including but not limited to payment of
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an earnest money deposit, description of the property and termination details, etc. With respect to Slum Rehabilitation Act, the LOI is a document which is issued in the second stage of the Slum Rehabilitation Project after the Annexure II has been certified by the Slum Rehabilitation Authority. It is only after the issue of the LOI that the Developer can proceed to arrange for interim accommodation, demolish structures on the land and proceed with construction. Development Rights A development right is a right to carry out development or to develop the land or building or both and shall include the transferable development right in the form of a right to utilize the FSI of land utilized either on the remainder of the land or partially reserved for a public purpose or elsewhere. Ownership Rights Ownership rights relate to the legal title of the property coupled with exclusive legal rights to possession. Co-ownership means that more than one person has a legal interest in the same property. Title Certificate A title certificate certifies whether a title is marketable or not. It is issued subsequent to investigation and examination of the title by an advocate/solicitor. There are generally two types of title certificates: (i)A clean certificate which certifies that the title has been examined and is marketable and free from encumbrances, claims or reasonable doubts; (ii)Qualified certificate that sets out conditions and reservations, whereby the title is not marketable. Joint Development Agreement A joint development agreement is an agreement whereby a developer or builder enters into an agreement with the owner for purchase and development of the land. The immovable property for development may be either vacant land or land with structures already built thereon. Such agreements contain obligations and rights of land owners and builders such as obtaining statutory permissions, ratio of sharing the developed property between owner and developer, process of finding prospective purchasers and funding the project, time duration of completion and penalties for violation.
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Deed of Assignment Assignment of rights under a contract is the transfer of the rights held by the Transferor under the contract to the Transferee. Such an assignment may be donative (essentially given as a gift), or it may be contractually exchanged for consideration. Land Reserves We believe that having an adequate supply of land and land development rights in strategic locations is critical to our ability to continue developing successful projects. We focus our acquisition efforts on lands where we can develop large saleable areas and maximize our returns in relation to the cost and time required to develop and sell a project. Our Land Reserves consist of saleable areas of land to which we have, or are in the process of acquiring, title or development rights either directly, or through acquisition agreements or letters of intent, or through memoranda of understanding. As of September 30, 2009, our total land reserves comprise approximately 197.18 million square feet of saleable area to be developed through 35 Ongoing and Planned projects. we have 17 Ongoing Projects, which are projects under construction and development, aggregating approximately 64.40 million square feet of saleable area, and we have an additional 18 Planned Projects, which are projects planned for construction and development in the future, aggregating approximately 132.78 million square feet of saleable area. We have provided details of our Ongoing and Planned Projects which include projects being undertaken on portions of our Land Reserves. The saleable area of our Ongoing and Planned Projects as on September 30, 2009 is summarized in the table below:
% of Planned Saleable
% of Project Type Ongoing Saleable
Area (in Sq. ft)
Total Area (in Sq. ft)
Total
Total Saleable Area
(in Sq. ft)
% of Total
Slum Rehabilitation and Development Rights 50,990,035 79.2 10,000,000
7.53 60,990,035
30.93
Residential 7,009,457 10.9 83,948,323
63.22 90,957,780
46.13
Commercial 5,430,000 8.4 22,106,296
16.65 27,536,296
13.96
Retail 969,456 1.5 16,727,821
12.60 17,697,277
8.98
Total 64,398,948 100.0 132,782,440
100.00 *197,181,388
100.00
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* Current land Bank is 197.18 Million Sq. ft excluding Land Bank from MMRDA Rental Housing Project. On start of project, Land bank will further increase by 25 Million Sq. ft before March 2010. Summary as on 30P
Total 64,398,948 100.0% 132,782,440 100.0% *197,181,388 100.0
* Current land Bank is 197.18 Million Sq. ft excluding Land Bank from MMRDA Rental Housing Project. On start of project, Land bank will further increase by 25 Million Sq. ft before March 2010. The following table summarizes the geographical distribution of our Ongoing and Planned Projects as of September 30, 2009: Location State Saleable Area (in
Sq. ft) % of Total
MMR* Maharashtra 171,137,228 86.70%
Kochi Kerala 14,999,600 7.60%
Hyderabad Andhra Pradesh 9,844,560 5.00%
Pune Maharashtra 1,200,000 0.60% Total
**197,181,388 100.00%
* Includes Palghar ** Current land Bank is 197.18 Million Sq. ft excluding Land Bank from MMRDA Rental Housing Project. On start of project, Land bank will further increase by 25 Million Sq. ft before March 2010.
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The following map shows the location of our Ongoing and Planned Projects in the Mumbai Metropolitan Region.
Real Estate Development Our experience in acquiring and selling land and land development rights, combined with our focus on residential, commercial and retail projects, allows us to take advantage of the growth in multiple sectors of the Indian market. Our real estate projects include several types of residential developments, such as apartment complexes and multi-purpose townships, as well as a variety of commercial space such as office space, multiplexes and retail space, including shops and malls, predominantly in the Mumbai Metropolitan Region. Residential Projects Most of our residential projects involve the construction of apartment complexes with multiple story apartment buildings. We also develop and construct township projects, which are self-contained planned communities with mixed-use residential and commercial or retail space. These projects require us to work closely with regulatory bodies and community leaders to ensure appropriate development of necessary infrastructure and public amenities, including roads, sewage, parks, schools and hospitals. We generally market our residential projects to middle and high income consumers as well as to corporate customers. We begin sales of apartment units upon commencement of construction and a substantial number of the residential units are pre-sold prior to the completion of construction of a project. After
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sales are completed, we do not retain any ownership rights or management obligations. The following table summaries our residential projects. Certain of these projects have commercial, retail and slum rehabilitation components, which are reflected in other tables below. Consequently, information related to payments made towards the cost of land for a project may be duplicated in the case of land used for more than one type of project.
Project Location
Saleable Area (in Sq.
ft)
Ongoing Projects: Metropolis Andheri (West) 650,000 Ghatkopar Ghatkopar 509,457 Kurla Premier Kurla 900,000 Kilburn Bhandup 1,300,000 BOC Mulund 1,200,000 Galaxy Kurla 400,000 Dongre Phase I Virar 1,250,000 Eveready New Mumbai 800,000 Total (A) 7,009,457 Planned Projects: Mega Township Virar I Virar 12,874,662 Kharadi* Pune 400,000 Mega Township Virar II Virar 15,882,810 Virar (East) Property Virar 2,166,666 Dongre Phase I Virar 1,347,402 Kukatpally* Hyderabad 1,019,304 Sasunavghar Property Vasai 16,661,700 Dongre Phase II Virar 4,961,484 Palghar Palghar 1,490,793 Kukatpally Hyderabad 6,969,600 Agashi Agashi 3,400,000 Kochi Kochi 6,299,640 Dewan Mann Vasai 3,745,958 Carmichael Rd Property Malabar Hill 63,615 Panvel Property Kalamboli 6,664,689 Total (B) 83,948,323
TOTAL (A+B) 90,957,780
* Being developed pursuant to joint development arrangements, for further details please refer to “Joint Developments and Partnerships”. The saleable area reflects the total area under development.
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Some of our residential Ongoing Projects are described in more detail below. Kurla Premier: The Kurla Premier is located near L.B.S. Marg, Kurla (West). The Kurla Premier project comprises approximately 900,000 square feet of saleable area. When completed, the project will be a nine-storey building with three wings, and comprising 915 apartments targeted at mid-and lower-income customers. This project was launched in March 2009 and the scheduled date of completion is expected to be October 2011. As of April 30, 2009, we have sold 685 apartments in this project. Metropolis: The Metropolis project is located at Four Bungalows, Andheri (West). The Metropolis project comprises approximately 650,000 square feet of saleable area. When completed, this project will be a 27-storey building comprising 414 apartments targeted at mid-and high-income customers. This project was launched in March 2009 and the scheduled date of completion is expected to be December 2011. As of April 30, 2009, we have sold 390 apartments in this project. Galaxy: The Galaxy project is located in Bhandari Estate, Kurla (East). The Galaxy project comprises approximately 400,000 square feet of saleable area. When completed, the project will be a 13-storey building with two wings, and comprising 480 apartments targeted at mid-and lower-income customers. This project was launched in March 2009 and the scheduled date of completion is expected to be April 2011. We have sold 175 apartments in this project. Virar Project: We propose to develop a 525 acre township project at Chikal Dongre village, Virar, with the MMRDA. We are required to construct and handover rental housing units free of charge to the MMRDA. The free sale integrated township component of the project will be available to the Company for free sale. Commercial Projects We have developed several commercial office projects in the Mumbai Metropolitan Region. These projects are medium-sized and mostly are targeted at established financial and service sector companies. We also build multiplexes, either as standalone structures or within malls. After construction of a commercial project, we generally sell the commercial space to individual buyers and retain no ownership or management responsibilities. The following table summarises our commercial Ongoing Projects and Planned Projects as on September 30, 2009. Certain of these projects have residential, retail and slum rehabilitation components, which are reflected in other tables in this section.
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Project Location Saleable Area (in
Sq.ft) Ongoing Projects: Metropolis Andheri (West) 1,020,000 Kurla Premier Kurla 2,000,000 Eveready New Mumbai 800,000 Worli Commercial Worli 110,000 HDIL Industrial Park Virar 1,500,000 Total (A) 5,430,000 Planned Projects: Kharadi Pune 800,000 Kalamsarry Kochi 8,000,000 Industrial project Palghar 10,306,296 Kurla Premier Kurla 3,000,000 Total (B) 22,106,296
TOTAL (A+B) 27,536,296 Some of our commercial Ongoing Projects are described in more detail below. Worli Commercial Property: Worli Commercial Property is a commercial building located in Worli and comprises 110,000 square feet of saleable area. The scheduled date of completion of the project is expected to be March 2011. We have obtained development rights from the lessor and the original developer, subject to certain approvals for use of the property from the Municipal Corporation of Greater Mumbai. Metropolis: The Metropolis project is located at Four Bungalows, Andheri (West). The Metropolis project comprises approximately 1,020,000 square feet of saleable area. The scheduled date of completion is expected to be December 2012. Retail Projects: We currently sell retail space to the retail store operators, rather than retaining ownership and leasing the space. We usually target a primary “anchor” retail operator during the development stage of our retail malls and then market the remaining saleable retail space to other retailers based on the location and demographic profile of the target consumers for the mall. We regularly evaluate the option of sale versus lease, and make our decision based on prevailing market conditions and other business considerations. The following table summarizes our retail Ongoing and Planned Projects as of September 30, 2009. Certain of these projects have residential, commercial and slum rehabilitation components, which are reflected in other tables in this section.
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Project Location Saleable Area
(in Sq. ft) Ongoing Projects: Metropolis Andheri (West) 200,000 Harmony Oshiwara 349,456 BOC Mulund 400,000 Multiplex Kandivali 20,000 Total (A) 969,456 Planned Projects: Mega Township Virar II Virar 2,802,849 Virar (East) Virar 916,667 Dewan Mann Vasai 936,490 Palghar Palghar 993,862 Mega Township Virar I Virar 2,271,999 Sasunavghar Property Vasai 2,940,300 Agashi Agashi 600,000 Kukatpally Hyderabad 113,256 Dadar Dadar 9,009 Kukatpally Hyderabad 1,742,400 Dongre Phase II Virar 875,556 Panvel Kalamboli 1,176,122 Kochi Kochi 699,960 Dongre Phase I Virar 649,351 Total (B) 16,727,821
TOTAL (A+B) 17,697,277 Our Multiplexes: Under the brand name Broadway, we operate a three screen multiplex at Vasai and a four screen multiplex at Kandivali. The Vasai multiplex and the Kandivali multiplex commenced operations in January 2008 and June 2009, respectively. Slum Rehabilitation and Development We engage in slum rehabilitation projects, on both government and private land that include new housing for slum dwellers under a Government plan administered by the Slum Rehabilitation Authority (SRA). We also build new housing for slum dwellers displaced by government infrastructure projects such as roadway expansions undertaken by the Government and other municipal bodies. Our activities also include redevelopment of certain areas or certain buildings. Land occupied by slum dwellers constitutes a significant portion of developable land in the Mumbai Metropolitan Region and rehabilitation projects therefore provide significant opportunities for real estate development. For each slum rehabilitation project administered by the SRA, the developer, before proceeding, must obtain the consent of at least 70% of the affected slum dwellers, must provide temporary housing for the affected slum dwellers during the rehabilitation process and must provide them, in the rehabilitated project, new permanent apartments of 225 square feet each that meet specific
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Government standards, along with a small maintenance fund. A slum rehabilitation project also requires the consent of the relevant regulatory authorities including a letter of intent and, in the case of slums on private land, the consent of the land owner. In exchange for rehabilitating a slum area on government land and re-housing its former inhabitants, the developer is granted by the relevant authority rights to develop an amount of saleable area equal to or greater than the surface area of rehabilitation housing built for the slum dwellers. Many of the slums being rehabilitated are located in the Mumbai Metropolitan Region’s business district and other areas in the central part of the Mumbai Metropolitan Region that are attractive locations for redevelopment. Rehabilitation projects give developers access to these areas for, in effect, the cost of clearing the slum and providing replacement housing in apartments for the affected slum dwellers. The development rights can be used by the developer in the construction and development of projects within the cleared area not used for rehabilitation housing for slum dwellers. However, in certain cases, this may not be possible due to the location, size, topography or other anomalous feature of the developable area. In these cases, the developer is compensated with land development rights that may be transferred to projects anywhere in the Mumbai Metropolitan Region north of the area being rehabilitated. These transferable development rights (TDRs), which are evidenced by certificates from the relevant regulatory authorities, can represent significant value to a developer because they permit construction of additional amounts of square footage of saleable area in areas of the Mumbai Metropolitan Region where the developer otherwise would not be permitted to build beyond a certain amount of saleable area. The growing real estate market in the Mumbai Metropolitan Region has created significant demand for TDRs. If we do not use the land development rights generated by a slum rehabilitation project, we sell them to other developers after evaluating market conditions and other business considerations. Sales of TDRs can improve our liquidity position and provide funding for our other projects. The slum rehabilitation schemes qualify for income tax exemptions for profits earned from sales of housing projects approved before March 31, 2007, subject to minimum alternative tax rules. Given the complexity of the various aspects of a slum rehabilitation project, including the relevant regulations, dealing with regulators and slum dwellers, and the accounting and tax aspects of these projects, we believe our extensive experience in the slum rehabilitation sector enhances our ability to maximise our returns on these projects. Our experience in this sector also has allowed us to earn the trust of slum dwellers, which helps us to successfully execute such projects. The following table summarises our slum rehabilitation projects, all of which are Ongoing Projects. Certain of these projects have residential, commercial and retail components, which are reflected in other tables in this section.
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Information related to payments made towards the cost of land may overlap for such projects. As on 30P
thP September, 2009
Project Location Saleable Area (in sf)
Ongoing Projects: Bandra (East) SRS Scheme I
Bandra-Kurla Complex 1,882,756
Bandra (East) SRS Scheme II
Bandra-Kurla Complex 159,074
Goregaon West Goregaon 4,000,000 Malad (West) Malad 117,205 MIAL Slum Project Mumbai 44,831,000 Total (A) 50,990,035 Planned: MIAL Slum Project Mumbai 10,000,000 Total (B) 10,000,000
TOTAL (A+B) 60,990,035 Some of our Ongoing Projects relating to Slum Rehabilitation and Development are described in more detail below. MIAL Slum Rehabilitation Project: Mumbai International Airport Private Limited has been granted the exclusive right to operate, maintain, develop, design, construct, upgrade, modernize, finance and manage the Chhatrapati Shivaji International Airport at Mumbai. We were awarded the MIAL Slum Rehabilitation Project in October 2007 as part of the Mumbai Airport expansion and modernization plan. This project has been categorized as a vital public project by the Government of Maharashtra. From the implementation of the MIAL Slum Rehabilitation Project, we expect to generate TDRs of approximately 44.83 million square feet in the aggregate. Under the slum rehabilitation agreement dated October 15, 2007 with MIAL, we are required to remove encroachments, hutments and unauthorized structures from 276 acres of land leased to the Mumbai International Airport Limited by the Airport Authority of India (“AAI”) and which has been encroached upon by slum dwellers, to rehabilitate certain eligible slum dwellers on land purchased by us at other locations in the MMR and to evict and remove the other slum dwellers from the encroached upon land. We are also required to procure all necessary approvals and certificates from regulatory authorities with respect to the slum rehabilitation project. In addition to constructing buildings to house the rehabilitated slum dwellers on land purchased by us, we are responsible for developing and constructing temporary transit camps for use by the slum dwellers until they are rehabilitated. Upon completion of the rehabilitation buildings, we are required to form cooperative housing societies of the rehabilitated slum dwellers and cause the transfer the land on which such buildings are built to the societies. In addition, it is our responsibility to repair
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and maintain the rehabilitation buildings for a period of 12 months from the handing over and possession of the respective building. All costs and expenses in connection with such obligations are required to be borne by us. Out of the 276 acres which we are required to clear, upon the rehabilitation of a minimum of 28,000 hutments in order to complete Phase I, we shall be awarded development rights over approximately 65.2 acres of land, subject to certain specified end-use limitations of such land. Our interest over such land is limited to a sub-lease that expires one day before the date of the expiry or termination of the MIAL AAI OMDA between MIAL and AAI. If not extended for an additional period of 30 years, such date is expected to be April 2036. For each of the locations that we rehabilitate the slum dwellers, we shall be required to purchase land and transfer such land parcels to the SRA and submit a scheme for redevelopment. The SRA shall issue us a LOI setting out the redevelopment scheme in respect of these land parcels containing the constructions specifications and various benefits that can be realized by us from the redevelopment. The MIAL Slum Rehabilitation Project has been declared as a Vital Public Project by Government of Maharashtra and being carried out under the DCR Scheme, and under such scheme, we will have the following additional benefits:
♦ In respect of the locations where the slum dwellers are
rehabilitated, we shall be awarded a FSI of 4. ♦ We shall be granted TDRs for an equal area of the entire land
transferred to the SRA in respect of the each of the locations where we rehabilitate the slum dwellers; and
♦ We shall be granted TDRs for an area which is 1.33 times the total area developed at each of the locations where the slum dwellers are rehabilitated.
The MIAL Slum Rehabilitation Project is required to be carried out in a number of phases over a period of four years commencing October 15, 2007. The agreement provides specific dates of completion for clearing specified parcels of land. We have purchased the land required for the Phase I of the MIAL Slum Project in Kurla (East and West) and the construction of rehabilitation buildings is underway. This agreement provides that we are also required to comply with the MIAL AAI OMDA and certain related agreements of MIAL. This agreement also contains customary representations and warranties, indemnities, events of defaults and their consequences, liquidated damages, termination including as a result of delay, force majeure and other provisions. Proposed Expansion Opportunities Leisure: We intend to focus on the hospitality segment in the future. Special Economic Zones We are considering developing Special Economic Zones. The legislation providing for SEZs was adopted in 2005 and has attracted strong interest from
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a variety of business sectors, due to the tax and infrastructure benefits of operating within a SEZ, including significant tax holidays with respect to corporate income tax. We have received in-principle approval from the Ministry of Commerce & Industry to develop, operate and maintain a “multi-product sector” SEZ. We have not yet determined when we would proceed with SEZ projects or whether we would execute such a project on our own or in collaboration with others. Our Project Execution Process The following flowchart summarizes the general process we undertake from commencement to completion of a project: Although this flowchart reflects the general sequence of project execution, a number of functions overlap in the process to ensure seamless implementation of the development and construction of a project. Depending on its size, it generally takes from nine to thirty months to complete a project, from identification of a site to finishing construction and unit sales. Identification of Lands We have a team dedicated to continuously seeking developable lands in desirable locations on which to construct suitable projects. This team uses internally-generated demographic data, third party reports, discussions with regulatory authorities and customer feedback to identify potential sites both in the MMR and, more recently, other cities in India. Once potential lands are identified, we undertake site visits and extensive feasibility studies. After conducting our analysis, we consider the type of project that would be most suited for development on the land being evaluated. Our senior management team then makes a final decision with respect to the financial feasibility and scope of each project to be undertaken by us on the proposed site. Acquisition of Land or Development Rights After a decision has been made to proceed with an acquisition of land or land development rights, we take the necessary steps to acquire the land. We generally do not finalize the acquisition until all required approvals and permits have been received from the relevant regulatory authorities and we have completed our due diligence on the land. Whenever possible, we obtain legal opinions that confirm our title to the land or development rights purchased from third parties.
Sales and Marketing/ Project Completion
Identify Lands & Perform Feasibility Studies
Planning/ Design; Obtain Permits and Approvals
Project Planning & Execution
Acquisition of Land or Development Rights
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Project Planning/Design and Approval Process Once we have identified a suitable site, decided upon the type of project to be developed with respect to that site and completed a preliminary agreement for the acquisition of land, our development team begins the process of designing the project and submitting the project plans for regulatory approval. We must seek and obtain approval for our building plans as well as our plans relating to the project site's infrastructure facilities, such as power and water. Upon such approval, we receive a commencement certificate, which allows us to commence construction on the land in accordance with our proposals. When construction is complete, we receive an occupancy certificate from the relevant regulatory body and finally, if the projects have been completed in accordance with applicable law, a building completion certificate. Project Planning and Execution Our planning and development team models the procurement process in conjunction with our finance and accounting teams in order to more precisely budget for the project and assist our sales and marketing team with pricing of the project. Materials procurement contracts are entered into directly between us and the suppliers, while large scale equipment such as bulldozers are provided by third party building contractors. We use multiple suppliers and contractors and we believe we would have no difficulty replacing a particular supplier or contractor if necessary. We typically staff each of our projects with an on-site project manager, a quality control officer and an inventory control officer. Our personnel retain all on-site project management and oversight roles, while construction labour is provided by a building contractor. Joint Developments and Partnerships From time to time, we enter into joint development agreements or partnerships with third parties in order to develop a project. Often, the other parties are land owners that grant us land development rights in exchange for sharing the completed project with us. We retain control over managing the execution of the projects to which our joint development agreements relate. We are currently party to two joint development arrangements. We have entered into an agreement to develop a project in Kukatpally II, Hyderabad with Anish Builders and My Palace Mutually Aided Co-operative Housing Society. Our share in the revenue from this project is 75.0%. We have also entered into an agreement to develop a project in Pune with Pentagon Developers. Our share in the revenue from this project is 62.0%. We also are a member of three partnership firms that are in the business of real estate development. Details of these partnerships and our profit sharing ratio in such firms are summarized in the following table:
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Name
Our Profit Sharing Ratio
Other Partners Partners’ Profit Sharing Ratio
Fine Developers 90.0 Sapphire Land Developers Private Limited
10.0
R.K. Wadhawan 20.0 Prithvi Realtors and Hotel Private Limited
Sunpreet Singh 5.0 Sales and Marketing and Completion Sales and Marketing We have a marketing and sales team consisting of more than 50 professionals. Members of this team are involved from project commencement, assisting with the identification of lands to be acquired and analyzing the economic viability of a project. We believe this involvement from the beginning of the process ensures that we properly identify appropriate types of development opportunities and tailor our pricing to fit the relevant markets. Different projects are targeted at different consumer sectors and we are able to earn better margins on higher end projects. In new and rapidly evolving real estate markets, this ability to analyze project economics is critical to our business. In the past, we have consistently followed our “build and sell” business model of developing land and selling it on to customers. Under this model we develop land and sell it to the customers as against leasing the properties to them. While we anticipate continuing our operations in this manner we will continue to evaluate other options, such as retaining ownership and leasing out property, based on prevailing market conditions. We begin making sales upon commencement of a project and usually enter into agreements to sell a substantial portion of each project prior to completion. Sales generally are conducted by our sales staff on the project site and through our head office, as well as through third party brokers. Various leading financial institutions and banks regularly provide finance to our clients for their residential units. Project Completion We transfer title to the customer upon the closing of sale of the project, which takes place after completion of the project and our receipt of a building completion certificate from the relevant regulatory authorities. After all of the
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properties within a project are turned over to owners, the day-to-day management and control of the project is relinquished to the management board or society of the owners. Competition The real estate development industry in India, while fragmented, is highly competitive. We face competition in the Mumbai Metropolitan Region (where currently our business activities are primarily focused) from various regional companies, including Hiranandani Developers, the Raheja Group, Kalpataru Developers, the Marathon Group, the Lokhandwala Group and Akruti Nirman Limited. Given our strategy of expanding our business activities to include real estate development in other regions of India, we may experience competition in the future from potential competitors with significant operations elsewhere in India, including the DLF Group, the Ansal Group, Parsvanath Developers and Unitech Limited. Certain of these Indian real estate development firms are also our joint venture partners in connection with specific projects, and may compete with us more directly in the future. We may also in the future face competition from large foreign real estate developers now operating in, or who enter, the Indian market. Competition is considered as part of the feasibility studies we undertake when considering whether to acquire lands for development or to proceed with further development of land we already own. In particular, we evaluate other projects in proximity to each potential site in order to determine the level of competition we would face from similar projects if we proceeded at that location. To the extent that we compete with other large developers, we believe that our reputation for quality construction is a critical competitive advantage that we need to maintain and develop. Health and Safety We are committed to complying with all relevant health and safety regulations applicable to our Company. We strive to minimize the risks inherent in the construction process by implementing standard safety precautions and eliminating hazards to people and the environment, to the extent possible. Our on-site project managers and engineers are responsible for ensuring that each project site meets required safety standards. Information Technology We use information technology systems to enhance our performance and efficiency. In particular, approximately two years ago we implemented a customised enterprise resource package software system provided by a third party vendor, which permits us to integrate systems among our departments, including engineering and accounting. This system has allowed us to streamline our processes while enhancing our monitoring and control functions. By integrating isolated systems, for example, we have been able to streamline the interface between procurement and accounting, so that inventory and billing
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are more quickly matched under systems which also facilitate better audit controls. Intellectual Property We have applied to register the “HDIL” brand name with the byline “Creating Value”. Employees As of September 30, 2009, we employed 743 people; we anticipate that our number of employees will continue to grow commensurate with the expansion of our business. In order to build our projects, we rely heavily upon contract construction workers supplied by third party contractors and who are not our employees nor included in our employee headcount. These workers operate under supervision by our employees, in particular our on-site project managers and engineers. For the year ended September 30, 2009, we had on average between 5,000 and 7,000 contract workers active on our projects. These workers’ wages are paid by the third party contractors who engage them and we provide insurance coverage for these workers as part of insurance on our construction sites. We believe our relations with our employees are good and we have never experienced any labour unrest or conflicts. Insurance Our operations are subject to hazards inherent in the construction and real estate industry, including accidents, collapsing structures, erosion, exposure to dangerous materials, such as certain solvents and risks related to machinery noise and manual handling activities. We carry general insurance for our head office and for certain of our projects under development. These policies are with the New India Assurance Company. The insurance coverage we carry varies from project to project, but generally includes, among other things, losses related to earthquake, fire, acts of terrorism, flood, accident and general liability insurance. Under our “Contractors All Risk” liability policy, we are insured against legal liability to pay damages for third party civil claims arising from bodily injury or property damage caused by an accident during project construction. We use an outside broker to secure our insurance policies and believe that our coverage is adequate. We have not made any major claims under our insurance policies.
Registered Office
Our registered office is located at Dheeraj Arma, 9P
thP Floor, Anant Kanekar Marg,
Station Road, Bandra (E), Mumbai 400 051. This building is a nine story office tower near Bandra train station, close to the Bandra Kurla Complex. We own the building, and lease six floors that we do not occupy ourselves to third parties.
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5. HISTORY AND CORPORATE STRUCTURE OF THE COMPANY
HISTORY AND MAJOR EVENTS We are part of the Wadhawan Group, which was founded by the late Mr. Dewan Kuldip Singh Wadhawan in 1973. The Wadhawan Group was founded for the purpose of land aggregation, land management, land development and construction of residential, commercial and retail units, townships and infrastructure. Initially, the Wadhawan Group was also involved in the marketing of residential, commercial and industrial plots. In 1973 the first residential building named “Kapil Kunj” at Vasai was completed by the Wadhawan Group. In 1978, all the projects of the Wadhawan Group came under the brand name of “Dheeraj.” Our Company was incorporated on July 25, 1996 as Housing Development and Improvement India Private Limited, with the objective of developing large-scale real estate projects including residential, commercial and retail projects such as shopping malls, multiplexes and integrated townships and partnering in development of public infrastructure. Since our incorporation in 1996, we have developed and constructed 34 projects covering approximately 34.04 million square feet of saleable area, KEY EVENTS AND MILESTONES Year Month Key Events, Milestones and Achievements 2001 January “The Mall” project in Malad, Mumbai built by our subsidiary,
Privilege Power and Infrastructure Private Limited (earlier known as Dewan Investments Private Limited)
2004 March Purchase of 30 acres of land from Automobile Products India Limited on LBS Marg, Near Bhandup Station, Mumbai for our “Dreams” Project.
2005 January 548 units in “Dreams” project on LBS Marg, Near Bhandup Station, Mumbai sold on the first day of opening of the booking
2005 March Completion of “Dheeraj Arma” comprising commercial premises in Bandra (East), Mumbai
2005 May Sale of FSI measuring 0.5 million sq. feet at Bandra Kurla Complex, Mumbai to Wadhwa Constructions.
2005 May Sale of FSI measuring 0.7 million sq. feet at Mulund, Mumbai to Nirmal Lifestyles.
2005 August Sale of FSI measuring 10.7 million sq. feet at Virar to Evershine Developers.
2006 May MoU with the Adani Group for the sale of rights in land measuring 1.7 million sq. feet at Bandra Kurla Complex, Mumbai
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Year Month Key Events, Milestones and Achievements 2006 November Receipt of in-principle approval by us from the Government
of India for establishing a Special Economic Zone for the multi service sector at Vasai, District Thane, Maharashtra
2007 October Awarded MAIL Rehabilitation Project on October 2007 as part of the Mumbai Airport expansion and modernization plan. This project has been categorized as a vital public project by the Government of Maharashtra.
OUR MAIN OBJECTS Our main objects as contained in our Memorandum of Association are: (a) To carry on the business of constructions, estate brokers, agents and
dealers in lands, flats, marionettes, dwelling house, shops, offices, industrial estates, lessees of lands, flats and other immovable properties and for these purposes to acquire purchase, take on lease or otherwise acquire and hold any lands or building of any tenure or description wherever situated, or rights or interests therein or connected therewith, to prepare buildings sites, and to construct, reconstruct, pull down renovate, develop, alter, improve, decorate and furnish and maintain flats, marionettes, dwelling, industrial estates, godowns works and conveniences, and sell the same on ownership basis, installment basis or lease basis and rental basis and transfer such buildings to cooperative societies, or associations of persons or individual as the case may be, to lay out roads and pleasure gardens and recreation grounds, plants, drains or otherwise improve the land or any part thereof.
(b) To carry on business of developing, operating, maintaining infrastructure
facilities, and to undertake development, maintenance, operating special economic zones and other industrial/IT parks, roads including toll roads, bridges, dams, rail system, highway projects, real estate development including constructions of housing, commercial, industrial buildings and sale/lease of units thereon, water supply projects including desalination projects, water treatment system, sanitation and sewerage system, solid waste management system, ports, airports, inland water way, inland ports, telecommunication services including cellular and to establish, operate, maintain power projects, generation, distribution and transmission of power.
(c) To render technical, commercial, management or any other type of
consultancy services, provide and render partial or total guidance, complete services to persons and institutions working or engaged in any activity relating to the objects of the company and to prepare techno-economic feasibility and project reports and to take up projects on turn-key basis.
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AMENDMENTS TO THE MEMORANDUM OF ASSOCIATION Since our incorporation, the following changes have been made to our Memorandum of Association:
Date Particulars April 23, 1998
The authorized share capital of the Company was increased from Rs. 2,500,000 to Rs. 20,000,000
April 16, 2003
The authorized share capital of the Company was increased from Rs. 20,000,000 to Rs. 100,000,000
January 12, 2005
Changes of the name of the Company pursuant to change in the status of the company from private to public. The approval was received from the Assistant Registrar of Companies for the change of name on February 3, 2005.
March 28, 2005
The authorized share capital of the Company was increased from Rs. 100,000,000 to Rs. 1,000,000,000
March 20, 2006
The authorized share capital of the Company was increased from Rs. 1,000,000,000 to Rs. 2,500,000,000
August 7, 2006
Changes in the object clause of the Company pursuant to Section 18(1) of the Companies Act 1956 by inserting clause 1 (b) & 1(c) which read as follows: 1 (b). To carry on business of developing, operating, maintaining infrastructure facilities, and to undertake development, maintenance, operating special economic zones and other industrial/IT parks, roads including toll roads, bridges, dams, rail system, highway projects, real estate development including constructions of housing, commercial, industrial buildings and sale/lease of units thereon, water supply projects including desalination projects, water treatment system, sanitation and sewerage system, solid waste management system, ports, airports, inland water way, inland ports, telecommunication services including cellular and to establish, operate, maintain power projects , generation, distribution and transmission of power. 1 (c). To render technical, commercial, management or any other type of consultancy services, provide and render partial or total guidance, complete services to persons and institutions working or engaged in any activity relating to the objects of the company and to prepare techno-economic feasibility and project reports and to take up projects on turn-key basis and the existing clause 1 renumbered as 1(a). The approval was received from the RoC, Maharashtra, Mumbai for the change of object clause on 29th August 2006.
August 7, 2006
Change of the name of our Company from Housing Development and Improvement India Limited to Housing Development and Infrastructure Limited. The approval was received from RoC,
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Date Particulars Maharashtra, Mumbai for the change of name on 29th August 2006.
February 29, 2008
The authorized share capital of the Company was increased from Rs. 2,500,000,000 to Rs 5,000,000,000.
July 01, 2008.
To carry on the business of asset management and in trusteeship of mutual funds, offshore funds, pension funds, provident funds, venture capital funds, insurance funds, portfolio management services/schemes, collective or private investment scheme/ plans, Real Estate Investment Trust, employee welfare or compensation schemes/ plans or any other plan including sponsoring any such schemes, fund(s) or a company or trust owning or managing real estate fund. Inserted clause 21A in the objects incidental or ancillary to the attainment of main object. The confirmation for the change in object received from the ROC, vide its certificate dated 18P
thP July, 2008.
CHANGES IN THE REGISTERED OFFICE
Date Particulars June 16, 1997
Our registered office was shifted from Karim Mahal, St. Alexious Road, (Off. Perry Road), Bandra (West), Mumbai 400 050 to Ground Floor, Dheeraj Apartment, P P Dias Compound, Natwar Nagar, Road No. 1, Jogeshwari (East), Mumbai 400 060
March 27, 2006
Our registered office was shifted from Ground Floor, Dheeraj Apartment, P P Dias Compound, Natwar Nagar, Road No. 1, Jogeshwari (East), Mumbai 400 060 to 9-01, Dheeraj Arma, Anant Kanekar Marg, Bandra (E), Mumbai 400 051 with effect from April 1, 2006.
OUR SUBSIDIARIES 1. Privilege Power and Infrastructure Private Limited Privilege Power and Infrastructure Private Limited (“PPIPL”) was incorporated under the Companies Act, 1956 as Dewan Investments Private Limited on September 4, 1984. Its name was subsequently changed to Privilege Power and Infrastructure Private Limited on June 7, 2006. The registered office of the company is located at 3P
(E), Mumbai 400 051. PPIPL became a subsidiary of our Company, with effect from October 1, 2005 when 206,520 equity shares aggregating to 99.5% of the paid up capital of
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PPIPL was acquired by our Company from the Promoters, entities forming part of the Promoter Group and others. PPIPL is engaged in the business of developing, operating and maintaining infrastructure facilities and to provide technical, management and other consultancy services. • Shareholding Pattern The shareholding pattern as of September 30, 2009 is as follows:
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
M/s Housing Development and Infrastructure Ltd. 206,520 99.52
Mr. Rakesh Kumar Wadhawan (as a nominee of HDIL) 1,000 0.48
Total
207,520
100.00
• Board of Directors
The Board of Directors of PPIPL. 1. Mr. Rakesh Kumar Wadhawan; 2. Mr. Sarang Wadhawan; 3. Mr. Ashok Kumar Gupta
Financial Information (Figures in Million except per share data)
Year ended March 31, 2009 Particulars 2009 2008 2007 Paid up Equity Share Capital 20.75 20.75 20.75 Reserve and surplus (excluding revaluation reserves) 103.50 100.94 104.57
Sales and other income 51.78 6.60 82.80 Profit/ (loss) after tax 4.24 0.39 61.89 Earning per share (EPS) Rs. 32.23 1.90 298.22 Net assets value (NAV) Rs. 598.72 586.39 603.88 The equity shares of PPIPL are not listed on any stock exchange. Further, PPIPL is not a sick company within the meaning of the SICA and is not under winding up. 2. HDIL Entertainment Private Limited. HDIL Entertainment Private Limited (“HDILEPL”) was incorporated under the Companies Act, 1956 on August 9, 2007 having its corporate office at
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The registered office of the company is located at 9-14, Dheeraj Arma, Anant Kanekar Marg, Bandra (E), Mumbai 400 051. HDILEPL is engaged in the business of operating Multiplexes, Theatres, Entertainment Centres, Art Galleries, Exhibition Centre, Event Management family Entertainment Centres, Bowling Alley, Pool Parlours, Cyber Cafes, Satellite Beaming and Television and Radio Channels. maintaining infrastructure facilities and to provide technical, management and other consultancy services. • Shareholding Pattern The shareholding pattern as on September 30,2009:
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Housing Development and Infrastructure Limited 9900 99.00
Mr. Rakesh Kumar Wadhawan (as a nominee of HDIL) 100 1.00
Total 10,000 100.00 Board of Directors:
1. Rakesh Kumar Wadhawan 2. Sarang Wadhawan
Financial Information: (Figures in Million except per share data)
Year ended March 31, Particulars 2009 2008 Paid up Equity Share Capital 0.10 0.10 Reserve and surplus (excluding revaluation reserves) 0.00 0.00
Sales and other income 30.32 3.77 Profit/ (loss) after tax (17.94) (2.96) Earning per share (EPS) Rs. (1864.57) (295.84) Net assets value (NAV) Rs.per share (2,150.41) (356.43)
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3. HDIL Oil & Gas Private Ltd. The Shareholding pattern as on 30P
thP September, 2009
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Housing Development and Infrastructure Limited 5100 51.00
Board of directors: Mr. Rakesh Kumar Wadhawan Mr. Sarang Wadhawan
Financial Information: (Figures in Million except per share data)
Year ended March 31,
Particulars 2009 2008 Paid up Equity Share Capital 0.10 0.10 Reserve and surplus (excluding revaluation reserves) 0.00 0.00
Sales and other income 0.00 0.00 Profit/ (loss) after tax (11.11) (0.00) Earning per share (EPS) Rs. (1,112.76) (0.58) Net assets value (NAV) Rs.per share (1,103.34) 7.20
4. Excel Arcade Private Limited The Shareholding pattern as on 30P
thP September, 2009:
Name of Shareholders
No. of Equity Shares
(face value Rs. 100 each)
Percentage Shareholding
Housing Development and Infrastructure Limited 9900 99.00
Mr. Rakesh Kumar Wadhawan (as a nominee of HDIL) 100 1.00
Total 10,000 100.00
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Board of Directors: Mr. Rakesh Kumar Wadhawan Mr.Sarang Wadhawan Mr.Virendra Vora Financial Information: (Figures in Million except per share data)
Particulars Year ended March 31, 2009 2008 Paid up Equity Share Capital 0.10 0.10 Reserve and surplus (excluding revaluation reserves) 0.00 0.00
Sales and other income 0.00 0.00 Profit/ (loss) after tax (0.04) (0.02) Earning per share (EPS) Rs. (4.86) (2.42) Net assets value (NAV) Rs.per share 2.73 6.09
5. HDIL Leisure Private Ltd. The Shareholding pattern as on 30P
thP September, 2009:
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Housing Development and Infrastructure Limited 9900 99.00
Mr. Rakesh Kumar Wadhawan (as a nominee of HDIL) 100 1.00
Total 10,000 100.00 Board of Directors: Mr.Rakesh Kumar Wadhawan Mr. Sarang Wadhawan Mr. Ashok Kumar Gupta Financial Information: (Figures in Million except per share data)
Particulars Year ended March 31,2009 Paid up Equity Share Capital 0.10 Reserve and surplus (excluding revaluation reserves) 0.00
Sales and other income 0.00
Profit/ (loss) after tax (10.17)
Earning per share (EPS) Rs. (1,017.11) Net assets value (NAV) Rs.per share (1,007.11)
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6. Blue Star Realtors Pvt. Ltd. The Shareholding pattern as on 30P
thP September, 2009:
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Housing Development and Infrastructure Limited 3,399,994 100.00
Mr. Rakesh Kumar Wadhawan - for HDIL 1 0.00
Mr. Sarang Wadhwan – for HDIL 1 0.00 Mrs.Malti Wadhawan – for HDIL 1 0.00 Mrs.Aruna Wadhawan – for HDIL 1 0.00 Mr Waryam Singh – for HDIL 1 0.00 Mr Ashok Kumar Gupta – for HDIL 1 0.00
Total 3,400,000 100.00 Board of Directors: Mr.Hetin Sakhuja Mr. Sarang Wadhawan Mr. Ashok Kumar Gupta Financial Information: (Figures in Million except per share data)
Year ended March 31, Particulars 2009 2008 Paid up Equity Share Capital 34.00 34.00 Reserve and surplus (excluding revaluation reserves) 9.24 8.51
Sales and other income 11.28 0.16
Profit/ (loss) after tax 1.13 0.00
Earning per share (EPS) Rs. 0.21 (0.00) Net assets value (NAV) Rs.per share 12.72 12.38
7. Ravijot Finance & Leasing Private Limited The Shareholding pattern as on 30P
thP September, 2009:
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Jayesh Tokershi Shah 665 6.65 Ketan Tokershi Shah 665 6.65 Geeta Rasiklal Shah 665 6.65 Tokershi Shivji Shah 665 6.65
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Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Sonal Jayesh Shah 665 6.65 Usha Ketan Shah 665 6.65 Tokershi S Shah (HUF) 10 0.10 Housing Development and Infrastructure Ltd. 6,000 60.00
Total 10,000 100.00
Board of Directors: Mr. Rakesh Kumar Wadhawan Mr.Sarang Wadhawan Mr.Waryam Singh Mr. Jayesh Shah Mr. Ketan Shah Mrs. Geeta Shah Financial Information: (Figures in Million except per share data)
Year ended March 31, Particulars 2009 2008 Paid up Equity Share Capital 0.10 0.10 Reserve and surplus (excluding revaluation reserves) 0.00 0.00
Sales and other income 0.00 0.00 Profit/ (loss) after tax (0.02) 0.00 Earning per share (EPS) Rs. (2.06) 0.00 Net assets value (NAV) Rs.per share 7.94 10.00
8. Mazda Estate Private Limited: The Shareholding pattern as on 30P
thP September, 2009:
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Housing Development and Infrastructure Limited 13,999 99.00
Mr. Rakesh Kumar Wadhawan (as a nominee of HDIL) 1 0.01
Total 14,000 100.00
Board of Directors: Mr. Rakesh Kumar Wadhawan Mr.Sarang Wadhawan
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Financial Information: (Figures in Million except per share data)
Year ended March 31, Particulars 2009 2008 Paid up Equity Share Capital 0.14 0.14 Reserve and surplus (excluding revaluation reserves) 0.00 0.00
Sales and other income 0.00 0.00 Profit/ (loss) after tax (0.03) (0.02) Earning per share (EPS) Rs. (2.23) (2.51) Net assets value (NAV) Rs.per share 2.78 5.02
9. Guruashish Construction Private Ltd.
The Shareholding pattern as on 30P
thP September, 2009:
Name of Shareholders
No. of Equity Shares (face value Rs. 100 each)
Percentage Shareholding
Housing Development and Infrastructure Limited 750,000 75.00
Mr. Pravin Raut 250,000 25.00 Total 1,000,000 100.00
Board of Directors: Mr. Rakesh Kumar Wadhawan Mr.Waryam Singh
Mr. Pravin Raut. Financial Information: (Figures in Million except per share data)
Year ended March 31, Particulars 2009 2008 Paid up Equity Share Capital 50.00 50.00 Reserve and surplus (excluding revaluation reserves) 0.00 0.00
Sales and other income 0.00 0.00 Profit/ (loss) after tax (0.02) (0.01) Earning per share (EPS) Rs. (1.64) (0.03) Net assets value (NAV) Rs.per share 98.22 99.86
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JOINT VENTURE/PARTNERSHIPS OF OUR COMPANY 1. D.S Corporation (“DSC”)
The deed of partnership of DSC was made on August 1, 2005. Its principal office is located at Dheeraj Apartments, P.P. Dias Compound, Natwar Nagar, Road No. 1, Jogeshwari(E), Mumbai 400 060, Maharashtra. DSC carries on business as builders and real estate contractors.
• Profit and Loss Sharing Ratio (as of September 30, 2009)
Name of Partners Profit & Loss Sharing Ratio (%) HDIL 45.00 Prithvi Realtors and Hotel Private Limited 20.00 Rakesh Kumar Wadhawan 20.00 Sarang Wadhawan 5.00 Waryam Singh 5.00 Sunpreet Singh 5.00
Total 100.00 The present partners of DSC are HDIL, Prithvi Realtors and Hotel Private Limited, Rakesh Kumar Wadhawan, Sarang Wadhawan, Waryam Singh and Sunpreet Singh.
2. Fine Developers:
• Profit and Loss Sharing Ratio (as of September 30, 2009) Name of Partners Profit & Loss Sharing Ratio (%) HDIL 90.00 Sapphire Land developers Pvt. Ltd 10.00 Total 100.00
3. Mahul Construction Corporation:
The deed of partnership of Mahul Construction (MC) was made on November 9, 2005. Its principal office is located at Dheeraj Apartments, P.P.Dias Compound, Natwar Nagar, Road No. 1, Jogeshwari (E), Mumbai 400 060, Maharastra. MC carries on the business of builders and real estate dealers. • Profit and Loss Sharing Ratio (as of September 30, 2009)
Name of Partners Profit & Loss Sharing Ratio (%) HDIL 85.00 Sarang Wadhawan 5.00 Waryam Singh 5.00 Sunpreet Singh 5.00 Total 100.00
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6. MANAGEMENT OF THE COMPANY 6.1 Board of Directors of the Company As on 30 P
thP September 2009
The following are the details of the Company’s Directors: Name, Father's Name, Address, Designation, Occupation and Term Nationality Age Other Directorships Mr. Rakesh Kumar Wadhawan Chairman S/o Late Mr. Kuldip Singh Wadhawan Address: Wadhawan House, Plot No.32/A, Union Park, road No. , Near Shatranj Hotel, Bandra (West), Mumbai 400 050. Executive Chariman Business Term: Upto 31P
stP March, 2013.
Indian 57 Privilege Power and Infrastructure Private Limited Wadhawan Livestocks Private Limited. Prithvi Realtors and Hotels Private Limited Dinshaw Trapinex Builders Private Limited Privilege Industries Limited Dewan Realtors Private Limited Libra Realtors Private Limited Heritage Housing Development India Private Ltd. Privilege Airways Private Limited Libra Hotels Private Limited Guruashish Construction Private Limited HDIL Entertainment Pvt. Ltd. GFM (India) Infrastructure Ltd. UM Architechtures and Contractors Ltd. HDIL Financial Services Private Limited. HDIL Energy Private Ltd. HDIL Infra Projects Private Ltd. HDIL power Private Ltd. HDIL Oil & Gas Private Ltd. Ravijyot Finance and Leasing Private Ltd. HDIL leisure Private Ltd. HDIL Trustee Company Private Ltd. Mazda Estate Private Ltd. Excel Arcade Private Ltd. Live India Television Networks Private Ltd.
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Name, Father's Name, Address, Designation, Occupation and Term Nationality Age Other Directorships Mr. Sarang Wadhawan Managing Director S/o Mr. Rakesh Kumar Wadhawan Address: Wadhawan House, Plot No.32/A, Union Park, road No. , Near Shatranj Hotel, Bandra (West), Mumbai 400 050. Managing Director Business Term: Up to March 31, 2011
Indian 33 Privilege Power And Infrastructure Private Limited Dinshaw Trapinex Builders Private Limited Privilege Industries Limited Prithvi Realtors and Hotels Private Limited Privilege Airways Private Limited Privilege Distilleries Private Limited Dinshaw Trapinex Limited Dinshaw Trapinex Commercial Broker (L.L.C) HDIL Entertainment Pvt. Ltd. KSD Entertainment Private limited. UM Architechtures and Contractors Ltd. HDIL Financial Services Private Limited. HDIL Energy Private Ltd. HDIL Infra Projects Private Ltd. HDIL power Private Ltd. HDIL Oil & Gas Private Ltd. Mazda Estate Private Ltd. Ravijyot Finance and Leasing Private Ltd. HDIL leisure Private Ltd. HDIL Investments Advisors Private Limited. Excel Arcade Private Ltd. Juhu Investments Private Limited. Suansa Hospitality Services Private Limited. Blue Star Realtors Private Ltd.
Mr. Waryam Singh S/o Mr. Kartar Singh Address: 1401, Stellar Tower, Lokhandwala Complex, Andheri (W), Mumbai 400053 Non Executive Non Independent Director
Indian 58 Prithvi Realtors & Hotels Private Limited. Heritage Housing Development India Private Limited Punjab and Maharashtra Co-operative Bank Limited Guruashish Construction Private Limited
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Name, Father's Name, Address, Designation, Occupation and Term Nationality Age Other Directorships Business (Former Chairman Punjab and Maharashtra Cooperative Bank Limited) Term: Liable to retire by rotation
Wadhawan Livestock Private Limited. Mack Star Marketing Private Ltd. Ravijyot Finance and Leasing Private Ltd. HDIL leisure Private Ltd.
Mr. Ashok Kumar Gupta S/o Mr. Jagdishrai Aggarwal Address: 401, Dheeraj Dhan, St. Alexious Road, Bandra (W), Mumbai 400050 Non Executive Director Professional Term: Liable to retire by rotation
Indian 60 Blue Star Realtors Private Limited Prithvi Realtors & Hotels Private Limited Midcity Bhoomi Developers Private Limited Wadhawan Livestock Private Limited. Privilege Power And Infrastructure Private Limited Smita Infrastructure Private Ltd. Blue Nile Credit Assets Private Ltd. Derby Developers Private Ltd. HDIL Trustee Company Pvt. Ltd. Somerset Construction Private Ltd.
Mr. Satya Pal Talwar S/o Mr. Tek Chand Talwar Address: 163, Beach Tower, P. Baloo Marg, Prabhadevi, Mumbai 400 025 Independent Director Former Deputy Governor, Reserve Bank of India Term: Liable to retire by rotation
Indian 72 Reliance Life Insurance Co. Limited Reliance General Insurance Co. Limited. Crompton Greaves Limited Videocon Industries Limited Reliance Communications Limited Reliance Communications Infrastructure Limited. Reliance Infratel Ltd. A B Hotels Ltd. Kalpatru Power transmission Ltd. Asian Oilfield Services Ltd. Reliance securities Ltd. Uttam Galva Steels Ltd. GTL Infrastructure Ltd. HDIL Investment Advisor Private Ltd.
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Name, Father's Name, Address, Designation, Occupation and Term Nationality Age Other Directorships Mr. Shyam Sunder Dawra S/o Mr. Bhoj Raj Dawra Address: D-5/13, Second Floor, Vasant Vihar, New Delhi 110 057 Independent Director Retired IAS Officer Term: Liable to retire by rotation
Indian 65 Steel Strip Infrastructure ltd. SAB Industries Ltd.
Mr. Lalit Mohan Mehta S/o Mr. Sadanand Mehta Address: 1551 (G.F.), Sector-38–B, Chandigarh 160 014 Independent Director Retired IAS Officer Term: Liable to retire by rotation
Indian 63
Mr. Sunil Behari Mathur S/o Mr. Kailash Behari Mathur Address: F-60, Malhotra Building II Floor, Connaught Place, New Delhi 110 017 Independent Director Former Chairman, Life Insurance Corporation of India Term: Liable to retire by rotation
Indian 64 ITC Limited Infrastructure Leasing & Finance Company Limited. National Stock Exchange Limited National Collateral Management Services Limited Munich Re India Services Private Limited EMD Technologies India Private Limited IDFC Trustee Co. Limited AIG Trustee Company (India) Private Limited Universal Sompo General Insurance Company Limited Orbis Financial Corporation Ltd. H o e c Limited. Havells India Limited. DCM Sriram Industries Ltd.
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Name, Father's Name, Address, Designation, Occupation and Term Nationality Age Other Directorships
JM Financial Asset Reconstruction Company Private Ltd. Ultra – tech Cement Ltd.
Mr. Surinder Kumar Soni S/o Mr. Achint Ram Soni Address: D-15, Enclave-II, Greater Kailash- II, New Delhi 110048 Independent Director Former Chairman, Oriental Bank of Commerce Term: Liable to retire by rotation
Indian 70 PNB Gilts ASP Research Service Private Limited
Mr Ramesh Chander Kapoor S-384, Panchasheel Park, New Delhi 110017 Independent Director Former chairman and managing director of United Bank of India and executive director of Oriental Bank of Commerce. Term: Liable to retire by rotation
Indian 73
Mr. Raj Kumar Aggarwal 3072/41, Gola Market, Near Golcha Cinema, Darya Ganj, New Delhi 100 002 Independent Director Term: Liable to retire by rotation
Indian 52 Board of BOB Capital Market Limited, a subsidiary of Bank of Baroda.
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6.2 Borrowing powers of the Company Borrowing Powers of the Directors in our Company: Our Articles, subject to the provisions of the Act authorise our Board, to raise or borrow or secure the payment of any sum or sums of money for the purposes of the Company. Our Members, have pursuant to a resolution passed on July 1, 2008 authorised our Board to borrow monies not exceeding Rs. 100,000 million (Rs. Hundred thousand million only) at any time. 6.3 Compensation of the Company’s Directors [ Name of Directors
Contract/Appointment Letter/Resolution
Details of Remuneration
Term
Shri Rakesh Kumar Wadhawan
Resolution of the Board of Directors dated 24P
thP January
2008 and resolution of the shareholders of our Company dated 29P
thP February 2008.
With effect from 1P
stP
April 2008. Remuneration: Salary and allowance p.a 60 mn, Monetary Value of Perquisites p.a. Rs. 60 mn.
Appointed as wholetime director for a term of 5 years on 1P
stP April 2008
Remuneration: Salary and allowance and perquisites p.a Rs.120 mn. He does not receive any other perquisites or benefits.
Shri Sarang Wadhawan
Resolution of the Board of Directors dated 24th January 2008 and resolution of the shareholders of our Company dated 29th February 2008.
With effect from 1st January 2008. Remuneration: Salary and allowance p.a 30 mn, Monetary Value of Perquisites p.a. Rs. 30 mn.
Appointed as managing director for a term of 5 m years on 1st January 2008. persuant to resolution passed by the way of Postal Ballot on 29th February 2008. Remuneration: Salary and allowance and perquisites p.a Rs.60 mn. He does not receive any other perquisites or benefits.
Shri Waryam Singh
Resolution of the Board of Directors dated April 27P
thP 2006
and resolution of the shareholders of our Company dated 12P
thP July 2006.
Sitting fees and Commission
N.A
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Shri Ashok Kumar Gupta
Resolution of the Board of Directors dated 27 P
thP April 2006
and resolution of the shareholders of our Company dated 12P
thP July 2006
Sitting fees and Commission
N.A
Shri Satyapal Talwar
Resolution of the Board of Directors dated 14P
thP June 2006
and resolution of the shareholders of our Company dated 12P
thP July 2006
Sitting fees and Commission
N.A
Shri Sunil Behari Mathur
Resolution of the Board of Directors dated 14P
thP June 2006
and resolution of the shareholders of our Company dated 12P
thP July 2006
Sitting fees and Commission
N.A
Shri Shyam Sunder Dawra
Resolution of the Board of Directors dated14P
thP June 2006
and resolution of the shareholders of our Company dated 12P
thP July 2006
Sitting fees and Commission
N.A
Shri Lalit
Mohan
Mehta
Resolution of the Board of Directors dated 14P
thP June 2006
and resolution of the shareholders of our Company dated 12P
thP July 2006
Sitting fees and Commission
N.A
Shri
Surinder
Kumar Soni
Resolution of the Board of Directors dated 15P
thP January
2007 and resolution of the shareholders of our Company dated 26P
thP June 2007
Sitting fees and Commission
N.A
Shri Ramesh
Chander
Kapoor
Resolution of the Board of Directors dated 21st May 2008 and resolution of the shareholders of our Company dated 21P
thP May 2008
Sitting fees and Commission
N.A
Shri Raj
Kumar
Agarwal
Resolution of the Board of Directors dated 21P
stP May 2008
and resolution of the shareholders of our Company dated 21P
thP May 2008
Sitting fees and Commission
N.A
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6.4 Compliance with Corporate Governance requirements The Company has complied with all the mandatory requirements of the Listing Agreements with Stock Exchanges as well as regulations and guidelines of SEBI. Further, there is no penalty/stricture by any statutory authority during the year. Our Company complies with the provisions in respect of corporate governance as stipulated in clause 49 of the Listing Agreements, including in respect of appointment of independent directors in the Board and the constitution of the Audit Committee, Shareholders’ / Investor’s Grievance Committee. 6.5 Shareholding of Directors The Articles of Association do not require the Company’s Directors to hold any qualification shares.
The current shareholdings of the Company’s Directors in the Company are:
Following table sets forth the shareholdings of the Directors in the Company as on September 30, 2009:
Sr. No.
Name of Directors No. of Shares Percentage (in %)
1 Mr. Rakesh Kumar Wadhawan 38,185,714 11.04
2 Mr. Sarang Wadhawan 11,571,427 3.35
3. Mr. Waryam Singh 7,997,400 2.31
4. Mr. Ashok Kumar Gupta 1,005,800 0.29
5. Mr. Raj Kumar Aggarwal 500 0.00
6. Mr. Satyapal Talwar Nil -
7. Mr. Shyam Sunder Dawra Nil -
8. Mr. Lalit Mohan Mehta Nil -
9. Mr. Sunil Behari Mathur Nil -
10. Mr. Surinder Kumar Soni Nil -
11. Mr. Ramesh Chander Kapoor Nil -
6.6 Interest of Directors All of our Directors, including independent Directors, may be deemed to be interested to the extent of fees payable to them for attending meetings of the Board or a committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them under our Articles of Association, and to the extent of remuneration paid to them for services rendered as an officer or employee of our Company. Our Directors, including independent Directors, may also be regarded as interested in the Shares held by them, including the Shares, if any, held by or
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that may be subscribed by and allotted to the companies, firms and trust, in which they are interested as directors, members, partners or trustees. Our Directors may also be regarded as interested to the extent of their interests in entities controlled by us or forming part of our promoter group. All of our Directors may also be deemed to be interested to the extent of any dividend payable to them and other distributions in respect of the said Shares. All of the Directors may be deemed to be interested in the contracts, agreements/ arrangements entered into or to be entered into by the Company with any company in which they hold directorships or any partnership firm in which they are partners as declared in their respective capacity. Except as otherwise stated in this Placement Document and statutory registers maintained by the Company in this regard, the Company has not entered into any contract, agreements, arrangements during the preceding two years from the date this Placement Document in which the Directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements, arrangements which are proposed to be made with them. The Company’s Directors have not taken any loan from the Company. 6.7 Changes in Our Board of Directors during the last three years
Name Date of Change Reason
Mr. Satyapal Talwar June 14,2006 Appointed
Mr. Sunil Behari Mathur June 14, 2006 Appointed
Mr. Shyam Sunder Dawra June 14, 2006 Appointed
Mr. Dheeraj Wadhawan September 8, 2006 Appointed
Mr. Kapil Wadhawan December 1, 2006 Appointed
Mr. Suriender Kumar Soni January 15, 2007 Appointed
Mr. Rakesh Kumar Wadhawan June 26, 2007 Re-Appointed
Mr. Waryam Singh June 26, 2007 Re-Appointed
Mr. Ashok Kumar Gupta June 26, 2007 Re-Appointed
Mr. Ramesh Chander Kapoor May 21, 2008 Appointed
Mr. Raj Kumar Aggarwal May 21, 2008 Appointed
Mr. Satyapal Talwar July 21, 2008 Re-Appointed
Mr. Sunil Behari Mathur July 21, 2008 Re-Appointed
Mr. Shyam Sunder Dawra July 21, 2008 Re-Appointed
Mr. Lalit Mohan Mehta July 21, 2008 Appointed
Mr. Joseph Pattathu May 5, 2009 Resigned
Mr. Dheeraj Wadhawan July 24,2009 Resigned
Mr. Kapil Wadhawan July 24,2009 Resigned
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6.8 Key Managerial Personnel Mr. K. P. Devassy (Chief Financial Officer), age 58 years, has over 27 years of experience in accountancy, audit, payroll and salary administration, income tax, company affairs, labour law and general administration. Mr. Devassy has bachelor of commerce degree from the University of Nagpur.
Mr. Pramod Purandare (Sr. Vice President - Land), age 44 years, has over 26 years of experience in the fields of construction and projects. He is responsible for the construction and execution of various projects. Mr. Purandare has a diploma in architecture from Mumbai University.
Mr. Shashikant S. Shinde (Sr. Vice President – Architect. General Project), age 51 years, has over 26 years of experience in the development of land and big layouts of residential and industrial complexes at Vasai, Virar, Palghar and Mumbai. He is primarily responsible for conceptualizing and finalizing the various building layouts and planning and designing of projects. Mr. Shinde has a bachelor of engineering degree from Mumbai University.
Mr. Balraj Dubey (Sr. Vice President Construction), age 41 years, has over 16 years of experience in the field of civil engineering. He has been associated with the design and development of various diverse projects including shopping malls, residential complex, interiors and exteriors of commercial projects. Mr. Dubey has a B.Sc. Engineering (Civil) degree and a MBA (Marketing and Finance) from Sagar University.
Mr. John D. Sequeira (Vice President – Procurement), age 41 years, has over 23 years of experience in field of purchase, procurement and quality. He has been dealing with the procurement of materials from various vendors & suppliers. He deals with brand management, vendor development and quality assurance. Mr. Sequeira holds a bachelor of commerce degree from Mumbai University.
Mr. Makarand Todankar (Vice President - Banking), age 35 years, has over 11 years of experience in the field of finance and accounting. He joined the Company in April 2006 and has been dealing mainly with financial management. Mr. Todankar has a Bachelor of Engineering (Electronics) and a MMS in finance from Mumbai University.
Mr. Dilip Kumar Sinha (Senior Vice President - Human Resource and Administration), age 58 years has over 30 years of experience in the fields of human resource in manufacturing, shipping/logistics and infrastructure industries. He joined the Company on April 14, 2008 and heads human resource and administration functions. Prior to joining the Company, he worked with Eicher, Escorts, SRF, FAG and the Adani Group. He graduated in Management from XLRI, Jamshedpur.
Mr. Ved Prakash Sharma (Vice President – Maintenance & Recovery), age 66 years, has more than 45 years of experience in the fields of co-operation, personnel management, accounts and audit. He was also the financial officer (administration and audit) of Kurukshetra University, Haryana, for more than
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20 years. He has also been a general manager with the district cooperative super bazar in Punjab and Haryana. Mr. Sharma has a Bachelor of Arts degree and a LLB from the University of Kurukshetra.
Mr. Darshan Majmudar (Vice President - Company Secretary & Legal), age 48 years has over 19 years of experience in finance, taxation and company secretarial practice in the packaging industry. He joined the Company on November 2, 2007. Prior to joining the Company, he has worked with different fields like Steel, Textile etc. He is a qualified company secretary and a chartered accountant.
Mr. Manoj Bhojwani, (Asst. Vice President - System Compliance), age 40 years, has over 18 years of experience in systems control, audit and accounts. He joined the Company in April 2006. He is involved in maintaining internal audit systems within the Company. Mr. Bhojwani has a bachelor of commerce degree from Mumbai University.
Mr.Venkat Iyengar, (Asst. Vice President - TDR), age 38 years, has over 19 years of experience in audit and accounting. He joined the Company in April 2006. He is engaged in maintaining internal audit systems within the Company. Mr. Iyengar has a master’s of commerce degree and a diploma in computer science from the Mumbai University.
Mr. Hari Prakash Pandey, (Asst. Vice President – Finance & Investors Relations), age 32 years, has over 8 years of experience in Accounts & Finance. He joined the company in January 2006. He is involved in Investor relationship of the company. Mr. Hari Prakash Pandey is qualified Chartered Accountant and MBA in Finance.
Ms. Lydia Luis (Asst. Vice President – Residential Sales) age 37 years, has over 16 years of experience in sales and marketing. she has been actively involved with sales and business development of the company. Presently, she is the head of our sales and marketing department.
Mr. Bhavesh Shah (Head - Electronic Data Processing) age 33 years has over 10 years of experience in accounts and taxation. He is the head of our EDP Department. Mr. Shah holds a bachelor of commerce degree and a post graduate diploma in computer science from Mumbai University. Mr. Sachin Mahamunkar (Asst. Vice President – Liasioning) age 36 Years has over 12 years of experience in the field of liasoning. He joined the company in June 1997. Mr Mahamunkar hold a Diploma in Civil Engineering and is an I.T.I Surveyor. Ms. Veena Sangli (Asst. Vice President – Architect General Projects) age 43 Years has over 11 years if experience in the filed of architecture. She joined the company in February 1998. Mrs. Sangli holds a Diploma in Architecture. Mr. Romel Bhog, Chief Executive Officer, HDIL Leisure Private Limited, age 34 years, has over 11 years of experience. He joined the company in March 2008. Prior to joining the company, he worked with Poonawalla Group, Pune. He has completed his MBA from Pune University.
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Mr. Mukesh Gupta, Chief Executive Officer, HDIL Entertainment Private Limited, age 46 years, has over 20 years of experience. He joined the company in April 2007. Prior to joining the company, he worked with Era E-Zone (India) Limited, Shrinagar Cinemas Limited, S.L.Raheja Group and Abhay Hotels Private Limited. He has completed his hotel management from Catering Technology & Applied Nutrition, Mumbai. All our Key Managerial Personnel as disclosed above are permanent employees of the Company and none of our Directors and our Key Managerial Personnel are related to each other. Except Mr. Romel Bhog and Mr. Mukesh Gupta, who are employees of HDIL Leisure Private Limited and HDIL Entertainment Private Limited, respectively, all our key managerial personnel as disclosed above are permanent employees of HDIL and none of our Directors and our Key Managerial Personnel except Mr. Rakesh Kumar Wadhawan and Mr. Sarang Wadhawan are related to each other. The changes in the Key Management Personnel in the last three years are as follows:
Name Date Reason for change
Mr. Ved Prakash Sharma July 1, 2006 Appointed
Mr. R.S. Moorthy October 2, 2006 Resigned
Mr. Krishna D. Lad November 17, 2006 Appointed
Mr. Mukesh Gupta April 9, 2007 Appointed
Mr. Amitabh Verma November 1, 2007 Resigned
Mr.Darshan Majmudar November 2, 2007 Appointed
Mr. Krishna D. Lad February 11, 2008 Resigned
Mr. Romel Bhog March 1, 2008 Appointed
Mr.Dilip Sinha April 14, 2008 Appointed
Mr.Devdutta B.Gangawanwale May 11, 2009 Resigned
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6.9 Shareholding Of the Company’s Key Managerial Personnel
The following of our key managerial personnel are shareholders in our Promoter group companies. Shareholding of the Key Management Personnel Except as provided below, our key management personnel do not hold any Equity Shares in our Company as of September 30, 2009
Name No. of Shares Pre Issue percentage shareholding (in %)
Mr. K. P. Devassy 8,000 0.00 Mr. Pramod Purandare 18,000 0.01 Mr. Shashikant S. Shinde 231,630 0.07 Mr. Balraj Dubey 95,714 0.03 Mr. John D. Sequeira Nil 0.01 Mr. Makarand Todankar 2,500 0.00 Mr. Dilip Kumar Sinha Nil - Mr. Ved Prakash Sharma 10,124 0.00 Mr. Darshan Majmudar 64 0.00 Mr. Manoj Bhojwani 115,714 0.04 Mr.Venkat Iyengar 75 0.00 Mrs. Lydia Luis 65,533 0.02 Mr. Bhavesh Shah 69445 0.02 Mr. Romel Bhog Nil - Mr. Mukesh Gupta 792 0.00 6.10 Employees
The Company does not have in place any Employee Stock Option Scheme or Employee Stock Purchase Scheme as on 30P
stP September 2009.
6.11 Promoters of the Company Our Promoters are Mr. Rakesh Kumar Wadhawan, Mr. Sarang Wadhawan, Mr. Kapil Wadhawan and Mr. Dheeraj Wadhawan. The details of our Promoters are as follows:
Mr. Rakesh Kumar Wadhawan is the Chairman of our Company. He is a resident Indian national. His driving license number is 450652. He does not hold a voter identification card.
Mr. Sarang Wadhawan is the Managing Director of our Company. He is a resident Indian national. His driving license number is MH029521294. He does not hold a voter identification card.
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Mr. Kapil Wadhawan is a non-executive director of our Company. He is a resident Indian national. His driving license number is MH029320749. He does not hold a voter indentification card.
Mr. Dheeraj Wadhawan is a non-executive director of our Company. He is a resident Indian national. He does not hold a driving licence. He does not hold a voter identification card.
6.12 Interest of Promoters The aforementioned Promoters of our Company are interested to the extent of their shareholding in us. Further, our Promoters who are also the Directors of our Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a Committee thereof as well as to the extent of other remuneration, reimbursement of expenses payable to them. Further, our individual Promoters are also directors on the boards of or members of certain Promoter Group entities and they may be deemed to be interested to the extent of the payments made by our Company, Except as stated otherwise in this Prospectus, we have not entered into any contract, agreements or arrangements during the preceding two years from the date of this Prospectus in which the Promoters are directly or indirectly interested and no payments have been made to them in respect of the contracts, agreements or arrangements which are proposed to be made with them including the properties purchased by our Company other than in the normal course of business. 6.13 Payment or benefits to the Promoters No amount or benefit has been paid or given to the Promoters by the Company, other than as remuneration as Director/Whole-time Director, in the two years preceding the date of this Information Memorandum, or proposed to be paid or given by it as on the date of this Information Memorandum. 6.14 Currency of Presentation Throughout this Information Memorandum, all the figures have been expressed in Rs. Million, except when stated otherwise. All references to “Rupees” and “Rs.” in this Information Memorandum, are to the legal currency of India and all references to “U.S. Dollar” and “US$” are to the legal currency of the United States.
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6.15 Dividend Policy Under the Companies Act, an Indian company pays dividends upon a recommendation by its board of directors and approval by a majority of the shareholders at the AGM, who have the right to decrease but not to increase the amount of the dividend recommended by the board of directors. Under the Companies Act, dividends may be paid out of profits of a company in the year in which the dividend is declared or out of the undistributed profits or reserves of previous fiscal years or out of both. The Articles of Association of the Company also gives the discretion to the Board of Directors to declare and pay interim dividends without shareholder’s approval at an AGM. A listed company in India may declare and disclose the dividend it issues only on per share basis. The Company does not have any formal dividend policy for the Shares. The declaration and payment of equity dividend would be governed by the applicable provisions of the Companies Act and Articles of Association of the Company. The following table details the dividend paid by the Company on the Shares for fiscals 2008 and 2009:
Particulars (per share except as specified)
Fiscal 2009 (in Rs. except percentage
date)
Fiscal 2008 (in Rs. except percentage
date) Face value of Shares 10 10 Interim Dividend on Shares Nil 2 Final Dividend of Shares Nil 3 Total Dividend on Shares Nil 5 Dividend Rate* Nil 50% Dividend Distribution Tax as a percentage Nil 16.995% *Interim dividend issued at the rate of 20% and final dividend issued at the rate of 30% The Board of Directors has not declared any dividend for fiscal 2009. The amounts paid as dividends in the past are not necessarily indicative of the dividend policy of the Company or dividend amounts, if any, in the future. Any future dividends declared would be at the discretion of the Board of Directors and would depend on the financial condition, results of operations, capital requirements, contractual obligations, the terms of our credit facilities and other financing arrangements of the Company at the time a dividend is considered, and other relevant factors. Dividends are payable within 30 days of declaration. When dividends are declared, all the shareholders whose names appear in the share register as on the “record date” or “book closure date” are entitled to be paid dividend declared by the Company. Any shareholder who ceases to be a shareholder prior to the record date, or who becomes a shareholder after the record date, will not be entitled to the dividend declared by the Company.
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Under the current Indian tax laws, dividends are not subject to income tax in India in the hands of the recipient. However, a company is liable to pay ‘dividend distribution tax’ currently at the rate of 15% (plus surcharge at 10% and education cess and secondary and higher education cess on dividend distribution tax at the rate of 3 %) on the total amount distributed as dividend. The effective rate of dividend distribution tax is approximately 17%. For further details, see ‘Taxation’. 6.16 Details of Various Committees of the company: There are three key Board level committees of the Company, which have been constituted and function in accordance with the relevant provisions of the Companies Act and the Equity Listing Agreement. These are
(i) Audit Committee, (ii) Remuneration Committee, and (iii) Share Transfer cum Shareholders’/ Investors’ Grievance Committee.
A brief on each Committee, its scope and composition is given below: Audit Committee The purpose of the audit committee is to ensure the objectivity, credibility and correctness of the company’s financial reporting and disclosure processes, internal controls, risk management policies and processes, tax policies, compliance and legal requirements and associated matters. The audit committee consists of the following:
1. Mr. Satya Pal Talwar; chairman 2. Mr. Ashok Kumar Gupta; 3. Mr. Shyam Sunder Dawra; and 4. Mr. Raj Kumar Aggarwal.
The terms of reference of the audit committee are as follows:
1. To oversee the financial reporting process and disclosures of financial information;
2. To review the quarterly/ half yearly and annual financial statements before submission to the Board of Directors with special emphasis on accounting policies, compliance of accounting standards and other legal requirements relating to financial statements;
3. To review the findings of the internal investigation and periodic audit reports;
4. To hold discussions with the external auditors about the scope of audit; 5. To recommend appointment/removal of statutory auditors and fixing their
remuneration; 6. To review all issues which are required to be reviewed by the audit
committee pursuant to the listing agreement with the stock exchanges and the Companies Act, 1956 with the management and the internal and external auditors;
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7. To review with the management the financial statements with reference to any related party transactions;
8. To review the observations of internal and statutory auditors in relation to all areas of operation of the Company, including internal control systems;
9. To examine all taxation matters, including related legal cases; 10. To review with the management the financial statements of the Subsidiary
Companies; and 11. Any other terms of reference as may be included from time to time in
Clause 49 of Listing Agreement. The Audit Committee has met four times during fiscal 2009. Remuneration Committee The Remuneration Committee is responsible for determining the Company’s remuneration policy, having regard to performance standards and existing industry practice. Under the existing policies of our Company, the Remuneration Committee inter alia determines the remuneration payable to our Directors and other key management personnel in our Company. Apart from discharging the above-mentioned functions, the Remuneration Committee also discharges the following functions:
1. Framing policies and compensation including salaries and salary adjustments, incentives, bonuses, promotion, benefits, stock options and performance targets of the top executives;
2. Remuneration of directors; and 3. Strategies for attracting and retaining employees and employee
development programme. The Remuneration Committee consists of the following:
1. Mr. Ashok Kumar Gupta, (Chairman); and 2. Mr. Satya Pal Talwar.
The Remuneration Committee has met once during fiscal 2009. Investor Grievance and Share Transfer Committee The Investor Grievance and Share Transfer Committee are responsible for the redressal of shareholder grievances and for giving effect of share transfer. This Committee consists of:
1. Mr. Waryam Singh; Chairman 2. Mr. Sarang Wadhawan; and 3. Mr. Lalit Mohan Mehta.
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The terms of reference of the Investor Grievance and Share Transfer Committee are as follows:
1. Investor relations and redressal of shareholders grievances in general and relating to non receipt of dividends, interest, non-receipt of balance sheet etc in particular;
2. Review of the periodicity and effectiveness of the share transfer process, statutory certifications, depository related issues and activities of the Registrar and Transfer Agent; and
3. Such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to be attended to by such committee.
This Committee is also responsible for approval of transfer of Equity and preference shares including power to delegate the same to registrar and transfer agents The committee has met four times during fiscal 2009. Policy on disclosures and internal procedure for prevention of insider trading Pursuant to the Company’s policy on disclosures and internal procedure for prevention of insider trading, any Director of the Company shall not derive benefit or assist others to derive benefit by giving investment advice from access to and possession of price sensitive information about the Company, which is not in public domain and constitutes insider information. All Directors of the Company are required to comply with SEBI (Prohibition of Insider Trading) Regulations, 1992 and also adhere to the Model Code of Conduct framed by the Company for prevention of Insider Trading, viz. The Housing Development and Infrastructure Limited Model Code of Conduct for Board of Directors. In addition to the Directors, the Model Code is applicable to senior management as well as designated employees of the Company.
Strictly Private & Confidential
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7. FINANCIAL INFORMATION 7.1 Financial data for HDIL and its subsidiaries FINANCIAL DATA FOR HDIL SUBSIDIARIES IS PROVIDED FROM PAGE NO. 104 -111
7.2 Details of loans and indebtedness Our aggregate borrowings as of September 30, 2009, as per the consolidated restated statements of assets and liabilities are as follows;
In Rs. Million S. No. Nature of Borrowing Amount
1. Secured Borrowings 32,711.38 Grand Total 32,711.38
Set forth below is a brief summary of our aggregate borrowings as on September 30, 2009: Secured borrowings:
Nature of borrowing/facility
Amount Sanctioned
Interest rate and
repayment
Amount Outstanding as on September
30, 2009 (Rs. in millions) Security
1. Term Loan from Bank of India
Rs, 2,000,000,000 Floating
Tenure: 36 months
Rs.2000
Property at Vasai.
2. Term Loan from Bank of India
Rs. 1,000,000,000 Floating
Tenure: 75 months
Rs. 856.83 Project Pant Nagar, Ghatkopar
(E), Mumbai
3. Term Loan from Life Insurance Corporation of India
Rs. 3,000,000,000 Fixed
Tenure: 60 months
Rs. 2812.5 Land at Chandansar,
Virar and Kochin
4. Term Loan from Union Bank of India
Rs. 2,300,000,000 Floating
Tenure: 42 months
Rs. 1200 Land at Mulund (W)/ Kasarali,
Mumbai
5. Term Loan from Central Bank of India
Rs. 3,000,000,000 Floating
Tenure: 58 months
Rs. 2998.56 Land at Kurla (W), Mumbai
Strictly Private & Confidential
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Nature of borrowing/facility
Amount Sanctioned
Interest rate and
repayment
Amount Outstanding as on September
30, 2009 (Rs. in millions) Security
6. Term Loan from Punjab National Bank
Rs. 2,000,000,000 Floating
Tenure: 58 months
Rs. 1995.90 Land at Dongre, Virar
7. Term Loan from Punjab National Bank
Rs. 2,500,000,000 Floating Tenure: 60
months
Rs. 1500 Project Land at Village Ambivali,
Charges on FSI/Developmen
t Rights 8. Term Loan from UCO Bank. Rs.
2,500,000,000 Floating
Tenure: 60 months
Rs. 1500 Project Land at Versova, Charges
on FSI/Developmen
t Rights 9. Term Loan from UCO Bank Rs. 2,000,000,000 Floating
36 months
Rs.1799.21 Land at Doliv, Virar.
10. Term Loan from United Bank of India
Rs. 1,000,000,000 Floating
Tenure: 36 months
Rs. 697.94 Land at Kopri, Virar
11. Term Loan from Jammu and Kashmir Bank Ltd.
Rs. 2,000,000,000 Floating
Tenure: 36 months
Rs. 1390.28 Land at Kopri, Virar.
12. Term Loan from Punjab and Sind Bank
Rs. 1,000,000,000
Floating 48 months
Rs. 914.62 Land at Chandansar,
Vasai. 13. ILFS PMDO Rs. 3,954,900,000 Fixed
Tenure: 60 months
Rs.1495.54 Immovable Properties at Vasai, Virar,
Doliv, Kharadi, Dahisar, Kasarali.
14. NCD from Life Insurance Corporation of India
Rs. 2,500,000,000 Fixed
Tenure: 54 months
Rs. 2500 Dheeraj ARMA, Land at Doliv
and Khardi, Virar
15. NCD from Life Insurance Corporation of India
Rs. 3,000,000,000 Fixed
Tenure: 54 months
Rs. 3000 Dheeraj ARMA, Land at Doliv
and Khardi, Virar
16. NCD from Life Insurance Corporation of India
Rs. 3,000,000,000 Fixed
Tenure: 47 months
Rs. 3000 Dheeraj ARMA, Land at Doliv
and Khardi, Virar
17. NCD from General Insurance Corporation of
Rs. 150,000,000 Fixed
Rs. 150 Dheeraj ARMA, Mumbai
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Nature of borrowing/facility
Amount Sanctioned
Interest rate and
repayment
Amount Outstanding as on September
30, 2009 (Rs. in millions) Security
India Tenure: 24 months
18. NCD from Punjab National
Bank Rs. 400,000,000 Fixed
Tenure: 24
months
Rs. 400 Land at Mahul and Kurla (E)
19. NCD from Bank of India Rs. 2,500,000,000 Fixed Tenure: 58
months
Rs.2500 Land at Mahul and Kurla (E)
Total
Rs. 32,711.38
Promoter group In addition to the Promoters named above, the following natural persons and companies are part of our Promoter group. Relatives of Promoters The natural persons who are part of our Promoter group (due to their relationship with our Promoters), other than the Promoters named above are as follows:-
Name of the Person Relationship Mrs. Damyantirani Wadhawan Mother of Mr. Rakesh Kumar Wadhawan Mrs. Malti Wadhawan Wife of Mr. Rakesh Kumar Wadhawan Mrs. Nikita Trehan Daughter of Mr. Rakesh Kumar Wadhawan Mrs. Anjana Sakhuja Sister of Mr. Rakesh Kumar Wadhawan Mrs. Romi Mehra Sister of Mr. Rakesh Kumar Wadhawan Mrs. Aruna Wadhawan Mother of Mr. Kapil Wadhawan Mrs. Vanita Wadhawan Wife of Mr. Kapil Wadhawan Master Karthik Wadhawan Son of Mr. Kapil Wadhawan Ms. Tiana Wadhawan Daughter of Mr. Kapil Wadhawan Mrs. Anu Wadhawan Wife of Mr. Sarang Wadhawan Ms. Sara Wadhawan Daughter of Mr. Sarang Wadhawan Mrs. Puja Wadhawan Wife of Mr. Dheeraj Wadhawan Ms. Yuvika Wadhawan Daughter of Mr. Dheeraj Wadhawan
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Other individuals forming part of the Promoter Group 1. Mr. Waryam Singh Companies/Partnership Firms forming part of the Promoter Group
1. D.S. Corporation 2. Mahul Construction Company. 3. Fine Developers.
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8. INDUSTRY OVERVIEW INDUSTRY OVERVIEW
The information in this section is derived from various government publications and industry sources. Neither we nor any other person connected with the Issue have verified this information. Industry sources and publications generally state that the information contained therein has been obtained from sources generally believed to be reliable, but that their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Growth of the Indian Economy India is the world’s largest democracy by population size, and one of the fastest growing economies in the world. According to CIA World Factbook, India’s estimated population will be 1.16 billion people as of July, 2009. India had a GDP on a purchasing power parity basis estimated at approximately US$3,267.00 billion in 2008. This makes it the fourth largest economy in the world after the United States of America, China and Japan (Source: CIA World Factbook). The last Annual Policy Statement of the Reserve Bank of India released in April 2008 placed real GDP growth for 2008-09 in the range of 8.0 to 8.5% (Source: Reserve Bank of India Annual Policy Statement for the Year 2009-10, April 21, 2009). However, following the global financial crisis, India’s economic growth has slowed down significantly to 6.7% as compared to 9.0% in fiscal 2008 (Source: Central Statistical Organization (“CSO”). The real GDP growth for the four quarters of the fiscal year 2008 as compared to the fiscal year 2009 are set out below: Real GDP Growth (%)
Manfacturing 10.0 5.5 8.2 5.1 8.6 0.9 6.3 (1.4) Financing, insurance, real estate and business services
12.6 6.9 12.4 6.4 11.9 8.3 10.3 9.5
GDP at factor cost
9.2 7.8 9.0 7.7 9.3 5.8 8.9 5.8
(Source: CSO)
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The Indian Real Estate Sector The Indian real estate sector involves the development of commercial offices, industrial facilities, hotels, restaurants, cinemas, residential housing, trading spaces such as retail outlets and the purchase and sale of land and land development rights. Historically, the real estate sector in India has been unorganized and characterized by various factors that impeded organized dealing, such as the absence of a centralized title registry providing title guarantee, a lack of uniformity in local laws and their application, non-availability of bank financing, high interest rates and transfer taxes and the lack of transparency in transaction values. In recent years however, the real estate sector in India has exhibited a trend towards greater organization and transparency in light of the various regulatory reforms.
According to Mr. Sudhir Nair, Head, CRISIL Research:
“Accelerated growth of Indian economy, recovery of global economy, improved liquidity and expected fall in interest rates are key factors that will signal demand revival in the residential segment. This segment is likely to see a much faster revival due to strong underlying demand for housing and supply coming at attractive price points.” The above trend is believed to have contributed to organized investment in the real estate sector from both domestic and international financial institutions. The nature and demand for property is also changing, with heightened consumer expectations that are influenced by higher disposable incomes. These trends have been reinforced by the growth in the Indian economy, which has stimulated demand for land and developed real estate. Demand for residential, commercial and retail real estate is rising throughout India, accompanied by increased demand for hotel accommodation and improved infrastructure. Additionally, the tax and other benefits applicable to SEZs are expected to result in new source of demand. According to ASSOCHAM, currently, the size of the domestic real estate market in India is estimated to be US$ 15.00 billion, of which FDI contributions are estimated to be less than US$ 4.00 billion (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector, October 2008). Since the opening of FDI into the real estate sector in 2005, the real estate sector has seen a substantial rise in investment year on year and is likely to see a steady increase over the next 4-5 years. However, due to the current global economic slowdown the real estate industry is experiencing a significant downturn. An industry-wide softening of demand for property has resulted from a lack of consumer confidence, decreased affordability, decreased availability of mortgage financing and large supplies of resale and new inventories. However, industry sources maintain that the medium to long term drivers of the sector have remained intact with a large demand for developed space and FDI is also expected to pick-up in the next couple of quarters.
India is reckoned as one of the fastest growing economies of the world and owing to its inherent advantages of a large consumer base, raw material
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resources, world class manufacturing capabilities, competitively priced talent base, a comprehensive legal & tax system and a strong operating financial system has become a preferred investment and business destination.
Real estate, a “sunshine industry” in India, is flourishing rapidly, propelled by strong demand drivers and significant transformations such as deregulation of the sector, increasing transparency and professionalism, improved product quality and service standards etc.
In spite of growth in real estate industry, like in any emerging sector, the Indian market also has its own share of risks and hurdles. In such a complex real estate market, we assist occupiers, developers, financiers and investors, by structuring & delivering customized real estate and infrastructure solutions.
A growing trend points to an increasing number of global direct real estate investment deals that are going through India-specific real estate funds, rather than taking the FDI route. (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008) According to Cushman & Wakefield Research estimates, the pan-India cumulative demand projection as in October 2008 for the real estate sector across office, residential, retail and hospitality is expected to be approximately 1,098.00 million square feet by the year 2012. The residential segment is expected to continue to drive real estate demand in the country accounting for nearly 63% of the total space demand during the period 2008-12. Despite the expected slow down in the office market, the demand for commercial office space is projected to be 243.00 million square feet during this time frame. The retail and hospitality segments are expected to constitute 95.00 million square feet and 73.00 million square feet, respectively, driven mainly by an increase in income levels as well as by accelerated travel in the domestic and international sectors (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector, October 2008). The pan-India demand projections for the next four years is set out below:
Demand Projection – Pan India
(Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector, October 2008)
The top seven cities in India account for nearly 80% of this pan-India demand in real estate with around 877.00 million square feet. The residential sector still
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remains the largest segment for the top cities as well with a 60% share, with commercial office, retail and hospitality accounting for 23%, 9% and 8%, respectively. The residential segment is expected to be the major demand contributor over the next five years with a total space requirement of 529.00 million square feet, followed by office space at 203.00 million square feet, retail at 79.00 million square feet and hospitality at 66 million square feet, respectively. The real estate demand is expected to increase marginally over the period with the Tier I cities expected to generate majority of the demand during 2008-12 (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector, October 2008). The demand projections in the top seven cities in India for the next four years is set out below: Demand Projection – Top Seven Cities
(Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector, October 2008) Primary Segments of the Real Estate Sector Activities in the real estate sector relevant to our business may broadly be classified into the following five segments - Residential, Commercial, Retail, Hospitality and Special Economic Zones (“SEZs”). Each of these segments is discussed below. The Residential Segment
Due to India’s highly favourable demographics, the residential segment demand within India in the recent past had consistently outpaced supply. Growing population, rising disposable incomes, a rapidly growing middle class and youth population, low interest rates, fiscal incentives on both interest and principal payments for housing loans, heightened customer expectations and increased urbanization and nuclearization were some of the reasons for this demand. However, according to Cushman & Wakefield’s Report, The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008), rising property prices and increased interest rates, coupled with a demand-supply mismatch
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has currently, brought down the overall affordability of residential properties in India. With the economy showing some signs of recovery, the demand in the housing segment may again pick-up. According to the Ministry of Housing of India, the housing shortage as on 2007 is 24.71 million units and the total requirement of housing during the Government’s 11th Five Year Plan period (2007-12) will be 26.53 million units. The magnitude of this backlog is evident from the fact that 21% of India's urban population lives in slum-like conditions and 35% in one-room accommodations. In this scenario, incentives from the Government in the form of tax sops such as duty cuts, subsidization of various construction inputs, increasing private-public participation (“PPP”) in projects, micro-financing, developing land and infrastructural facilities is expected to boost the move towards low-cost housing initiatives. A notable initiative in this direction has come from the floor space index (“FSI”) increase in Mumbai, with the Mumbai Metropolitan Regional Development Authority (“MMRDA”) planning to build over 500,000 houses over the next six years as part of the slum rehabilitation scheme of the Maharashtra State Government. (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector, October 2008) Projected Demand for Residential Segment The total demand for the residential segment is estimated to be approximately 687.00 million square feet across India for the next five years, of which the top seven cities account for nearly 77%. (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008)
(Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector, October 2008)
Changing Demographics and Increasing Affluence India’s demographics have been impacted by large increases in employment opportunities, people in the earning age bracket (25 to 44 year olds) and higher salaries. Such factors are increasing disposable incomes and driving demand for new residential and retail properties. The table below shows historic and projected annual growth rates for different segments of India’s population, classified by levels of annual income. The figures highlight that growth is expected especially in the higher income segments. For
R e s i de n ti a l D e m a n d P ro je cti o n (2 0 0 8 -1 2 )
N C R , 17 %
B a n g a l o r e , 16 %
M u m b a i , 6 %
K o l k a t a , 4 %C h e n n a i , 16 %H y d e r a b a d , 9 %
P u n e , 10 %
O t h e r s , 2 2 %
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example, the number of households with annual incomes of between Rs.2.00 million and Rs.5.00 million per year, Rs.5.00 million and Rs.10.00 million per year and in excess of Rs.10.00 million per year is expected to increase in size by 23%, 26% and 28%, respectively, between financial year 2002 and 2010, as illustrated by the table. These higher income segments of India’s growing middle class are expected to provide a strong impetus for the continued development and growth of the Indian real estate sector.
Household Income (Rs. mn. p.a.)
Households in FY96 (,000)
Households in FY02 (,000)
Expected households in FY06 (,000)
Expected households in FY10 (,000)
CAGR (FY96-02) (%)
CAGR (FY02-06) (%)
CAGR (FY06-10) (%)
>10 5 20 52 141 26.0 27.0 28.3
10 to 5 11 40 103 255 24.0 26.7 25.4 5 to 2 63 201 454 1,037 21.3 22.6 22.9 2 to 1 189 546 1,122 2,373 19.3 19.7 20.6 1 to 0.5 651 1,712 3,212 6,173 17.5 17.0 17.7 0.5 to 0,2
(Source: www.ncaer.org) Large Segment of the Population Economically Active India’s growing population in the earning age bracket is recognized as a key driver of growth in housing demand.
Shift in Consumer Preferences from Renting to Owning Houses India’s changing demographic profile has led to a steady decline in the portion of households living in rented premises. Rising income levels is believed to be one of the reasons for this change. However, due to a shortage of properties available on rent and an increase in the rents being charged to tenants, consumers have increasingly been investing in property. Factors such as the increase in the standard of living of consumers and the greater availability of financing for consumers are expected to fuel a further decline in the number of households renting premises. Increasing Urbanization India has witnessed a trend of increased urbanization as people migrate from rural to urban areas seeking employment opportunities. The emergence of the integrated township format is another key highlight in the residential sector. Availability of large land parcels as well as office developments in major cities’ peripheral areas have also accelerated integrated township to accommodate the growing population of the city. These integrated townships offer consolidated development of commercial, retail, residential, and leisure facilities.
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Shrinking Household Size India’s traditional joint family (or multi-occupant) residences are gradually being replaced by individual or smaller nuclear family residences. Given India’s increasing population, such contraction in the size of the average household is expected to increase demand for housing. Trend towards high-rise residences in urban areas A large proportion of the demand for residential developments, especially in urban centres such as Mumbai, Bangalore, Delhi (Gurgaon and Noida) and Pune, is likely to be for high-rise residential buildings. Since this is a fairly new segment, the growth of the high-rise segment is expected to be faster than the growth of more traditional urban housing segments. The reasons for the anticipated demand are the lack of space in cities such as Mumbai and proximity to offices and IT parks in places such as Gurgaon, Bangalore and Pune. The high-rise trend is gradually expanding into other cities such as Kolkata, Hyderabad and Chennai as a result of increasing affordability, nearness to IT or BPO parks and the development of townships within close proximity to such IT and BPO parks. Affordable Housing – The new Buzz word Increased demand for affordable housing from the middle income and low income group is expected to be a key feature in the growth of the Indian real estate industry. The Commercial Segment The commercial real estate market in India has continuously been evolving in response to a number of changes in the business environment. The growth of the commercial real estate sector in India has been fuelled, in large part, by the increased revenues of companies in the services business, particularly in the IT and ITES sectors. Large space requirements by the IT/ ITES sector has led to real estate growth being spread beyond the customary central business district to the suburban and peripheral locations of major cities. For example, over the past years, Bandra Kurla Complex (“BKC”) in the Western suburbs of Mumbai has emerged as a thriving commercial hub, and along with the contiguous western suburban locations of Khar, Santa Cruz, Andheri, Malad and Goregaon accounts for 44% of office stock across Mumbai. The micro-markets of Andheri, BKC and BKC-Kalina Road are the highest contributors to total office space stock in the Western Suburbs (Source: Knight Frank – Q1 2009 India Office Market).
During the first six months of 2008, the seven major cities in India witnessed commercial office space supply over and above space uptake, validating the temporary slump in the economy and in the realty sector at large. An oversupply situation was prominent in a few micro-markets, primarily in the suburban and peripheral locations of certain cities (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008). However, according to the same report, this correctional phase, partially gripping the office sector at present, is expected to lead to a more stable market situation in the near future.
According to Cushman & Wakefield’s Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008), the demand for commercial office space is estimated to be approximately 243.00 million square
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feet across India and Bangalore being the largest IT hub in India is likely to lead the pack in commercial office space demand with an estimated office space requirement of 51.00 million square feet. Mumbai ranks fourth in terms of the cumulative absolute numbers and the demand growth because of its sky-high real estate values that only a few corporate firms can afford. (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008)
(Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008) Commercial locations in India: Over the past five years, locations such as Bangalore, Gurgaon, Hyderabad, Chennai, Kolkata and Pune have established themselves as emerging business destinations that are competing with traditional business destinations such as Mumbai and Delhi, especially with respect to their commercial real estate sector. These emerging destinations have succeeded in matching their human resources base with necessary skill sets, competitive business environments, operating cost advantages and improved urban infrastructure. The current relative position of the urban growth centres in India can be summarized as follows:
• Locations such as Mumbai and Delhi have a metropolitan character and have consistently been traditional business destinations with a favorable record in attracting investment opportunities. However, factors such as increasing operating costs and constraints on the availability of land may impede such areas from sustaining a high rate of growth in their respective business districts. Therefore, commercial real estate growth is expected to be focused in the suburbs and other peripheral locations of these cities. For example, with respect to Mumbai, commercial real estate growth is expected to be focused in areas north of central Mumbai and Navi Mumbai and to the east of the city center.
• Locations such as Bangalore and Gurgaon have human resource potential,
quality real estate and operating cost advantages. As such, these locations are best positioned to attract investment in the near future. Lack of infrastructure is currently the main inhibiting factor precluding robust growth in these areas.
• Locations such as Pune, Chennai, Hyderabad and Kolkata offer cost
advantages, well-developed infrastructure, supportive city governments and
C om m e rcial O ffice De m an d Proje ction (2008-12)
N C R , 2 0 %
B a n g a l o r e , 2 1%
M u m b a i , 9 %K o l k a t a , 3 %C h e n n a i , 14 %
H y d e r a b a d , 8 %
P u n e , 8 %
Ot h e r s, 17 %
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minimal restraints on the supply of real estate. While the number of large occupiers in these locations has yet to reach optimum levels, these locations attract a large amount of real estate investment. Growth in these emerging destinations is predominantly led by the expansion and consolidation plans of corporations in the IT and ITES sectors.
• Locations such as Jaipur, Coimbatore, Ahmedabad, Kochi and Lucknow
have a large talent pool combined with low cost real estate. As such, businesses in the technology sector have demonstrated a growing interest in these locations as they seek to expand their operations. These markets are expected to see significant real estate growth over the next three to five years.
The Retail Segment While real estate development in the retail sector is a relatively new phenomenon in India, it rode the growth phase with retailers in the recent years, domestic as well as foreign, aggressively investing in this sector. However, the spillover of the global economic crisis into the Indian market has had an impact on the real estate demand and therefore the prices.The demand drivers for retail space in a city typically include demographics, such as resident consumer age profile, dominant consumer occupation and spending capacity, in addition to macro policy decisions, such as allowing FDI in single brand retailing and cash-and-carry formats. India’s retail boom primarily originated in the metros and then trickled down to the Tier II and Tier III cities. The increased purchasing power of the growing middle class and its consumerist aspirations are some of the factors propelling planned retail activities in the country. Established global retailers such as the German Metro AG, the South African Shoprite, Wal-Mart and now UK's Tesco, have already made their entry into India along with luxury brands such as Armani, Aigner, Versace, Louis Vuitton, Dolce & Gabbana, Zegna and Hugo Boss among the many others have also established their presence across major Indian cities. (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008) Historically, the Indian retail sector has been dominated by small independent local retailers such as traditional neighborhood grocery stores. However, during the 1990s, organized retail outlets gained increased acceptance due to changing demographic factors such as an increase in the number of women working, changes in the perception of branded products, the entry of international retailers into the market and the growing number of retail malls. According to Knight Frank’s India Retail Market Review (Quarter 3, 2008), organized retailing accounts for about 4% of the total retail market and is expected to increase in size to US$ 107.00 billion by 2013. However, the high rentals demanded by the owners and the slow down due to the global economic crisis may have an impact of real estate demand. The growth rate for retail space also has led to high demand for shopping mall space. According to Knight Frank’s India Retail Market Review (Quarter 3, 2008), malls have emerged as family entertainment centers with food courts and multiplexes benefiting the most from the growing mall culture. Further, around 332 malls accounting to approximately 102.00 million square feet are in the pipeline in Tier I and Tier II cities. Of these, majority of the malls are scheduled to come up in the National Capital Region, which comprises of Gurgaon, Noida and New Delhi
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(“NCR”), followed by Mumbai, in the next two to three years. The projected retail demand figures (essentially representing shopping mall development) depict a large variation in demand among the Tier I, II and III cities. The NCR leads with 19.00 million square feet (20%) of the total estimated retail demand, followed by Mumbai at 15.00 million square feet (16%) owing to the high consumer spending, as shown in the pie chart below: (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008)) The growth in the film industry is expected to translate into demand for more real estate space for construction of more theatres. The key economic advantages of multiplex cinemas over single-screen cinemas include better occupancy ratios and the ability for cinema operators to choose to show movies in a larger or a smaller theatre based on expected audience size. Multiplex cinema operators are therefore able to maintain higher capacity utilization compared to single-screen cinemas and can provide a greater number of film showings. As each movie has a different screening duration, a multiplex cinema operator has the flexibility to decide on the screening schedule so as to maximize the number of shows in the multiplexes, thus generating a greater number of patrons. Multiplexes also allow for better exploitation of the revenue potential of the movie. The key drivers of growth responsible for the expected increase in the number of multiplex cinemas include an increase in disposable income across an expanding Indian middle class, favorable demographic changes, strong growth in organized retail and the availability of entertainment tax benefits for multiplex cinema developers. The Hospitality Segment The growing economy and increasing commercial activity, coupled with the entry of several trans-national corporations have helped in the growth of the hospitality sector in India in the recent years. The demand for the sector continues to be dependant on business and leisure travellers within the country as well as by a significant increase in foreign travellers coming to India. However, the economic downturn and the terror attacks in Mumbai in November 2008 have adversely affected the inflow of foreign travellers in India. One of the most noticeable trends in the Indian realty sector has been the emergence of service apartments and the potential of this business segment is estimated to be nearly 20% of the total
R e ta i l D e m a n d P ro je ct i o n (2 0 0 8 -1 2 )
N C R , 2 0 %
B a n g a l o r e , 1 1 %
M u m b a i , 1 6 %K o l k a t a , 9 %
C h e n n a i , 8 %
H y d e r a b a d , 1 0 %
P u n e , 8 %
O t h e r s , 1 8 %
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hospitality industry (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008)). A strong domestic economy, business opportunity, the Government's open sky policy, initiatives to liberalise foreign investment and especially the efforts of India’s Ministry of Tourism's (“MoT”) to communicate the "Incredible India" campaign have together contributed to a robust demand for hospitality space in major cities across India. In keeping with the current growth rate, India's hospitality industry is anticipated to grow at 8% per annum between 2007 and 2016. (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008) Major cities like Bangalore, Mumbai, NCR, Hyderabad, Chennai and Kolkata are witnessing significant developments in this sector and are likely to generate demand of more than 60.00 million square feet over the next five years. This accounts for over 90% of the pan-India hospitality space forecasts which is nearly 73.00 million square feet. Bangalore and NCR are expected to generate majority of the demand in this sector (together adding 31.00 million square feet or 43% share of pan-India demand projection), followed by Mumbai with 12.00 million square feet (16%). Cheaper accommodation alternatives such as bed-and breakfast formats and home stays are being promoted by the Government in anticipation of the large volume of expected visitors to NCR for the forthcoming Commonwealth Games in 2010 scheduled in the city. In addition, cities such as Jaipur, Ahmedabad, Kochi and Goa are also expected to add a significant share with approximately 6.00 million square feet of upcoming hospitality space in the rest of the country between 2008-2012. This is largely due to the Government's initiatives to promote tourism in the Tier II and Tier III. (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008) The chart below shows the projected hospitality demand from 2008-12: (Source: Cushman & Wakefield Report: The Metamorphosis – Changing Dynamics of the Indian Realty Sector (October 2008)) According to the MoT, 5.50 million tourists were expected to visit India in 2008-09 which will account to approximately Rs. 500.00 billion in foreign exchange (Source: Federation of Hotels & Restaurants Association of India, HVS and Ecotel’s Indian Hotel Industry Survey 2007- 2008 (“HVS Report”). Further, it is estimated that demand is going to exceed supply by 100% in the next two to three years. The rapid increases in average room rates that have made some Indian cities the most expensive
Hospitality Demand Projection (2008-12)
NCR, 25%
Bangalore, 19%
Mumbai, 16%Kolkata, 5%
Chennai, 11%
Hyderabad, 10%
Pune, 5%Others, 9%
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markets in the world, coupled with the global economic crisis and the negative travel advisory which was issued for India, in the wake of the Mumbai terror attacks, are expected to correct the performance of the hotel industry across India in 2009-10. Nonetheless, according to the HVS Report, this slowdown is expected to be a short term effect as most Indian cities face a shortage of quality rooms, especially in the mid market, budget and economy hotels, which caters to the fast growing domestic consumption. Special Economic Zones The Government introduced SEZs in 2000 to provide an internationally competitive environment for exports free of bureaucratic barriers. SEZs are specifically designated duty-free zones deemed to be foreign territories for purposes of Indian customs controls, duties and tariffs. The introduction of SEZs is aimed at attracting foreign investment and increasing exports in order to promote economic development and employment. As of December 18, 2008 there are a total of 274 notified SEZs all over India. In addition, these SEZs employ a total (which includes notified SEZs, State/ Private SEZs set up before 2006 and Government SEZs) of 362,650 persons and have resulted in total investments of Rs. 937.07 billion as of September 30, 2008. Further, exports from these SEZs increased by 92% during 2007-08 to Rs. 666.38 billion as compared to Rs. 346.15 billion in 2006-07 (Source: SEZ website, http://sezindia.nic.in accessed on June 2, 2009). There are three main types of SEZs: integrated SEZs, which may consist of a number of industries; services SEZs, which may operate across a range of defined services; and sector-specific SEZs, which focus on one particular industry. Minimum sizes for SEZs are 2,500 acres for a multi-product SEZ, 250 acres for a sector-specific SEZ, and 25 acres for SEZs in certain specific industries, such as biotech, IT services, gems and jewellery. Under current legislation, SEZ developers and tenants are granted various income tax benefits, which are expected to attract software companies in particular, given that certain tax breaks in existing software technology parks expire in 2009. Slum Rehabilitation Scheme One sector of the real estate development market that is unique to Mumbai is it’s Slum Rehabilitation Scheme (“SRS”). In 1995, the Government of Maharashtra initiated the Slum Rehabilitation Scheme to be administered by the newly-created Slum Rehabilitation Authority (“SRA”). The objective of the SRS is to redevelop slums in the Mumbai area. Through the scheme, slum dwellings are replaced by residential buildings containing flats of 269 square feet that are constructed free of cost to former slum dwellers by private real estate developers participating in the scheme. The Government of Mumbai subsidizes this clearance and construction by granting developers the right to develop a proportion of former slum land for their own purposes, or by granting them transferable development rights (“TDRs”) which may be used to develop land elsewhere in Mumbai north of the slum land concerned. In other words, in exchange for the construction of flats for slum dwellers, real estate developers are allowed to construct residential, commercial and retail properties on slum land, whether it is government or private land, which they can then freely sell. Moreover, TDRs permit developers to develop land in certain parts of Mumbai that are outside the rehabilitated slum area. A TDR is made available in the form of a certificate issued by the municipal corporation of Mumbai,
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and its owner can use it either for actual construction or can sell it on the open market. Residential development on slum land that is subject to the SRS also benefits from a superior Floor Space Index (“FSI”) allowance which determines the total permitted construction area as a portion of the total land area of a site. Under the SRS, the FSI is generally around 2.5 as against a normal FSI of 1.33 thereby making SRS development more attractive for developers. Moreover, the SRS can enable a developer to acquire land in prime locations in Mumbai, a city where the scarcity of land is a constraint on real estate development. The acquisition can be made at, in effect, lower cost (e.g., the cost of constructing replacement housing for the slum dwellers) than traditional purchases of land for cash, thereby reducing the asset cycle risk for the developer between land acquisition and sale of developed property or FSI/TDRs. The innovative subsidy mechanism of the SRS has spurred redevelopment activity in certain deprived areas of Mumbai which were previously unattractive to real estate developers. In addition to helping fulfill the social obligations of the government, which does not have the resources to undertake rehabilitation projects on a large scale, an on-going benefit of the SRS to the government of Mumbai includes the addition of individuals to the tax rolls when they occupy new housing who, as slum dwellers, were not previously part of the tax base. The Mumbai Real Estate Market Mumbai is the capital city of Maharashtra and is also the commercial, entertainment and fashion capital of India. Mumbai is made up of seven connected small islands and the suburban area of Salsette Island. It is well connected by air, road and rail to other major cities in India. Mumbai’s traditional textile industry have made way to the new economy of financial services, call centres and other business process outsourcing services, information technology, engineering, healthcare and entertainment companies. As the financial hub of the country, the headquarters of a number of financial institutions like the Bombay Stock Exchange, Reserve Bank of India, National Stock Exchange and Life Insurance Corporation are located in Mumbai. India’s leading companies such as Tata, Birla, Godrej and Reliance are also based in Mumbai. Mumbai is also the financial capital of India and has been the country's favored destination for real estate investment by institutions and individuals across the country and abroad. Its commercial real estate stock has been rising on account of connectivity with extended suburbs as well as the satellite township of Navi Mumbai, which provides sufficient housing space for the working population. The pace of real estate development in Mumbai has been much faster than the infrastructure development due to the increasing population in the city. The population of the Mumbai Metropolitan Region grew at a CAGR of 2.7% to 18.89 million from 1991- 2001. As of 2001, the Mumbai Metropolitan Region’s population accounted for 20.0% of that of the state of Maharashtra. The growth remains higher in suburbs compared to the island city. As of 2001, population density (persons per square kilometer) stood at 49,163 in the island city, 24,605 in the western suburbs and 20,410 in the eastern suburbs. (Source: Knight Frank’s India Retail Market Review (Quarter 3, 2008). According to Cushman & Wakefield’s Marketbeat, Mumbai Residential Report (Q1, 2009), the recent price cuts from developers and lowering of home loan interest
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rates has marginally improved demand for low and mid end user segments. However, the over all macroeconomic conditions continue to be a major dampener for the residential sector in Mumbai and as a result rental and capital values witnessed correction across most micro markets in the first quarter of 2009. Many residential projects which are still in the planning stage and have not started construction have now been postponed as most developers are focusing on selling existing inventory and completing under construction projects. Additionally, the Maharashtra Government's recent decision to double the FSI to 4.00 for cluster redevelopment of old and dilapidated buildings will help add more residential supply in the space starved city and stimulate the real estate sector. However with the ongoing slowdown, it is unlikely for any cash starved developer to initiate such redevelopment projects in the next nine to 12 months. (Source: Cushman & Wakefield Report: Marketbeat, Mumbai Residential Sector, Quarter 1, 2009) The graph below gives the estimated new retail supply in Mumbai for the periods mentioned:
New retail supply year-wise
9.17.3
3.4
16.520
0
5
10
15
20
25
2008 2009 2010
Year
A rea C umulat ive A rea
(Source: Knight Frank’s India Retail Market Review (Quarter 3, 2008) According to Knight Frank’s India Retail Market Review (Quarter 3, 2008), with the presence of over 30 malls in the Mumbai Metropolitan Region currently and more than 50 expected to come up in the next three years, the retail sector maybe heading towards an over-supply. The report further states that the rental values will now depend on the success of malls, which in turn will depend on factors like tenant mix, branding, traffic and location management. At present, medium and smaller retailers in malls are facing tough times because of the high rentals and low conversion rates. The rentals, which exhibited an upward trend in the last two years, have seen a correction in the third quarter of 2008 and are expected to rationalize in the coming period. Over the next three years, as depicted in the graphs below, while around 26.02 million square feet of Grade A office space is expected to be infused across Mumbai, incremental demand for such space, assuming realistic GDP forecasts, is forecasted to be only 18.40 million square feet, or 71.0% of anticipated supply. This amounts to a predicted oversupply of 7.50 million square feet, a figure that is mitigated by the fact that due to financial constraints on the supply and demand sides, restructuring and realignment of projects could be a prominent feature across
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India's real estate market over the coming months. (Source: Knight Frank – Q1 2009 India Office Market)
Estimated new office supply 2009-11
11.29.2
5.7
20.4
26
0
5
10
15
20
25
30
2009 2010 2011
Year
Are
a (m
n.sq
.ft)
Supply C umulat ive Supply
(Source: Knight Frank – Q1 2009 India Office Market)
Projected office demand 2009-11
20.518.4
16.1
0
5
10
15
20
25
Optimist ic R ealist ic C o nservat ive
Scenario
Are
a (m
n.sq
.ft)
(Source: Knight Frank – Q1 2009 India Office Market)
Challenges Facing the Indian Real Estate Sector Lack of National Reach of Existing Real Estate Development Companies There are currently very few real estate development companies in India that can claim to have operations throughout the country. Most real estate developers in India are regionally based and active in areas where the conditions are familiar to them because of factors such as:
• the differing tastes of customers in different regions;
• difficulties with respect to large scale land acquisition in unfamiliar locations;
• inadequate infrastructure to market projects in new locations;
• the large number of approvals which must be obtained from different authorities at various stages of construction under local laws;
• the long gestation period of projects;
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• Difference in Local laws and regulations governing the sector; and
• No standard norms and standards followed hence very difficult to evaluate different projects judiciously.
Majority of the Market is in the Unorganized Segment The Indian real estate sector is highly fragmented with many small builders and contractors, who account for a majority of the housing units constructed. As a result, there is less transparency in dealings or sharing of data between these builders and contractors. Demand Dependent On Many Factors Real estate developers face challenges in generating adequate demand for many projects. The factors that influence a customer’s choice of property are not restricted to quality alone, but also depend on a number of external factors, including proximity to urban areas, and facilities and infrastructure such as schools, roads and water supply, each of which is often beyond the developer’s control. Demand for housing units is also influenced by policy decisions relating to housing incentives. Also, in light of recent events which lead to the global economic slowdown, the real estate industry is also experiencing a significant downturn and an industry-wide softening of demand for property has resulted from a lack of consumer confidence, decreased affordability, decreased availability of mortgage financing, and large supplies of resale and new inventories. Increasing Raw Material Prices Construction activities are often funded by the customer, who makes cash advances at different stages of construction. In other words, the final amount of revenue from a project is pre-determined and the realization of this revenue is scattered across the period of construction. The real estate sector is dependent on a number of components such as cement, steel, bricks, wood, sand, gravel and paints. A significant challenge that real estate developers face is dealing with increasing costs for raw materials. As the revenues from sale of units are predetermined, adverse changes in the price of any raw material directly affects the developers’ financial results. Although, historically, the prices of raw materials have generally risen, these prices have been decreasing over the last year. Interest Rates One of the main drivers of the growth in demand for housing is the availability of finance at low rates of interest. Tax Incentives The existing tax incentives available for housing loans are one of the major factors influencing demand. Reforms in the Indian Real Estate Sector
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Foreign Direct Investment in Real Estate In 2005, the Government modified the FDI rules applicable to the real estate sector by permitting 100% FDI with respect to townships, housing, built-up infrastructure and construction development projects, subject to a number of guidelines. See “Regulations and Policies – FDI in real estate sector”. Housing Regulations The Government has suggested the repeal of the Urban Land (Ceiling and Regulation) Act, 1976, (“ULCRA”) by way of the Urban Land (Ceiling and Regulation) Repeal Act 1999, which has so far been adopted by the state governments of Haryana, Punjab, Uttar Pradesh, Gujarat, Karnataka, Madhya Pradesh, Rajasthan, Orissa and Andhra Pradesh, but being a state subject has not been repealed in a number of other states. Maharashtra has recently repealed the ULCRA. See “Regulations and Policies – The Urban Land (Ceiling and Regulation) Act, 1976”. Recent reforms Over the past decade, India has emerged as a leader in the global economy. It is a magnet for foreign direct investment (FDI), and has displaced Mexico as the third most preferred country for foreign investment. FDI in India is expected to increase to US$15 billion this year, triple the 2004 figure. Many foreign companies are starting or expanding operations in India. One-fifth of all Fortune 500 companies including Eli Lilly, General Electric, and Hewlett Packard have set up research and development facilities in India. The surge in foreign investment, more joint ventures between Indian and foreign companies, and the growth of India’s domestic industries have created more employment opportunities for India’s young, highly educated, professional workforce and fueled the growth of the country’s middle class. Real estate is one of the fastest growing sectors in India. Market analysis pegs returns from realty in India at an average of 14% annually with a tremendous upsurge in commercial real estate on account of the Indian BPO boom. Lease rentals have been picking up steadily and there is a gaping demand for quality infrastructure. A significant demand is also likely to be generated as the outsourcing boom moves into the manufacturing sector. Further, the housing sector has been growing at an average of 34% annually, while the hospitality industry witnessed a growth of 10-15% last year. India also scores on the construction front. A Mckinsey report reveals that the average profit from construction in India is 18%, which is double the profitability for a construction project undertaken in the US. The importance of the Real Estate sector, as an engine of the nation’s growth, can be gauged from the fact that it is the second largest employer next only to agriculture and its size is close to US $ 12 billion and grows at about 30% per annum. Five per cent of the country’s GDP is contributed by the housing sector. In the next three or four or five years this contribution to the GDP is expected to rise to 6%.
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9. LEGAL PROCEEDINGS
Save as described below, the Company believes that the Company is not involved in any material legal proceedings and in the opinion of the Company, no proceedings are threatened, which may have, or have had during the 12 months preceding the date of this Placement Document, material adverse effect on the Company’s business, financial position, profitability or results of operations. A summary of legal proceedings involving the Company and its projects is set forth below. MATERIAL LEGAL PROCEEDINGS Cases where the Company is a party 1. Messer Holding Limited has initiated proceedings against Shyam M. Ruia
and others, in the High Court, Bombay in relation to the property bearing CTS No. 551/27, 552, 552/1, 551/5 to 552/12 situated at village Nahur, Mulund, taluka Kurla (Suit Property), development rights over which were sold by M/s. Bombay Oxygen Corporation Limited to the Company for a consideration of approximately Rs. 2,000 million. The Company has been made a party in a notice of motion in the aforesaid proceedings. Messer Holding Limited has alleged that the transfer of development rights to the Company is null and void. A status-quo order has been passed by the Supreme Court of India, as a result of which construction at the Suit Property cannot be carried forward. The matter is pending.
Messer Holding Limited has filed a suit in the High Court, Bombay against the Bombay Oxygen Corporation Limited and the Company in relation to the Suit Property. Messer Holding Limited has prayed for cancellation of development agreement between the Company and the Bombay Oxygen Limited, in relation to the transfer of development rights in the Suit Property. The matter is pending.
2. Prakash Gunaji Shinde (Plaintiff) has filed a suit in the City Civil Court,
Bombay against M/s. R.T. Constructions and the Company (the Defendants). The Plaintiff has alleged that the Defendants were required to provide an accommodation to 1,309 tenants by constructing 8 towers in Vile Parle (east), the but the said towers were not properly built. The Plaintiff has contended that allotment letters were also not provided. It was alleged by the Plaintiff that most of the land was used for construction of shopping mall and for commercial use and about 40 to 50 people were not provided accommodation. The Plaintiff has prayed for injunction on the construction work. The matter is pending.
3. M/s. Lok Holdings & Constructions Limited (Plaintiff) had filed an arbitration
petition against the Company in the High Court, Bombay. Pursuant to an agreement between the Plaintiff and the Company, in relation to a property situated at village Ambivali, Versova, the Plaintiff claimed refund of Rs 268.5 million which it had allegedly given on credit to the Company for purchase of TDRs. The Company submitted that in the terms of the agreement, it was supposed to pay Rs. 308.5 million to the Plaintiff, in the event it receives TDRs free of cost. In anticipation of free TDRs, the Company had also made
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an adhoc payment of Rs 50 million to the Defendant, out of the total credit of Rs. 310 million. However, the Company did not receive the TDRs free of cost and had to purchase the same from the open market. The Company therefore demanded a refund of Rs. 50 million from the Plaintiff. In accordance with the terms of the said agreement, the parties referred the matter to an arbitrator and the Plaintiff approached the High Court, Mumbai for interim relief. The High Court rejected the said claim for interim relief. Pursuant to an order of the High Court, an arbitrator has been appointed and the matter is pending. The Company has filed an arbitration petition before the High Court, Mumbai praying that the Plaintiff may be directed to deposit Rs. 50 million in the court of which the Company had made an adhoc payment to the Plaintiff. The petition is pending.
Cases in relation to projects of the Company where the Company is not a party :
Nowrsji J. Gamadia represented by his legal heir, Behram N. Gamadia (Plaintiff) has filed a suit in the High Court, Mumbai against Samarthmal P. Seth (Defendant) with respect to property at C.S. No. 18/738, Carmichael Road, Mumbai (Suit Property). The Company had entered into a deed of assignment in respect of the Suit Property with the Defendant. The Plaintiff has prayed for declaration from the High Court, Mumbai that the partnership firm constituted by the Plaintiff and Defendant has been abandoned and that the Suit Property is not partnership property but an absolute property of the Plaintiff. The Plaintiff has also pleaded for alternate relief by way of declaration from the Court that the partnership firm stands dissolved. The Court had appointed a receiver with respect to the Suit Property. The issues have been framed and the matter is pending.
Oomer Ahmed, an erstwhile partner of the Defendant, has filed a suit against Samarthmal P. Seth alleging that he had not retired from the erstwhile partnership firm and that the erstwhile partnership between them in relation to the Suit Property is not dissolved. The matter is pending. The total amount involved is approximately Rs. 550 million.
OTHER PROCEEDINGS Cases where the Company is a party
The Company has approximately 48 property related proceedings initiated against it and it has initiated two property related proceedings against various parties. These proceedings are pending adjudication. These proceedings primarily relate to property related disputes which include disputes in relation to ownership of properties, evacuation of slum dwellers, acquisition of TDRs and slum rehabilitation projects.
Cases in relation to projects of the Company where the Company is not a party
Two proceedings are pending in relation to our projects, in which the Company is not a party, at various stages of adjudication. These proceedings primarily relate to creation of interests and right to possession.
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CRIMINAL CASES
1. One Mr. Nilesh Patil has filed complaint in the Ld. Metropolitan Magistrate’s Court at Mulund against the Hon’ble Chairman of HDIL. The said complaint is challenged by filing Criminal Revision Application No. 971 of 2009 in the Hon’ble Court of Sessions, Mumbai and the same is pending for final hearing.
2. One Mr. Praful Dave has filed the above case against Angel Developers in the
Metropolitan Magistrate Court, Vikhroli, Mumbai and the same is pending for final hearing.
3. Ashna Co-op. HSG Ltd. has filed the above case against one Karm Trading
and Investment Pvt. Ltd. and Sapphire Land Development Pvt. Ltd., in the Ld. Metropolitan Magistrate’s Court at Bandra, Mumbai under the provisions of MOFA Act and the same is pending for appearances.
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10. GOVERNMENT APPROVALS AND LICENSING ARRANGEMENTS The Company has obtained Government and other applicable approvals for carrying on its business, and all such approvals are currently valid and in force. The Company will apply for, and will continue to apply for, relevant renewals, modifications and new licenses, as may be necessary or become required for the purposes of its business or operations.
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11 OTHER REGULATORY AND STATUTORY DISCLOSURES
11.1 Authority for the Issue The Debentures are being issued pursuant to the resolution passed by the Board of Directors of the Company at their meeting held on 29P
thP October 2009 and subject to
the provisions of the Act and the Memorandum and Articles of Association of the Company. The present issue is within the general borrowing limits in terms of the resolution passed under Section 293 (1) (d) of the Act at the Annual General Meeting of the shareholders of the Company held on 27th January 2007 giving their consent to the borrowing by the Directors of the Company from time to time up to 50000 Million (Rupees Fifty Thousand million only). The borrowings under these Debentures will be within the prescribed limits as aforesaid. 11.2 Prohibition by SEBI Our Company, our Directors, any of our Associates or group companies, and Companies with which our directors are associated as Promoters, have not been prohibited from accessing the capital market under any order or directions passed by SEBI. The listing of any of our securities has never been refused at anytime by any of the stock exchanges in India. 11.3 Eligibility of the Company to enter the capital market The norms regarding eligibility to enter the capital market are not applicable as per current regulations to private placement of Debentures. 11.4 Disclaimer clause of SEBI and BSE AS REQUIRED, A COPY OF THE INFORMATION MEMORANDUM FOR ISSUE OF DEBENTURES AGGREGATING RS. 11,500,000,000.00/- (RUPEES ELEVEN THOUSAND FIVE HUNDRED MILLION ONLY) ON A PRIVATE PLACEMENT BASIS HAS BEEN FILED WITH THE WHOLESALE DEBT MARKET (WDM) SEGMENT OF BOMBAY STOCK EXCHANGE LIMITED (BSE) IN TERMS OF THE SEBI CIRCULAR NO. SEBI/MRD/SE/AT/36/2003/30/09 DATED SEPTEMBER 30, 2003 AND SEBI CIRCULAR NO. SEBI/MRD/SE/AT/46/2003 DATED DECEMBER 22, 2003 (“SEBI PRIVATE PLACEMENT CIRCULARS”). AS PER THE PROVISIONS OF SEBI PRIVATE PLACEMENT CIRCULARS, A COPY OF THIS INFORMATION MEMORANDUM HAS NOT BEEN FILED WITH OR SUBMITTED TO SEBI. IT IS DISTINCTLY UNDERSTOOD THAT THIS INFORMATION MEMORANDUM SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED TO HAVE BEEN APPROVED OR VETTED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THIS INFORMATION MEMORANDUM.
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IT IS ALSO TO BE DISTINCTLY UNDERSTOOD THAT FILING OF THE INFORMATION MEMORANDUM WITH BSE SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR VETTED OR APPROVED BY BSE. BSE DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THIS INFORMATION MEMORANDUM. THE BOARD OF DIRECTORS OF THE COMPANY AND ITS AUTHORISED SIGNATORY HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE INFORMATION MEMORANDUM ARE ADEQUATE AND IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 IN FORCE FOR THE TIME BEING AND AS APPLICABLE AS PER THE SEBI PRIVATE PLACEMENT CIRCULARS. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE. HOWEVER, BEFORE INVESTING, PLEASE READ THE “DISCLAIMER” ON PAGE 10 OF THIS INFORMATION MEMORANDUM. 11.5 Disclaimer Statement of the Company The Company accepts no responsibility for statements made otherwise than in the Information Memorandum or any other material expressly stated to be issued by or at the instance of the Company and that anyone placing reliance on any other source of information would be doing so at their own risk. 11.6 Caution The Company and its Directors accept no responsibility for statements made otherwise than in this Information Memorandum or any other material issued by or at the Companys instance and that anyone placing reliance on any other source of information, would be doing so at his or her own risk. 11.7 Disclaimer in respect of jurisdiction Any dispute arising out of this Issue will be subject to the jurisdiction of appropriate court(s) and/or tribunals/authorities in Mumbai only. This Issue is being made only to specific entities and persons to whom this Information Memorandum is addressed, and to no other person(s) or entities. 11.8 Disclaimer clause of BSE Kindly refer to Clause titled “Disclaimer clause of SEBI and BSE” 11.9 Filing of the Information Memorandum This Information Memorandum has been filed with BSE in terms of Clause 4.2(b) of the SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003 as the Debentures are being privately placed and issued in the denomination of Rs. 1,000,000.00/-(Rupees One Million Only) each. This Information Memorandum is not required to be filed with any other regulatory authority, as per the provisions of the SEBI Private Placement Circulars.
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11.10 Listing An application has been made to the BSE for permission to list the Debentures to be issued and allotted in terms of this Information Memorandum on the WDM segment of the BSE. 11.11 Consents Consents in writing of: (a) Directors through the authority vested by resolutions passed by the Board and the Sub Committee of the Board of Directors) (b) Compliance Officer; (c) Debenture Trustee to act in their respective capacities have been obtained and such consents have not been withdrawn upto the time of filing this Information Memorandum with BSE. M/s Thar & Associates, Chartered Accountants, have given their written consent to the inclusion of their report in this Information Memorandum in the form and context in which it appears herein and such consent has not been withdrawn up to the date of filing of this Information Memorandum with BSE. 11.12 Expert Opinions Except as stated elsewhere in this Information Memorandum, the Company has not obtained any expert opinions. 11.13 Expenses of the Issue The Expenses of the Issue shall not exceed 0.5% of the Issue size. The said expenses will cover the Underwriters' Commission, fees of the Registrar to the Issue, fees of the Trustees to the Debentureholders and other incidental Issue expenses. 11.14 Underwriters Commission, brokerage and Selling Commission This Issue has not been underwritten. The Company does not intend to pay any brokerage or selling commission in addition to the Underwriting Commission. 11.15 Previous public or rights issues in the last five years
• The company has come out with allotment to promoters, the promoters group and others (10 allottees) of 8,000,000 equity share of Rs.10/- each for cash at a price of Rs. 72.50 per equity share (including share premium of Rs.62.50 per equity share) aggregating to Rs. 580.00 million.
• The company has come out with Bonus issue in the ratio of 4:1 of 40,000,000 equity share of Rs.10/- each for Capitalisation of reserve.
• The company has come out with Bonus issue in the ratio of 13:5 of
130,000,000 equity share of Rs.10/- each for Capitalisation of reserve.
• The Company has come out with maiden issue of 300,000 equity share of Rs.10/- each for Pre-IPO Placement to BCCL at a price of Rs.500.00 per equity share (including share premium of Rs. 490.00 per equity share)
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aggregating to Rs. 150.00 million. The Equity share has been offered in a 100% book-building process.
• The Company has come out with maiden issue of 29,700,000 equity share of
Rs.10/- each for cash at a price of Rs.500.00 per equity share ( including share premium of Rs. 490.00 per equity share) aggregating to Rs.14,850 million. The Equity share has been offered in a 100% book-building process.
• The company has come out with GSO allotment of 4,272,081 equity share of
Rs.10/- each for cash at a price of Rs. 500.00 per equity share (including share premium of Rs.490.00 per equity share) aggregating to Rs. 2,136.04 million.
• The company has come out with Bonus issue in the ratio of 2:7 of
6,12,20,595 equity share of Rs.10/- each for Capitalisation of reserve • The company had come out with QIP issue of 70,350,000 equity shares of
Rs.10 at the price of Rs. 240 per share including a premium of Rs.230 per share, aggregating Rs. 16,884 million.
• The company has made a preferential allotment of 2,60,00,000 convertible
warrants of Rs. 10 each to Shree Rakesh Kumar Wadhawan, promoter & Executive Chairman of the company at a price of Rs. 240 per warrant. This convertible warrant will be converted into equity share upon receipt of full subscription.
11.16 Stock Market data STOCK MARKET DATA The Company’s Shares are listed on the BSE and the NSE. The Shares of the Company were first listed on July 24, 2007. The stock market data given below is for periods subsequent to such date. As the Company’s Shares are actively traded on the BSE and NSE, the stock market data has been given separately for each of these stock exchanges. As of September 30, 2009, the Company had 345,842,676 Shares outstanding. A. The following tables set forth the reported high and low closing prices of the
Company’s Shares on the NSE and the BSE and the number of Shares traded on the days such high and low prices were recorded, for the fiscal years 2008 and 2009.
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Monthly high and low prices and trading volumes on the NSE and the BSE for the six months preceding the date of filing of this Placement Document: The BSE:
(Source: www.bseindia.com; www.nseindia.com) The NSE:
NSE Month Date High
(Rs.) Volume (No. of Shares)
Date Low (Rs.)
Volume (No. of Shares)
Average (Rs.)
June 2009 June 5 327.70 13742822 June23 208.30 16235286 268.00 July 2009 July 28 293.50 18058110 July 13 179.05 24512989 236.28 August 2009 August 31 321.00 10418399 August 10 247.10 9456293 239.05 September 2009
September 17
340.50 13180076 September 4
288.25 10878315 314.38
October 2009
October 22
411.00 15680317 October 30
310.00 13606066 360.05
November 2009
November 12
380.00 12601081 November 3
288.25 14436230 334.13
(Source: www.bseindia.com; www.nseindia.com)
Notes • High, low and average prices are of the daily closing prices. • In case of two days with the same closing price, the date with higher
volume has been considered. B. The following tables set forth the details of the volume of business transacted
during the last six months on the NSE and the BSE. (No. of Shares.)
Period BSE NSE June 2009 134,982,690 365,487,231 July 2009 147,956,483 389,825,022 August 2009 87,701,898 254,069,800 September 2009 71,062,492 227,411,837 October 2009 73,388,432 226,039,731 November 2009 84,025,273 250,635,210 (Source: www.bseindia.com; www.nseindia.com)
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(in Rs. million) Period BSE NSE
June 2009 35,678 96,363 July 2009 34,719 91,750 August 2009 24,957 72,145 September 2009 22,383 71,634 October 2009 26,367 81,159 November 2009 28,532 85,169 (Source: www.bseindia.com; www.nseindia.com) C. The following table sets forth the market price of the Shares on the NSE and the BSE on the first working day following the Board meeting approving the Issue.
(Source: www.bseindia.com; www.nseindia.com) 11.17 Mechanism evolved for redressal of investor grievances Investor grievances will be settled expeditiously and satisfactorily by the Company. The Company has appointed Karvy Computershare Pvt. Ltd, to retain records for an appropriate period from the last date of despatch of Letters of Allotment/ Debenture Certificates/Refund Orders to enable the investors to approach the Registrar for redressal of their grievances. All grievances relating to the Issue may be addressed to the group in-house Registrar giving full details such as name, address of the applicant, application number, number of Debentures applied for, amount paid on application and the bank branch/collection centre where the application was submitted.
Disposal of Investor Grievances
The average time required by the Karvy Computershare Pvt. Ltd for the redressal of routine investor grievances shall be 7 days from the date of receipt of the complaint with requisite details. In case of non-routine complaints and where external agencies are involved, the Registrar would strive to redress these complaints as expeditiously as possible. ALL INVESTORS ARE HEREBY INFORMED THAT THE COMPANY HAS APPOINTED A COMPLIANCE OFFICER (NOT BEING AN “OFFICER IN DEFAULT” UNDER SECTION 5(F) OF THE ACT) WHO MAY BE CONTACTED IN CASE OF ANY PRE-ISSUE/POST-ISSUE RELATED PROBLEMS. 11.18 Changes in Auditors in the last three years There has been no change in our auditors during the last three years.
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12. OFFERING INFORMATION
12.1 Terms of the Issue: For the basic terms of this Issue, information as to who can apply, how to apply, rights of instrument-holders and other material particulars regarding the terms of this Issue, kindly refer “Terms of the Issue of Debentures” . 12.2 Minimum subscription: 1000 Debentures & in multiples of 100 debentures thereafter. 12.3 Option to subscribe Debentures to be issued under this Information Memorandum shall be issued and held in dematerialised form only, and the Company shall make necessary arrangements in this regard. 12.4 Fictitious Applications As a matter of abundant caution and although not applicable in the case of Debentures, attention of applicants is specially drawn to the provisions of subsection (1) of Section 68A of the Companies Act, 1956: “Any person who: a) makes in a fictitious name an application to a company for acquiring, or
subscribing for, any shares therein, or b) otherwise induces a company to allot, or register any transfer of shares
therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.”
12.5 Refund Orders The Company shall ensure that the refund orders, if any, shall be dispatched by registered post, and adequate funds shall be made available to the Registrar for that purpose. 12.6 Undertakings a) The Company hereby undertakes that: The complaints, if any, in respect of the Issue would be attended to
expeditiously and satisfactorily; It shall take the necessary steps for the purpose of listing the Letters of
Allotment in respect of the Debentures on the WDM within seven days of finalisation of basis of allotment;
No further issue of securities shall be made till the securities offered through this Information Memorandum are listed or till the application moneys are refunded on account of non-listing, etc.;
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The funds required for dispatch of refund orders/allotment letters/certificates by registered post shall be made available to the Karvy Computershare Pvt. Ltd by the issuer Company
Necessary co-operation with the credit rating agencies shall be extended in providing true and adequate information till the debt obligations in respect of any Debentures issued under this Information Memorandum are outstanding.
b) The Company further undertakes that: (i) It shall confirm utilisation of funds raised through the Debentures in
accordance with the stated objects in this Information Memorandum, to the Trustees at the end of each half-year;
(ii) With prospective effect, the Company shall disclose the complete name and address of the Trustees in the annual report;
(iii) It will provide a compliance certificate duly certified by the Debenture Trustee to the Debentureholders, (on a yearly basis), in respect of compliance with the terms and conditions of issue of Debentures as contained in the Information Memorandum;
(iv) It will furnish a confirmation certificate that the security created by the Company in favour of the Debentureholders is properly maintained and is adequate enough to meet the payment obligations towards the Debentureholders in the Event of Default.
c) The Company hereby additionally undertakes as follows:
The Company shall immediately upon the Company becoming aware inform the Trustee(s) of any changes taking place in the ownership or control of the Company whereby control of the Company will change or has changed. In the event any Debentures being issued under this Information Memorandum having to be stamped (including for amounts higher than the amount originally determined by the Company) for whatever reason, the Company undertakes to affix the stamp or bear the cost of affixing the stamp to such Debentures and such other charges and penalties as may be required to be paid in respect of the same.
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13. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
Copies of the contracts and documents referred to below, all of which have been attached to a copy of this Information Memorandum, which has been delivered to BSE may be inspected at the Registered office of the Company between 10.00 a.m. To 5.00 p.m., on any working day between the date of this Information Memorandum and the date of closing of this issue.
1) Certified true copy of the Memorandum and Articles of Association of the Company, as amended.
2) Copy of the resolution of the Board of Directors passed at the meeting held on 29th October 2009 approving the issuance of Secured Non-Convertible Debentures on a private placement basis.
3) Copies of the Balance Sheet, Profit and Loss Account for the Three years ended 31P
stP March, 2009 and the report of the Auditors thereon of the
Company.
4) Rating letter of CARE assigning credit rating for this Issue.
5) Copy of the in-principle approval granted by the Bombay Stock Exchange Limited, Mumbai (BSE) for listing of the Debentures to be issued in terms of this Information Memorandum.
6) Copies of the agreement between the Company and National Securities Depository Limited (NSDL)
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14. Auditors Report
CONSOLIDATED FINANCIAL INFORMATION OF HOUSING DEVELOPMENT AND INFRASTRUCTURE LIMITED
To, Date: June 3P
rdP, 2009
The Board of Directors, Housing Development And Infrastructure Limited Dheeraj Arma, 9P
thP floor,
Anant Kanekar Marg, Station Road, Bandra (E), Mumbai-400051.
AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS OF HOUSING DEVELOPMENT AND INFRASTRUCTURE LIMITED AS AT END FOR EACH OF THE YEARS ENDED MARCH 31, 2007, MARCH 31, 2008 AND MARCH 31, 2009.
1. We have audited the attached Consolidated Financial Statements (the “consolidated statements”) of Housing Development and Infrastructure Limited (the Company) along with its subsidiaries Privilege Power and Infrastructure Private Limited, Blue Star Realtors Private Limited, HDIL Entertainment Private Limited, Ravijyot Finance and Leasing Private Limited, Mazda Estate Private Limited, HDIL Leisure Private Limited, Excel Arcade Private Limited and HDIL Oil and Gas Private Limited annexed to this report for the purposes of inclusion in the Placement Document prepared by the Company in connection with the Qualified Institutions Placement (“QIP”) of its equity shares in accordance with the provisions of Chapter XIII-A of the Securities and Exchange Board of India (“SEBI”) Disclosure and Investor Protection Guidelines, 2000 (the “Guidelines”), as amended from time to time. The preparation of such consolidated statements is the responsibility of the Company’s management. Our responsibility is to report on such statements based on our procedures.
2. We have examined such consolidated statements taking into consideration the Guidance Note on Reports in Company Prospectuses and Guidance Note on Audit Reports/Certificates of Financial Information in Offer Documents issued by the Institute of Chartered Accountants of India.
3. We report that the figures disclosed in such consolidated statements have been extracted from the consolidated statements of the Company for each of the years ended March 31, 2007, March 31, 2008 and March 31, 2009 which have been audited by us and in respect of which we have issued Audit Opinions dated 31st May 2007,21P
stP May 2008 and 23P
rdP May 2009 respectively
to the board of directors of the Company. [In the preparation of these consolidated statements, no adjustment has been made for any events occurring subsequent to the dates of our audit reports specified herein.]
4. For the purpose of our audit of the consolidated statements of the Group, we have placed reliance on the following:
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I) Audited financial statements of the subsidiaries which reflects total assets of Rs.5187.50 million as at March 31, 2009, total revenues of Rs.93.38 million for the year ended on that date have been audited by us; and
II) The financial statements of the subsidiary which reflect total assets of Rs.926.56 million as at March 31, 2009, total revenues of Rs.Nil for the year ended on that date and total assets of Rs.838.54 million as at March 31,2008, total revenues of Rs.Nil for the year ended on that has been audited by other auditors, whose report has been furnished to us and our opinion, in so far as it relates to the amounts included in respect of this subsidiary, is based solely on the reports of the other auditor.
5. There have been no audit qualifications in our Audit Reports for each of the years ended March 31, 2007, March 31, 2008 and March 31, 2009.
6. We conducted our audit in accordance with the auditing standards generally accepted in India to enable us to issue an opinion on the general purpose financial statements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe our audit provides a reasonable basis for our opinion.
7. We report that the consolidated statements of the Company as at and for each of the years ended March 31, 2007, March 31, 2008 and, March 31, 2009 have been prepared by the Group in accordance with the requirements of the applicable Accounting Standards (AS) on “Consolidated Financial Statements” (AS-21), and on the basis of the separate audited financial statements of the Company and its subsidiaries as listed in para 1 above.
8. On the basis of the information and explanations given to us and on the consideration of the separate audit reports on individual audited financial statements of the Company and its subsidiaries, we are of the opinion that the said consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India :
i. In case of consolidated balance sheet, of the consolidated state of affairs of the Company as on March 31, 2007, March 31, 2008 and, March 31, 2009
ii. In case of consolidated profit and loss account, of the consolidated profit for the year ended March 31, 2007, March 31, 2008 and, March 31, 2009 and
iii. In the case of consolidated cash flow statement, of the consolidated cash flows for the year ended March 31, 2007, March 31, 2008 and, March 31, 2009.
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In our opinion, the ‘financial Information as per audited Financial Statements’ and other Financial Information mentioned above for the years ended 31 P
stP
March, 2009, 2008, and 2007 have been prepared in accordance with Part IIB of Schedule II of the Act and the Guidelines.
This report should not in any way be construed as a reissuance or redating of any of the previous audit reports nor should this be construed as a new opinion on any of the Financial Statements referred to herein.
This report is intended solely for your information and for inclusion in offer documents in connection with the proposed QIP of the company and is not to be used, referred to or distributed for any other purpose without our prior written consent in each instance and which consent may be given only after full consideration of the circumstances at that time.
For M/s THAR & CO. Chartered Accountants Jayesh R. Thar (Proprietor) Membership No. 032917
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CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES, AS RESTATED (Rs. in Million)
Particulars Schedule March 31,
2009 March 31,
2008 March 31,
2007 SOURCES OF FUNDS
Shareholders' funds Capital A 2,754.93 2,142.72 1800.00 Reserves and surplus B 41,463.27 34,272.35 5541.97 Share Application Money Loan funds C Secured loans 40,933.20 19,460.77 3756.85 Unsecured loans 500.00 11,666.67 - Minority interest 0.03 0.09 - Deferred tax liability D 30.26 15.39 8.28
85,681.69 67,557.99 11,107.10
APPLICATION OF FUNDS
Fixed assets E Gross block 653.83 575.53 266.68 Less : Depreciation 56.20 31.51 15.93 Net block 597.63 544.02 250.75 Capital work-in-progress 151.71 52.25 3.46 749.34 596.27 254.21 Goodwill on consolidation F 478.47 91.11 22.98 Investments G 2,490.88 1,914.52 1577.55 Deffered tax assets H 6.49 0.24 0.61 Current assets, loans and advances Inventories I 69,128.00 55,228.71 13244.79 Sundry debtors J 1,669.11 566.60 3113.12 Cash and bank balances K 754.89 3,505.06 57.06 Loans and advances L 17,097.37 13,107.63 1238.50 88,649.37 72,408.00 17,653.48 Less : Current liabilities and provisions
Current liabilities M 6,509.04 5,763.18 7918.50 Provisions N 183.82 1,713.22 669.92 6,692.86 7,476.40 8,588.42 Net current assets 81,956.51 64,931.60 9,065.06 Miscellaneous expenditure (to the extent not written off or adjusted)
O - 24.25 186.69
85,681.69 67,557.99 11,107.10 Significant account policies and notes to accounts.
X
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CONSOLIDATED SUMMARY STATEMENT OF PROFIT AND LOSS, AS RESTATED
(Rs. in Million)
Schedule March 31,
2009 March 31,
2008 March 31,
2007 INCOME Turnover P 17,284.41 23,804.50 12,041.92 Other income Q 539.84 528.52 205.99 17,824.25 24,333.02 12,247.91 EXPENDITURE (Increase) / Decrease in stock in trade R (1,373.45) (124.60) (113.75) (Increase) / Decrease in work-in-progress S (12,525.84) (40,406.32) (8,361.94) Cost of premises capitalised as investment/fixed asset
(61.87)
(180.00)
(240.62)
Cost of Construction, development and operating expenses
T 16,951.70
47,039.90
13,842.42
Project specific interest W 5,367.47 1,364.37 506.41 Employees' remuneration and welfare expenses
U 220.75 122.40 84.76
Administrative expenses V 908.35 431.01 211.40 Interest W 581.74 43.37 54.84 Depreciation 25.43 14.89 7.58 Preliminary expenses written off 15.38 7.46 5.70 10,109.66 8,312.48 5,996.80 Operating profit before tax and Exceptional Items
7,714.58
16,020.54
6,251.11
Exceptional Items - - - Operating profit before tax 7,714.58 16,020.54 6,251.11 Less :Provision for tax 920.78 1,906.00 768.24 Less:-Provision for fringe benefit tax 13.36 4.60 2.03 Less: Provision for wealth tax 0.33 0.14 0.10 Less :Deferred tax liability 8.96 8.49 3.85 Add : MAT Credit entitlement 0.82 - - Add :Deferred tax asset 0.04 0.98 0.71 Add:-Excess provision for taxation no longer required
- - 2.41
Add :Deferred tax asset of earlier year - - - Profit after tax before minority interest 6,772.01 14,102.29 5,480.01 Less : Minority interest (5.46) - - Balance brought forward from previous year
5,723.88 4,901.12 1,036.72
Add /(less): Deffered tax asset/(liabilities) for earlier year
0.30 - -
Add : MAT Credit entitlement 336.60 - - Add:-Excess provision for taxation no longer required
757.71 0.27 -
Less: Short Provision for Income Tax 0.01 4.02 - Less : Preliminary expenses written off 0.73 - - Less : Share issue expenses 0.41 - -
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Schedule March 31,
2009 March 31,
2008 March 31,
2007 Adjustments for subsidiaries added (0.11) 6.28 - Profit available for appropriation 13,594.72 19,005.94 6,516.74 Appropriations : Transferred to General Reserve 5,736.71 4,876.32 629.88 Transferred to Capital Redemption Reserve
- 6.21 -
Transferred to Debenture Redemption Reserve
2,250.00 7,125.00 -
Interim Dividend - 420.00 - Proposed Dividend - 642.81 - Dividend distribution tax - 180.62 - Utilised for issue of Bonus Shares - - 980.00 Profit before minority interest 5,608.01 5,754.98 4,906.87 Less : Losses of minority adjusted against majority interest
5.41 (0.00) 0.00
Less : Preacquisition profit (0.11) 6.88 - Less : Impairment of Goodwill 58.27 24.22 5.75 Profit carried to Balance sheet 5,544.44 5,723.88 4,901.12 Earnings per share-Basic and diluted (Amount in Rs.)
28.57
53.82
23.67
Equity shares of par value Rs. 10/- each 275,492,676 262,057,9
32 231,428,5
71 Significant account policies and notes to accounts.
X
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CONSOLIDATED STATEMENT OF CASH FLOWS, AS RESTATED Consolidated Cash Flow Statement for the period ended on
(Rs. In Millions)
March 31, 2009
March 31, 2008
March 31, 2007
A Cash flow from operating activities Net profit before tax 7,714.58 16,020.54 6,251.12 Adjustments for : (1) Depreciation 25.43 14.89 7.58 (2) Expenses of increasing authorised share capital 15.38 7.46 5.70 (3) Interest expenses 581.74 43.37 39.92 (4) Investment Income (469.72) (415.28) (72.95) (5) Profit on sale of investments (1.77) (111.69) - (6) Loss on sale of asset 0.32 0.11 - Operating profit before working capital changes 7,865.95 15,559.39 6,231.37 Movements in working capital : Decrease / (Increase) in inventory (13,899.29) (41,983.93) (8,475.69) Decrease / (Increase) in sundry debtors (1,102.52) 2,546.53 (2,331.12) Decrease / (Increase) in other receivables (3,988.39) (11,869.12) (566.60) (Decrease) / Increase in trade and other 755.73 (2,142.43) 3,831.57 Cash generated from/(used in) operations (10,368.51) (37,889.56) (1,310.46) Less : Direct taxes paid (net of refunds) 628.64 1,636.51 199.68 Net cash from /(used in) operating activities (10,997.15) (39,526.07) (1,510.15) B Cash flows from investing activities (1) Sale of fixed assets 0.25 0.05 - (2) Purchase of Investments (net of Sales) (572.72) (336.96) (420.40) (3) Investment Income 469.72 415.28 3.34 (4) Profit on Sale of Investments 1.77 111.69 - (5) (Increase) / Decrease in capital Work in (99.46) (48.79) 6.89 (6) Purchase of fixed assets (including additional (525.36) (405.92) (203.74) Net cash from/(used in) investing activities (725.80) (264.64) (613.91) C Cash flows from financing activities (1) Proceeds from issue of equity shares - 17,136.04 - (2) Proceeds from borrowings 25,013.70 29,311.83 1792.20 (3) Repayment of borrowings (14,707.94) (1,941.24) - (4) Interest paid (581.74) (43.37) (39.92) (5) Dividend paid (including dividend distribution (751.32) (491.05) - (6) IPO expenses - (726.40) - (7) Preliminary Expenses (0.03) - - (8) Expenses towards increase in share capital - (12.45) (10.78) (9) Proceeds from Share Application Money Net cash from/(used in) financing activities 8,972.68 43,233.36 1,741.50
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March 31, 2009
March 31, 2008
March 31, 2007
Net increase/(decrease) in cash and cash (2750.27) 3442.66 (382.55) Cash and cash equivalents at the beginning of 3,505.06 57.06 439.61 Less : Delink of subsidiary (0.02) - - Less : Upon addition of new subsidiaries 0.12 5.34 - Cash and cash equivalents at the end of the year 754.89 3,505.06 57.06 Components of cash and cash equivalents as at 31 P
stP
Cash on hand 10.21 12.21 12.11 With banks - on current account 217.16 191.95 44.95 - on deposit account 527.62 3,300.90 - Cash and cash equivalents at the end of the 754.89 3,505.06 57.06
Notes :
1) The above cash flow statement has been prepared under the "Indirect Method" as set out in Accounting Standard - 3 "Cash Flow Statement” issued by The Institute of Chartered Accountants of India.
2) Figures in the brackets indicate outflow.
(Rs. In Millions)
Particulars 31-Mar-09 31-Mar-
08 31-Mar-07 Schedule "B" Reserve and surplus Capital reserve
Balance as per last balance sheet 0.60
0.60 -
-
Particulars 31-Mar-09 31-Mar-08 31-Mar-07 Schedule "A" (Rs. In Millions) Share capital Authorised :
50,00,00,000 Equity shares of Rs.10/- each 5,000.00
5,000.00
2,500.00
Issued, subscribed and paid up
27,54,92,676 Equity Share of Rs.10/-each fully paid up. 2,754.93
2,142.72
1,800.00
(Of the above 6,12,20,595 Shares are alloted as fully paid -up by way of bonus shares)
2,754.93
2,142.72
1,800.00
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0.60 0.60 Capital redemption reserve
Balance as per last balance sheet 6.21
- -
Add:-Transferred from Profit and Loss Account - 6.21 -
6.21
6.21 -
Share premium
Balance as per last balance sheet 15,899.49
958.03
100.00
Add: Received during the year - 16,793.32 -
Less : Issue expenses written off - 893.83 -
Less : Utilised for redumption of preference shares - 958.03 -
Less:-Utilised for issue of fully paid bonus shares 612.21
-
100.00
15,287.28
15,899.49 -
Debenture redemption reserve
Balance as per last balance sheet 7,125.00
- -
Add:-Transferred from Profit and Loss Account 2,250.00
7,125.00 -
Less : Transferred to General Reserve 2,500.00
- -
6,875.00
7,125.00 -
General reserve
Balance as per last balance sheet 5,517.17
640.85
230.98
Add:-Transferred from Profit and Loss Account 5,736.71
4,876.32
629.87
Add : Transferred from Debenture Redemption Reserve 2,500.00
- -
Less : Cost of increasing authorised share capital written off 4.12
- -
Less : Utilised for issue of fully paid bonus shares - -
220.00
13,749.75
5,517.17
640.85
Surplus
Profit and Loss Account 5,544.44
5,723.88
4,901.12
41,463.27
34,272.35
5,541.97
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(Rs. In Millions)
Particulars 31-Mar-
09 31-Mar-
08 31-Mar-
07 Schedule "C" Loans Fund Secured loans
15,900 Redeemable non convertible debentures of Rs.10 lacs each
15,900.00
8,750.00
-
-
-
Term loan from Scheduled Banks 22,033.20
7,710.77
3,756.85
-
-
Term loan from Financial Institutions 3,000.00
3,000.00
-
40,933.20
19,460.77
3,756.85
Unsecured loans
50 Redeemable non convertible debentures of Rs.100 Lacs each 500.00
3,000.00
-
Term loan from Scheduled Banks -
8,666.67
-
500.00
11,666.67
-
(Rs. In Millions)
Particulars 31-Mar-09 31-Mar-08 31-Mar-07
Schedule "D"
Deferred tax liability
Arising on account of timing difference in,
Depreciation 30.26 18.46 9.22
Provision for gratuity - (1.56) (0.31)
Provision for encashment of leave encashment - (1.51) (0.63)
30.26 15.39 8.28
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(Rs. In Millions)
Particulars 31-Mar-09 31-Mar-08 31-Mar-07
Schedule "F"
Goodwill on consolidation
Balance as per last balance sheet 91.11 22.98 28.77
Add / (Less) : Goodwill / (Capital reserve) on acquisition of interest in subsidiary 445.64 92.34 (0.04)
Less: Impairment 58.28 24.21 5.75
478.47 91.11 22.98
(Rs. In Millions)
Particulars 31-Mar-09 31-Mar-08 31-Mar-07
Schedule "G"
Investments
Long Term Investments (at cost)
In immovable property
Investment in property at Dheeraj Arma 411.28 411.28 411.28
Investment in property - Flats at Virar 1.31 1.31 1.31
Investment in property - Pali Arcade 31.37 - -
Investments other than trade
Investments (Unquoted)
Punjab & Maharashtra Co-op. Bank Limited 5.75 5.75 1.50
2,30,000 Equity shares of Rs.25/- each fully paid up
Cost of Construction, development and operating expenses
Land 3,348.40 33,141.61 6,286.64
TDR - 135.03 136.71
Tenancy rights 6,080.65 2,074.65 5,417.34
Construction materials and other expenses 7,493.29 11,683.26 2,001.74
Box office Purchases and operating expenses 29.36 5.35 -
16,951.70 47,039.90 13,842.43
(Rs. In Millions)
Particulars 31-Mar-09 31-Mar-08 31-Mar-07
Schedule "U"
Employee's remuneration and welfare expenses
Salary and welfare expenses 220.75 122.40 84.76
220.75 122.40 84.76
(Rs. In Millions)
Particulars 31-Mar-09 31-Mar-08 31-Mar-07
Schedule "V"
Administrative expenses
Sales promotion and advertisement expenses 304.15 113.71 75.21
Brokerage and commission 12.30 2.69 12.96
Electricity charges 10.22 4.65 4.79
Insurance charges 0.14 1.10 6.23
Repairs and maintenance to other assets 3.63 2.66 1.45
Other administrative expenses 101.93 49.39 10.29
Loss on sale of car 0.32 0.11 -
Printing and stationery 11.05 8.44 5.75
Traveling and conveyance expenses 164.64 49.72 14.76
Professional fees 26.54 61.43 15.18
Rent , rates and taxes 26.84 27.71 18.82
Stamping and registration 0.70 24.62 13.41
Communication expenses 18.47 14.40 8.50
Directors remuneration and sitting fees 196.22 27.43 -
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181
Remuneration to auditors 13.90 3.27 2.75
Donation 17.25 39.63 21.26
Filing fees paid to the ROC 0.05 0.05 0.04
908.35 431.01 211.40
(Rs. In Millions)
Particulars 31-Mar-09 31-Mar-08 31-Mar-07
Schedule "W"
Finance expenses
Project specific interest 5,367.47 1,364.37 506.41
Other interest 581.74 43.37 54.84
5,949.21 1,407.74 561.25
Statement of significant accounting policies and notes on consolidated accounts for the year ended 31P
stP March,2009
1. Basis of Preparation
(a) The financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in India (“GAAP”) under the historical cost convention on an accrual basis and comply in all material respects with the mandatory Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government in consultation with the National Advisory Committee on Accounting Standards. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year. (b) Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the company.
(c) Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates. Any revision to accounting estimates is recognised in accordance with the requirements of the respective accounting standard.
2
Principles of consolidation
The consolidated financial statements relate to the Company and its subsidiaries & joint venture (hereinafter together with the Company collectively referred to as ‘the Group’). In the preparation of these consolidated financial statements, investments in Subsidiaries and joint ventures have been accounted for in accordance with Accounting Standard (AS) 21 (Consolidated Financial Statements) and Accounting Standard (AS) 27 (Financial Reporting of Interests in Joint Ventures) respectively. The consolidated financial statements are prepared on the following basis:- (a) Subsidiary companies are consolidated on a line-by-line basis by adding together the book values of the like items of assets, liabilities, income and expenses after eliminating all significant intra-Group balances and intra-Group transactions and also unrealized profits or losses, except where cost cannot be recovered. The results of operations of a subsidiary are
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included in the consolidated financial statements from the date on which the parent subsidiary relationship came into existence. (b) Interest in the assets, liabilities, income and expenses of the joint ventures are consolidated using proportionate consolidation method. Intra group balances, transactions and unrealized profits/losses are eliminated to the extent of Company’s proportionate share, except where cost cannot be recovered. (c) The difference between the cost to the Group of investment in Subsidiaries and joint venture and the proportionate share in the equity of the investee company as at the date of acquisition of stake is recognized in the consolidated financial statements as Goodwill or Capital Reserve, as the case may be. Goodwill arising on consolidation is tested for impairment at the balance sheet date. (d) Minorities’ interest in net profits of consolidated subsidiaries for the period is identified and adjusted against the income in order to arrive at the net income attributable to the shareholders of the Group. Their share of net assets is identified and presented in the consolidated balance sheet separately. Where accumulated losses attributable to the minorities are in excess of their equity, in the absence of the contractual obligation on the minorities, the same is accounted for by the holding company. (e) As far as possible, the consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented, to the extent possible, in the same manner as the Company's stand alone financial statements. (f) An interest in jointly controlled entities which is acquired and held exclusively with a view to its subsequent disposal in the near foreseeable is accounted for as an investment in accordance with Accounting Standard (AS) 13, Accounting for Investment.
3 Fixed assets and depreciation
(a) Fixed Assets are capitalized at cost inclusive of expenses incidental thereto. (b) In the case of following companies the depreciation on fixed assets has been provided on straight-line method at the rates and in the manner as specified in Schedule XIV to the Companies Act, 1956. i) Housing Development and Infrastructure Limited
ii) Privilege Power and Infrastructure Private Limited
iii) HDIL Oil & Gas Private Limited
iv) HDIL Leisure Private Limited
v) HDIL Entertainment Private Limited
(c) In the case of following companies the depreciation on fixed assets has been provided on written down value (WDV) method at the rates and in the manner as specified in Schedule XIV to the Companies Act, 1956. i) Bluestar Realtors Private Limited
ii) Mazda Estate Private Limited
4 Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments and are carried at lower of cost and fair value determined on an individual investment basis whereas all other investments are classified as long-term investments and are carried at cost except provision for diminution in value is made to recognize a decline other than temporary as specified in Accounting Standard (AS 13) on
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“Accounting for Investments”.
5 Inventories
Inventories are valued as follows:
(i) Completed property for sale and Transferable development rights are valued at lower of cost or net realizable value. Cost includes cost of land, land development rights, materials, services, borrowing costs and other related overheads as the case may be. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. (ii) Projects in progress are valued at cost. Cost includes cost of land, land development rights, materials, services, borrowing costs and other related overheads. Cost incurred / items purchased specifically for projects are taken as consumed as and when incurred / received.
6 Revenue recognition
The company follows completed project method of accounting (“Project Completion Method of
Accounting”). Allocable expenses incurred during the year are debited to work-in-progress account. The income is accounted for as and when the projects get completed or substantially completed and then revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.
Sale: - a) Unit in Real Estate:-
Revenue is recognised when the significant risks and rewards of ownership of the units in real estate have passed to the buyer.
b) Rent: - Revenue is recognised on accrual basis.
c) Interest: - Revenue is recognised on a time proportion basis taking into account the amount
outstanding and the rate applicable. d) Dividends: -
Revenue is recognised when the shareholders’ right to receive payment is established by the balance sheet date.
e) Share of profit - Partnership firms: -
Share of profit / (loss) from partnership firms is accounted for in respect of the financial year ending on or before the balance sheet date.
f) Income from box office is recognised as and when the movie is exhibited. Income from food and beverages, is recognised at the point of sale on the counter. Income is net of refunds and complimentary issues.
7
Borrowing cost
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset (including real estate projects) are considered as part of the cost of the asset. Other borrowing costs are treated as period costs and charged to the profit and loss account as and when they are incurred.
8 Employees Retirement Benefits:
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(i) Provident Fund Retirement benefit in the form of Provident Fund is a defined contribution scheme
and the contributions are charged to the profit and loss Account of the year when the contributions to the respective funds are due.
(ii) Gratuity Retirement gratuity liability of employees is a defined benefit obligation and reflects
the actuarial valuation of the future gratuity liability. (iii) Leave Encashment
Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation as at the end of the year.
(iv) Actuarial Gains/ Losses Actuarial gains/ losses are immediately taken to the Profit and Loss Account and
are not deferred. 9 Income taxes
(i) Tax expense comprises of current, deferred and fringe benefit tax. Current
income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
(ii) Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
(iii) At each balance sheet date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
(iv) MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.
10 Goodwill
Goodwill is tested for impairment on an annual basis. If on testing, any impairment exists, the carrying amount of goodwill is reduced to the extent of any impairment loss and such loss is recognised in the profit and loss account.
11 Earnings per share
Basic earnings per share are calculated by dividing the net profit / loss for the period attributable to equity shareholders (after deducting attributable taxes) by average number of
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equity shares outstanding during the period. The average number of equity shares outstanding during the period is adjusted for event of bonus issue to the existing shareholders. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
12 Impairment
An asset is treated as impaired when the carrying cost of the asset exceeds its recoverable value. An impairment loss is charged to the profit and loss account in the year in which an asset is identified as impaired. The impairment loss recognised in earlier accounting periods is reversed if there has been a change in the estimate of recoverable amount as specified in Accounting Standard (AS 28) on impairment of assets.
13 Foreign currency transaction Foreign currency transactions are accounted at the rates prevailing on the date of transaction. Year end current assets and liabilities are translated at the exchange rate ruling on the date of Balance Sheet. Exchange differences on conversion are adjusted to;
a) cost of fixed assets, if the same relates to acquisition of fixed assets. b) profit and loss account, if it relates to the monetary items. c) investment in shares of foreign company is expressed in Indian currency at rates of
exchange prevailing at the time when original investment is made.
14 Segment reporting policies
The main business of the Company is Real estate development and construction of residential and commercial properties, infrastructure facilities and all other related activities which revolve around the main business and as such there are no separate reportable segments as specified in Accounting Standard (AS - 17) on “Segment Reporting”. The Company through its subsidiary companies have forayed into entertainment, hospitality, power and oil segment as well. Since their revenue / activities are not significant these are not reported separately.
15 Provisions
A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
16 Leases
a) Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks and benefits of ownership
of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
b) Where the Company is the lessor
Lease income is recognised in the profit and loss account on a straight-line basis over the lease term. Recurring costs are recognised as an expense in the profit and loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the profit and loss account.
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B. Other Notes:
1.
As per Accounting Standard (AS-18) on “Related Party Disclosures” the disclosure of transactions with related parties as defined therein are given in the respective final accounts of the holding and subsidiary companies.
Related party disclosure
A
. List of related parties with whom transactions have taken place during the current accounting period and relationship:
Privilege Power and Infrastructure Private Limited
HDIL Entertainment Private Limited
Blue Star Realtors Private Limited
Ravijyot Finance & Leasing Private Limited
HDIL Oil & Gas Private Limited
Excel Arcade Private Limited
Mazda Estate Private Limited
HDIL Leisure Private Limited
Associates
Enterprise significantly influenced by key management personnel
Privilege Airways Private Limited
Privilege Industries Limited
Guruashish Construction Private Limited
Ravi Ashish Land Developers Limited
Joint Venture
D. S. Corporation
Fine Developers
Mahul construction Corporation
B. Transactions with related party (Rs. in millions)
31/03/2009 31/03/2008 31/03/2007 Nature of transaction Associat
e Joint Venture
Key Management Personnel
Total Associate
Joint Venture
Key Management Personnel
Total Associate
Joint Venture
Key Management Personnel
Total
Loans/advances paid
105.45
-
-
105.45
57.22
-
-
57.22
-
-
-
-
Investment in partnership firm
-
(747.31)
-
(747.31)
-
-
-
- (128.85)
761.48
-
632.63
Investment in Equity/preference shares
-
-
-
- 7.30
311.95
-
319.24
-
-
-
-
Interest received -
89.26
-
89.26
-
-
-
- -
-
-
-
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187
31/03/2009 31/03/2008 31/03/2007 Nature of transaction Associat
e Joint Venture
Key Management Personnel
Total Associate
Joint Venture
Key Management Personnel
Total Associate
Joint Venture
Key Management Personnel
Total
Lease rent received
0.12
-
-
0.12
-
-
-
- -
-
-
-
Share of revenue received
-
-
-
- -
-
-
- -
-
-
-
Share of profit received
0.38
-
-
0.38
-
-
-
- -
-
-
-
Directors Remuneration
-
-
180.00
180.00
-
-
16.13
16.13
-
-
1.50
1.50
Salary Paid -
-
2.94
2.94
-
-
1.73
1.73
-
-
-
-
Development right/ Land/ Expenses
1,230.07
-
-
1,230.07
1,927.48
-
-
1,927.48
-
-
866.63
866.63
Dividend paid -
-
-
- -
-
70.12
70.12
-
-
-
-
Outstanding as at year end- Due from
1,291.25
1,431.30
-
2,722.55
-
1,488.95
-
1,488.95
-
1,185.83
-
1,185.83
Outstanding as at year end- Due to
14.45
-
-
14.45
-
-
-
- 8.82
13.54
-
22.36
C. Key management personnel Name Designation
Shri Rakesh Kumar Wadhawan Executive Chairman
Shri Sarang R. Wadhawan Managing Director
Shri K. P. Devassy Chief Financial Officer
Shri Darshan Majmudar Company Secretary
2. Remuneration to Auditors 31-Mar-2009 31-Mar-2008
31-Mar-2007
(Rs. in millions)
(Rs. in millions)
(Rs. in millions)
a. Audit fees 7.05 1.29 2.75 b. Taxation Matters 2.85 0.88 0.50 c. Management Consultancy 2.00 0.70 0.50 d. Other Services 2.00 0.39 0.32 13.90 3.26 4.07 Managerial Remuneration
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3.
31-Mar-2009 31-Mar-2008 31-Mar-
2007
(Rs. in millions) (Rs. in
millions) (Rs. in
millions)
a.
Remuneration to Chairman and Managing Director
Salaries 180.00 16.13 1.50
b. Commission to Non Executive Directors 15.00 10.00 -
c. Sitting fees 1.22 1.32 0.98 196.22 27.44 2.48 4.
The Company has adopted Accounting Standard 15 (revised 2005)- Employee benefits (" AS-15"). Pursuant to adoption, the Company has determined the liability for gratuity and leave encashment in accordance with revised AS - 15.
A) Gratuity Plan :-
I)
The AS-15 (Revised 2005) stipulates that the rate used to discount post employment benefit obligation (both funded and non-funded) should be determined by reference to market yields at the balance sheet date on government bonds. The currency and terms of the government bonds should be consistent with the currency and estimated terms of the post-employment benefit obligation.
II) Estimated future salary increases take account of inflation, seniority, promotion and other retirement factors, such as supply and demand in the employment market.
The following table set out the status of the gratuity plan as required under AS -15.
a)
Reconciliation of opening and closing balance of the present value of the defined benefit obligation:
31-Mar-2009 31-Mar-2008
31-Mar-2007 *
(Rs. in millions)
(Rs. in millions)
(Rs. in millions)
Obligations at period beginning 4.15
1.15
-
Interest cost @ 0.08 0.33
0.09
-
Current service cost 3.53
1.97
-
Benefits paid -
-
-
Actuarial (gain) loss on defined benefits obligation (0.33)
0.94
-
Obligation at period end 7.68
4.15
-
b)
Amounts to be recognised in the Balance Sheet
Present value of Defined
benefits obligation as on 7.68 4.15
-
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189
Fair value of plan assets as
on - -
-
Liability recognised in
balance sheet 7.68 4.15
-
c) Gratuity cost for the
period
Current service cost 3.53 1.97
-
Interest cost on obligation 0.33 0.09
-
Expected return on plan
assets - -
-
Net actuarial (gain) loss (0.33) 0.94
-
Expense recognised in the statement of Profit and Loss 3.53
3.00
-
B)
Leave encashment liability :-
I) The AS-15 (Revised 2005) stipulates that the rate used to discount post employment benefit obligation (both funded and non-funded) should be determined by reference to market yields at the balance sheet date on government bonds. The currency and terms of the government bonds should be consistent with the currency and estimated terms of the post-employment benefit obligation.
II) Estimated future salary increases take account of inflation, seniority, promotion and
other retirement factors, such as supply and demand in the employment market.
The following table set out the status of the leave encashment plan as required under AS 15
a) Reconciliation of opening and closing balance of the present value of the
defined benefit obligation:
31-Mar-2009 31-Mar-2008 31-Mar-2007 *
(Rs. in millions)
(Rs. in millions)
(Rs. in millions)
Obligations at period
beginning 3.12 2.36
-
Interest cost @ 0.08 0.25 0.19
-
Current service cost 3.57 0.87
-
Benefits paid - -
-
Actuarial (gain) loss on
defined benefits obligation 1.32 (0.30)
-
Obligation at period end 8.26 3.12
-
b) Amounts to be
recognised in the
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190
Balance Sheet
Present value of Defined
benefits obligation as on 8.26 3.12
-
Fair value of plan assets as
on - -
-
Liability recognised in
balance sheet 8.26 3.12
-
Leave Encashment cost for the period
Current service cost 3.57 0.87
-
Interest cost on obligation 0.25 0.19
-
Expected return on plan
assets - -
-
Net actuarial (gain) loss 1.32 (0.30)
-
Expense recognised in the statement of Profit and Loss 5.14
0.76
-
*Mandatory disclosure as per A- 15 (Revised) came in to effect from Accounting
commencing on or after December 7, 2006 therefore the same is not given.
C) Valuation Assumptions
Considering the above stipulation in the case of gratuity and leave encashment, the
following assumptions have been made.
i)Mortality : LIC (1994-96) Ultimate
ii)Discount Rate : 8 percent
iii)Salary Growth : 7 percent per annum
iv)Withdrawals : 2 percent in the age range up to 35 years, decreasing thereafter to 1 percent up to age 45 and to 1/2 percent for higher ages
v)Retirement age : 60 years
5. Capital commitments 31-Mar-2009 31-Mar-2008 31-Mar-2007
(Rs. in millions) (Rs. in
millions) (Rs. in
millions) a. Estimated amount of
contracts remaining to be executed on capital account and not provided for (net of advances and deposits)
75.49 40.13 1.99
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191
6.
Contingent Liabilities not provided for 31-Mar-2009 31-Mar-2008 31-Mar-2007
(Rs. in millions) a. Claims against the
company not acknowledged as debts represented a suit filed by a party in the High Court, Bombay and disputed by the company
(i) Relating to failure to handover multiplex premises.
373.78 373.78 373.78
(ii) Other matters 631.70 - - 1005.48 373.78 373.78 In the opinion of the management the above claim is not sustainable.
b. Guarantees provided by the bank 293.87 291.50 -
c.
Letter of credits provided by the bank NIL 40.47 -
7.
Supplementary statutory information 31-Mar-2009 31-Mar-2008 31-Mar-2007
(Rs. in millions)
(Rs. in millions)
(Rs. in millions)
i) Earnings in foreign
currency NIL NIL NIL
ii) Expenditure in foreign currency
- Professional fees NIL 30.61 NIL - Other matters 19.70 116.74 33.46 iii) Value of imports calculated
on CIF basis
- Capital goods 6.92 0.53 NIL
- Construction materials and other expenses 5.72 183.06 29.13
8. Licensed capacity, installed capacity, etc. With regard to clause 3(ii) of Part II of Schedule VI to the Companies Act, 1956, the
Company is of the view that in respect of its real estate operations, the Company does not fall under the category of clause 3(ii)(a) “Manufacturing Company” or clause 3(ii)(b) “Trading Company” or clause 3(ii)(c) “Company rendering or supplying services”, but falls under the category of “Other Companies” as given in clause 3(ii)(e). As such, quantitative data for opening stock, purchases and closing stock have not been given.
9.
Secured loans: -
Secured loans are received by the holding company and the particulars of the securities are given in the note number 12 to the notes on accounts of holding company.
10. Investment in partnership
firms: - The holding Company (HDIL) has investment in various partnership firms and details
regarding share of profit, other partners are appearing in the note number 13 to the notes on accounts of holding Company.
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192
11. Earning per share has been computed as under: 31-Mar-2009 31-Mar-2008 31-Mar-2007
(Rs. in millions) (Rs. in
millions) (Rs. in
millions) a) Profit after taxation 7,870.82 14,104.83 5,480.02
(b)
Weighted average number of shares used in computing earnings per share
275492676 262057932 231428571
(c)
Basic and Diluted Earning per share
28.57 53.82 23.67
(d)
Nominal value per equity share of Rs. 10/-
12.
Micro, Small and Medium Enterprises Micro, Small and Medium Enterprise under Micro, Small and Medium Enterprise
Development Act, 2006 and Companies Act, 1956 have been determined based on the information available with the company and the required disclosure are given below:
31-Mar-2009
31-Mar-2008
31-Mar-2007
(Rs. in millions)
(Rs. in Millions)
(Rs. in millions)
i) Principal amount remaining unpaid on 31st March, 2009 - - -
ii) Interest due thereon as on 31st March, 2009 - - -
iii) Interest paid by the company in terms of Section 16 of Micro, Small and Medium Enterprises Development act, 2006, alongwith the amount of the payment made to the supplier beyond the appointed day during the year - - -
iv) Interest due and payable for the period of delay in making payment (which have been paid but beyond the day during the year) but without adding the interest specified under Micro, Small and Medium Enterprises Development Act, 2006. - - -
v) Interest accrued and remaining unpaid as at 31st March, 2009
- - -
vi) Further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprises.
- - - 13. The consolidated results for the year ended 31st March, 2009 are not comparable with
the previous year, due to following: i) Investment in subsidiary i.e. Mazda Estate Private Limited and Excel Arcade Private
Limited during the year
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193
ii) Divestment of subsidiaries:
HDIL Infraproject Private Limited
14. Previous year's figures have been regrouped, rearranged and reclassified wherever necessary. Accordingly, amounts and other disclosure for the previous year are included as and integral part of the current year’s financial statement and are to be read in relation to the amounts and other disclosures relating to the current year.
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15. DECLARATION:
We, the Directors/Authorised Signatory of the Company, declare that all the
relevant provisions of the Companies Act, 1956, the guidelines issued by the
Government and the guidelines and circulars issued by the Securities and
Exchange Board of India established under Section 3 of the Securities and
Exchange Board of India Act, 1992, have been complied with and no statement
made in this Information Memorandum is contrary to the provisions of the
Companies Act, 1956 or the Securities and Exchange Board of India Act, 1992 or
rules, guidelines and circulars issued thereunder.
For and on behalf of Board of Directors
Place: Mumbai Mr. Sarang Wadhawan Managing Director Date: October 29, 2009
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