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A REPORT ON

PROJECT APPRAISAL
SAHARA CITY HOMES JAIPUR
by TAVNEET SINGH SARNA

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A REPORT ON

PROJECT APPRAISAL
SAHARA CITY HOMES JAIPUR
by TAVNEET SINGH SARNA 10BSP0218

A report submitted in partial fulfillment of the requirements of PGPM Program of IBS GURGAON

AUTHORIZATION

This is to certify that this report is submitted in partial fulfillment of the requirements of PGPM Program of ICFAI Business School (IBS), Gurgaon. This report document titled: Project appraisal of Sahara city homes, Jaipur. is done by Tavneet Singh as part of the completion of the study at Sahara prime city ltd(SPCL) during his Internship program under the guidance of

SYNOPSIS

The real estate sector in India has evolved from disorganization and inefficiency to greater organization and transparency, accompanied by various regulatory reforms. In the past, factors such as the absence of a centralized title registry providing title guarantee, lack of uniformity in local laws affecting real estate and their application, the unavailability of bank financing, high interest rates and transfer taxes and the lack of transparency in transaction values led to inefficiencies in the sector. However, in recent years, the real estate sector in India has exhibited a trend towards greater efficiency and transparency due to the various laws and regulations that have been implemented to govern the sector. The Indian real estate sector has traditionally been dominated by a number of small regional players with relatively low levels of expertise and/or financial resources. Sahara prime city ltd. is a largest infrastructure developing company in India. Sahara India Pariwar has many companies under its belt and prime city is one of the most important one. Sahara is majorly into developing townships development and residential complexes under the name of Sahara city homes and Sahara grace respectively. Sahara City Homes is a chain of well planned, self-sufficient, high quality townships across 217 Indian cities. Meticulous and aesthetic planning & designing, considering varied requirements is the essence of the product mix, which consists of high-rise, mid-rise apartments and independent houses. Sahara City homes at Jaipur is being developed on approximately 200 acre (80.94 hectare) of land out of which 55%-65% area has been exclusively earmarked for open space, roads & landscaped greenery. An ideal model of modern urban development, Sahara city Homes Township is a destination providing comprehensive peace, comfort and security. Until last year all the work was handled from lucknow head office, but in the year 2009 company decided to divide projects under different zones in result to which they estabilished a office in Gurgaon. Now the major departments under this zonal office are finance, supply chain department handling all the work in north zones.

This project explains following in detail: Basic methodology according to architectural department Purchase order formation Sales procedure in the organization Indent creation process Lead time management by SCM department Procurement process

Introduction of The Project

This project will involve about the following I. II. III. IV. V. Environmental Analysis Internal analysis Opportunities and threats Strength and weakness Strategies

Environmental Analysis

Jaipur, the capital of Rajasthan, is a major destination for tourists. Because of its close proximity to Delhi and NCR where real estate prices are skyrocketing, Corporates plan to move to Jaipur. Easy connectivity to the prominent cities and international destinations makes it a favorable business destination. As IT and BPO industry continue to flock into the city, there has also been an inflow of large workforce, creating a dearth of residential spaces in the city. Prominent Industrial Areas are - Vishwakarma Industrial Area & Jhotwara Industrial Area towards NorthWest of the city, Bais Godam & Sudarshanpura Industrial Area Sanganer & Sitapura Industrial towards South. Malviya Industrial Area towards South-East. Prominent Industries are - RICO, Gems & Jewelleries Industry, and Handicraft Industry. Jaipur is rated as one of the top five destinations for the growth of real estate industry.

Per Capita Income In Rs. Urban Areas- 2006 Market Size In Cr.- 2006

60282

. 16218

H.H Owning 4 Wheelers (%) 2006

7.40

City All India Ranking- 2001

12

City State Ranking - 2001

City Category- 2001

Increasing Urbanization As people migrate from rural to urban areas seeking employment opportunities, there has been a corresponding demand for real estate in cities throughout India. As a result, there has been an increase in the amount of townships being developed throughout India. The availability of large parcels of land and office developments in major cities and their surrounding areas have accelerated the construction of integrated townships to accommodate the growing population of these cities. These integrated townships often include commercial, retail, residential, and leisure facilities.

Shrinking Household Size Indias traditional joint family (or multi-occupant) residences are gradually being replaced by individual or smaller nuclear family residences. This trend is expected to continue as factors such as increasing urbanization and migration for employment opportunities, particularly in sectors such as business process outsourcing and financial services, cause a decrease in the size of the average Indian household. Given Indias increasing population, such contraction in the size of the average household is expected to increase demand for new housing and mortgages.

Growth in the Mortgage Sector The Indian mortgage sector has experienced significant growth in recent years, with housing loans outstanding increasing from 3.44% of GDP in 2001 to 8.5% in 2006. Mortgage penetration as a percentage of GDP is just 5% in India compared to the Asian average of around 20%. Mortgage penetration in India is expected to increase to meaning that a greater number of consumers will be in a position to purchase residential property.

Sahara is one of the largest real estate development companies in India, based on the size of its land reserves available for development and number of locations in which its land reserves are located, which consist of approximately 8,484.65 acres of land, including 4,194.10 lacs square feet of saleable area, which is either owned or for which it has contractual development rights. Its business plan is focused on developing 88 integrated townships under the brand name of Sahara City Homes. Sahara City Homes Jaipur is an integrated township typically comprising of a gated community with residential units in the form of apartment towers, townhouses and individual houses together with ancillary facilities such as schools, a hospital, a hotel, retail and leisure facilities. The residential complexes typically will be smaller scale developments comprised solely of residential units. Primary source of revenue is expected to be from the construction and sale of residential units within the integrated townships. The integrated township at Jaipur is located at National Highway 12, Jaipur Highway, opposite Radha Swami Beelwa Beas, Tonk Road, Village - Bilwa Manpur. The integrated township will comprise 3,283 residential units with an approximate saleable area of 43.61 lacs square feet.

Distribution of land use


60 50 40 30 20 10 0 Residential Commercial Amenities open spaces Road

Competitive Strengths of project The Real Estate market of Jaipur is witnessing an uptrend over the past few years. With new projects launched, such as Mahindra IT SEZ and acquisition of land by Infosys, has made Jaipur an important destination for expansion which in turn will give rise to the employment in the city and thus increase the disposable income of the population. The city is expanding along three major corridors namely Tonk Road, Ajmer Road and Delhi Road and Saharas project site is located on Tonk Road. Due to low land rates and rentals, the demand in the city is witnessing an uptrend. The real estate professionals of the Sahara Group who have now been employed in this project have developed expertise in the real estate sector through projects undertaken by the mother company previously. The project is benefited not only from managerial guidance from the Sahara Group, but also from its established business relationships and widespread brand recognition throughout India.

Challenges faced by the project The upcoming local & national players, which are offering plots & lower middle range independent houses, are major challenge to this project. Upcoming competing residential townships projects in and around the city located at other prominent and upcoming locations. There is huge competition in Jaipur where project is being developed. The major competitors include DLF Limited, Unitech Limited and Sobha Developers Limited. There is also threat from large foreign real estate developers now operating in, or who enter, the Indian market. Competition is considered as a part of the feasibility study which is undertaken when considering whether to acquire lands for development or to proceed with further development of land which is already owned. Indian financial institutions are competing with each other to invest in this higher return segment. Some of the prominent companies promoting real estate funds in India are HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshitij Venture Capital Fund (a group venture of Pantaloon Retail India Ltd) and ICICIs real estate fund, India Advantage Fund. Regulated under SEBIs (Securities and Exchange Board of India) Venture Capital Funds, these are closed-ended schemes with an initial public offer (IPO) contributing to a discount on NAVs (Net Asset Value). The Tata group has joined hands with private equity firm, Xander, through its group company Trent in April 2007 to raise US$ 1 billion for an institutional retail real estate fund. India's top real-estate firm DLF has raised US$ 2.24 billion in the country's largest initial public offering in June 2007. It has also entered into a joint venture agreement with Indian pharmaceutical major Ranbaxy group company Fortis Healthcare to set up hospitals across the country with investments of about US$ 1.5 billion. Meanwhile, an HDFC-sponsored real estate fund has been permitted to bring up to US$ 790 million of FDI into the country, while Indiabulls Real Estate (IREL) is looking to raise up to US$ 1.2 billion.

Majority of retailers are now planning to expand within the current city, and a similar percentage is willing to open new stores in other cities within India. The most confident among them are home and interior retailers and sports apparel/equipment retailers, followed by department stores and jewellery and food retails. While the last decade saw the transition of sleepy towns like Gurgaon, Noida and Faridabad into enviable addresses, today these tier I towns, as they are called, are saturated and far beyond the means of the middle class. Naturally, the opportunity in the residential development in Tier-II and Tier-III cities--like Hyderabad, Cochin, Chennai, Coimbatore and Pune--is equally enormous. For instance, Pune, the engineering and automobile hub of western India--about 160-km southeast of Mumbai--is emerging as a major IT centre. With sprawling software parks coming up all over the city and its suburbs, the demand for high-value apartments is growing. Beyond professionals and people looking to relocate from Mumbai or even overseas, are the older people who have sold a bungalow and want to live in spacious, easy-to-manage surroundings. Developers maintain that the bar for the super-premium luxury housing has risen from US$ 231,964 to over US$ 463,929 per unit.If the year 2006 was marked by some of the country's biggest land deals, the future of India is set to usher in the gold rush of realty.

Opportunities Firstly, it is the sustained high growth rate of GDP and increasing GDP per capita in the country providing an impetus to the real estate demand across segments. According to the recent FICCI report: the last three years have seen real GDP rise a cumulative 26 per cent, with impressive increases of 8.5per cent in 2003/04, 7.5per cent in 2004/05 and 8.4per cent in 2005/06 on the back of the robust growth across industries. Thus, setting into motion the demand for commercial / industrial as well as residential real estate. Secondly, the huge demographic shift being witnessed in the country in the last decade is cited as one more reason behind the sectors exponential growth. The increasing rate of life expectancy, declining infant mortality and a high but falling birth rate in the country have created an additional demand for housing and infrastructure for the ever-increasing burgeoning population. Urbanization, is seen as another underlying macroeconomic factor that is fostering the growth in India. According to the estimates of United Nations Population Division, the urban population of India will grow at a rate of 2.5per cent per annum for the next two and a half decades, doubling it to 600 million people by 2030. And according to Census of India estimates, 41per cent of the total population will be living in the urban areas by 2011, thus triggering an increase in demand for space in these areas.

Besides these, favourable reforms ensuring easy project financing, increased fiscal incentives to developers and simplification of Government procedures are the few of the bottom factors that have catapulted the growth in this sector.

90 80 70 59 60 50 40 30 20 10 0 2001 2005 2006 2010 64 70 73

81

2014

HOUSING STOCK(MILLION UNITS)

Large population in the earning bracket

Increase Urbanisation

Shrinking Household Sizes

Challenges In pursuance of the expected growth that this sector will take, the future is full of challenges. In the commercial office segment, in spite of the huge demand, the developers may have to face heat from the ups and down of other sectors since this segment, in particular, is highly dependent on the performance of the Indian IT/ITES. Secondly, with the introduction of the SEZ policy, it is believed that a significant amount of the office space demand will be targeted in SEZs. While in the residential segment, if one goes by the Planning Commission report there is a shortage of approximately 9 million units; and this deficit, as per the Asian Development Bank, would escalate to around 22 million units by 2007/08, and upto 10 million units by 2030. The most deterring challenge that would come on the way would be the product differentiation and correct understanding of the consumer needs. These challenges would be applicable to both the national or international players as the consumer preferences in India vary from one location to other and brand value in a highly competitive market would be stiff without substantial product differentiating factors. Another segment that would gain momentum is the hospitality sector. According to the Ministry of Tourism, Government of India, there are an estimated 1.2 million hotel rooms in the country, of which star hotels account for a mere 7per cent (approximately 80,000 rooms). The Ministry forecasts that there will be a total 2.9 million hotel rooms in India in 2010 and 2020 respectively. From the real estate perspective, the biggest deterrent in the growth in this segment could be the delay in further relaxation for FDI in the sector. Major Players(jaipur.) # Ansal Properties # DLF Group # Eros Group # Parsvanath Developers # Eldeco Group # Sahara # Omaxe # Plumeri

Snapshot of Real Estate

Growth in urban population

15-20%

Income profile

25-40% rise in incomes.

Residential property Rates

By 10-90%

Commercial property Rates

By 10-30%

Industry Profile:Real Estate Pie 2005-06 Real Estate Pie 2008 Projected Demand Of Residential Property in next five years. Projected Demand Of Commercial Property in next five years. 200 Million sq.ft $12 Billion $50 Billion 20 Million houses.

Sahara prime city has its zonal office in Gurgaon. This zonal sub-division was only done last year to facilitate and quicken the project work on sites. As zonal divisions has many advantages like Direct interaction with the suppliers on site. Easy accessibility of site. Quick response to problems and issues raised on site Better understanding of work and labor conditions on site. Delegation of work, as now head office does not have major work to do.

There are mainly three major departments working under this organization. Which are as follows:-

Supply chain management Supply chain management department is comprised of five divisions, as follows: procurement; inventory and logistics; control; administration and human resources; and Zonal supply chain management heads.

The procurement team focuses on obtaining raw materials, electrical equipment, plumbing and other hardware. The inventory and logistics team works with the procurement team to facilitate the flow of materials and ensure adequate inventory at each site. The control team acts as a link between the various teams and their system requirements and ensures the availability of administrative services to each department. The administration and human resources team ensures adherence to our policies and procedures and manages employees. The zonal supply chain management heads have responsibility for efficient operations at sites within their zones. In addition, each individual site has a dedicated supply chain manager. The supply chain management department also administers centralized purchasing for large volume and expensive items, such as cement, steel and finishing productions

Marketing department Marketing and sales team consisting of more than 150 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. Tthis 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. In new and rapidly evolving real estate markets, this ability to analyze project economics is critical to our business. Sales generally are conducted by sales staff on the project site and through head office, as well as through third party brokers. Various financial institutions and banks regularly provide finance to the clients for their residential units. The price of residential units based on analysis of demand in a particular region, taking into consideration market demographics, location and competition. Under sales contracts penalties for delayed delivery of residential units are incurred. These penalties are based on interest charges on payments already made to us by customers. The commission is paid ranging from 2.4% to 4.5% of the sales price to each agent who sells a residential unit on companys behalf, with the exact amount depending on the number of units sold. For projects which are not yet commenced, the commission is paid 2.4% of the sales price to each agent who sells a residential unit on companys behalf. the title is transferred to the customer upon the completion of the construction of the building or structure and after execution of the definitive agreement with the customer. The title of the land on which the building is located to an independent housing society is only transferred. After all of the buildings or structures within a project are turned over to owners or housing societies, the day-to-day management and control of the project is relinquished to the management board or society of the owners. The company has agreement with SICCL dated August 22, 2009 pursuant to which SICCL has been allotted 4,198 residential units for an aggregate consideration of Rs. 141,972.57 lacs, which represents a discount of approximately 10 percent on the selling prices for these residential properties. SICCL seeks end purchasers for these properties, who then execute definitive agreements directly with us to purchase title to the property directly from us at a price agreed by us with SICCL. Of the total amount payable to us by SICCL, the amount of Rs. 47,329.92 lacs has already been received, or approximately 33% of the total due, with the balance payable according to a schedule linked to the progress of construction of the relevant units. The record payments to company from SICCL under Loans and Advances and then only record revenue in accordance

OBJECTIVES OF THE STUDY The need for investing in current assets and elaborate the concept of operating cycle. To find out indent creation in the organization. To find out working of archaeological department. To find out procurement process To find out the profitability of the company To know the firm liquidity position i.e., the ability or capacity of the firm to meet its short term obligations out of current assets. To analysis the nature, content, form, and utility of 2 financial statements viz. Balance sheet and Profit And Loss statement. To study the utility of financial ratios in determining the financial capacity of the firm. To study the need for analyzing the changes in a firms funds and cash flow position. To focus on the decision making role of accounting system. To know the overall performance of the business

Abstract of work done:-

First step in project appraisal is to know the financial feasibility of the project for this cost analysis is done and means of finances of the project, cost of production and cash flow requirement.

Financial year 2009 ( Lacs) Income Realty income Income from financial activities Other income Increase/(decrease) in inventory Total income 17153.81 513.63 29.76 28662.97 46360.17 37.00% 1.11% 0.06% 61.83% 100% % of total income

Expenditure Purchases Exp. On work in progress Administrative exp. Employees cost Depreciation Interest and finance charges Loss from joint venture Total expenditure 4774.63 32592.43 282.37 872.80 27.36 906.98 4.54 41461.11 10.30% 70.30% 4.92% 1.88% 0.06% 1.96% 0.01% 89.43%

Profit before tax or return on project

4899.06

10.57%

Income Realty income: Realty income is comprised of sales of flats and villas, sale of development rights, real estate development charges, transfer and cancellation charges and rental income

Income from financial activities:Income from financial activities include income from the sale of securities , profit on sale of investment in securities, interst income and dividend income.

Other income: Other income reflects miscellaneous income,including income from transfer from fees paid to us by our customers who have sold their units on to other customer prior to completion of construction

Increase/(decrease) in inventories: This represents the difference between the opening balance and the closing balance of inventory at the beginning and ending of the fiscal year. Inventories include, among other things, land and land develomen rights,project work in progress,stores and consumables related to hospitality services and medical services an other cosumables and stock of securities Expenditure Purchases: The cost of sales consists of the purchases of land and land developmental rights, the purchase of project work in progress, stores and finishing materials, such as steel,cement,flooring products,hardware,lifts,mechanical and electrical equipment,doors and windows,bathroom fixtures and other interior fittings and wood. Purchases also includes costs of traded securitiesand of hospitality and medical consumables.

Expenditure on project work in progress:The expenditures on project work in progress include construction and developmental expences, including payments to third party contractors, salary and wages, including reimbursements, pension contribution, staff welfare expences, travel expencesand other miscellaneous expences related to employee at particular construction sites, and advertisements and publicity costs.

Administrative expences: The administrative exences consists of staff welfare expences, rent and utility charges, legal and proffesional charges, power and fuel charges, repair and maintenance, taxes,filling fees for items such as registrar of companies registrations,travel expences,impairment of assets,auditors fees losses from the sale of investmentand miscellaneous expences.

Employee cost: This consists of salaries and wages paid to our officers and employees,training and recruitment expences, contribution to provident and other fund for the benefit of our officers and employees and other welfare expences. Employees cost does not include the costs of labour,architects or consultants which are allocable to specific development

Depreciation: This costs are charged for fixed assets, a large portion of which are related to sahara hotel and hospital.

Prellimenary expences written off: This reflects exences relating to estabilishing the real estate business and terminating or transfering other business previously operated by us, in particulars payments are made to the registrar of companies in respect of increase in share capital for various of our land owning subsidaries acquired during fiscal year 2009.

Interest and finance charges: interest and finance charges consist of interest paid on term loans and other loans obtained from banks, financial institutions and other lenders, as well as the related proceeding charges

CASH FLOW The following table below summarizes our consolidated cash flows for the fiscal years 2009 and 2008.
( in lacs) FY 20009 14664.12 75833.62 55427.13 5742.37 4888.71

Net cash from operating activities Net cash flow from investing activities Net cash flow from financing activities Change in cash st Cash and cash equivalents as on 31 March

FY 2008 112734.87 5910.74 129270.70 10625.09 10631.08

Cash and cash equivalents decreased to 4,888.71 lacs as of March 31, 2009 from 10,631.08 lacs as of March 31, 2008, primarily due to the results of cash flows described below. Our cash and cash equivalents are predominantly comprised of bank deposits, current account balances and cash on hand. Cash Flows from Operating Activities Net cash generated from operating activities was 14,664.12 lacs for the fiscal year 2009, consisting of net profit before tax of 5,041.53 lacs, which increased by 487.43 lacs after adjustments for non-cash items. Cash generated due to working capital changes during fiscal year 2009 was 9,135.16 lacs. Net cash used in operating activities was 112,734.87 lacs for the fiscal year 2008 consisting of net profit before tax of 12,438.75 lacs, which increased by 542.14 lacs after adjustments for non-cash items. Cash used due to working capital changes during fiscal year 2008 was 125,715.75 lacs mainly due to an increase in inventories of 251,873.88 lacs, which was partially offset by an increase in net trade payables of 127,029.54 Cash Flows from Investing Activities Net cash used in investing activities was 75,833.62 lacs for the fiscal year 2009, primarily due to an increase in fixed assets (including capital work in progress) of 73,558.34 lacs. Net cash

used in investing activities was 5,910.74 lacs for the fiscal year 2008, primarily due to an increase in investments of 5,509.86 lacs. Cash Flows from Financing Activities Net cash generated from financing activities was 55,427.13 lacs for the fiscal year 2009, primarily due to an increase in share capital of 23,488.20 lacs, an increase in secured loans of 32,448.15 lacs.

Accounting ratios Return on net assets= Net income/Total assets =4636017000/21660339000 =0.21 or 21% Hence the net asset ratio is positive, which means company is getting good returns on total assets employed in the project and morover the earning capacity of these assets are also very good.

Net gearing= net debt/equity =176381000/5667751000 =.031 or 3.1% Net gearing ratio shows relationship between debt and equity. In other words it is a tool to measure that how secured are companys debunture holders agains equity of the firm. In this case it is 3.1% which is considered to be good for a company which have such a huge land reserve or asset block.

Operation cash flow ratio=

operation cash flow/total debts

= =

2226252000/2361447000 0.94 or 94%

Sahara has huge investment in its operating activities so its very important to know operation cash flow ratio, which shows relation of cash flow to total debts. This shows what amount of funds are available with the company to meet its debts. In this scenario its 94% which is good.

Asset turnover ratio= = =

net sales/total assets 1715381000/11327462000 0.151 or 15.1%

For a real estate company sale fluctuate ery steeply, the asset turnover ratio gives us the clear picture of relationship between total sales and assets. The asset turnover ratio is15.1% is ok considering major sale comes from realty incom in the organization.

Debt ratio = = =

total liabilities/total assets 11327462000/32987801000 0.34 or 34%

Sahara is about to come with its IPO in a very a short while so for a investor its very important to get a clear picture of how liabilities are paid of in the business. Debt ratio shows the relationship between liabilities and assets, which in this case is 34% that means companys creditors are very well backed by asets of the company.

Profit margin= = =

net profit/net sales 320488000/1715381000 0.186 or 18.6%

For any organization its very important that it makes considerate amount of profit, because this is the only factor through which income is actually generated in the busines and other activities are carried out.

FLOW FROM ARCHAELOGICAL DEPARTMENT VIEW For a company like SAHARA the major operations are handled by architectural department. It is a significant department in the organisation as it undertakes a variety of tasks including acquisition of the land according to specified requirements. First of all a blue print is given to the liason team which searches for appropriate land.Thereafter the layout of the available land plots are sent to the head office in Gurgaon and then after meeting top executives and getting go through from Mumbai office the land is asked to purchase.Land acquisition also cotains many steps which is explained as follows

Due dilligence of land and getting all the required information about the land Step I

Entering into negotiations witht the seller of land or getting land development rights Step II

Obtaining title of the land .The land will not be acquired until the management is satisfied that the title defects have been rectified Step III

Land acquisition is followed by receiving all the necessary NOCs i.e no objection certificates

from various departments. That includes environmental department , fire department, forest department, agricultural department (if this is agricultural land) and national highway authority if the land is on national highway. This is normally a very tiresome and time taking process because various changes are made in the initial plan as demanded by several departments and architectural is continously on its toes to sketch new and improved designs which fulfills the requirements of the organisation and norms set by the government. When the designs are finalised and passed, next comes the work of marketing department to make brouchers and start working on to give a project an amazing start which will help in the required take off which is must needed for any project. Alongside the supply chain department keeps working with different suppliers and small companies for the supply of raw materials and services required in builduing the project In an organisation with multilateral dimension like Sahara this process is executed very systematically using step by step indent creation system which is very effective and have been employed through starting in the organisation..

The following flowchart explains the implementation of the aforesaid process

PROCEDURE FOR PROCUREMENT OF LAND AT JAIPUR

Obtained the proposal through different sources and selected one on the report based on our survey team comprising personnel of Land Acquisition, Planning & Marketing. After negotiating with Associate signed M.O.U. with specific average rate for procurement of land. Engagement of local Advocate for scrutiny of title Certificate & N.E.C. etc. After getting satisfied in all respect we released fund according to fund demand of our Associate through our local office. To start Procurement of land as per terms and conditions of M.O.U. in favor of Group of Companies /Persons as per ceiling limit applicable in Rajasthan Imposition of Ceiling on Agricultural Holdings Act 1973 . After Procurement of land we processed for mutation of land in favor of purchaser Company/Personnel and subsequently applied to concerned authority for demarcation and possession of land. As per Section 90B of the Rajasthan Land Revenue Act, 1956 the land has been surrendered to the J.D.A. and is in the process of being made available to us through patta for Development under the provisions of Section 90B (6) of the Rajasthan Land Revenue Act, 1956. After Procurement & Mutation if any Government Land falls within Project applied for exchange of land from the concerned Authority.

Percentage wise distribution of land use:-

Residential

Commercial

Amenities

open spaces

Road

13% 15% 52% 15% 5%

SUPPLY CHAIN MANAGEMENT

The Procurement process followed at SCM has been framed in a way to obtain best value from its procurement expenditure in a cost efficient way within a shortest possible lead time. SCM is committed to meet the needs of the indenter, both now and in the future, by providing consistently high quality material as approved by the user.

Procurement is defined as the whole process of acquisition of goods and services from third parties. This process includes the entire procurement cycle from the initial concept of assessing business need through to the end of a contract or the end of the useful life of the asset.

The aims & strategy of SCM is to Deliver consistently high quality services that meet users needs, with a range of partners from other sectors Provide savings and better value for money, thereby improving the cost effectiveness in procurement through buying expertise to make savings. Support the execution department by providing required material with in a time line. Be delivered through different structures and in new forms.

Procurement Process The indents primarily has been grouped under three categories Capital Items Construction Material Consumables items

LEAD TIME CALCULATION

Based on the category of product line procured the SCM has worked out the lead time required for each category of product line as detailed below which facilitates the planning section to plan and execute the construction project seamlessly. The lead time for each category of product line worked out on actual experience basis are as stated:

Sl. No.

Product Line

Minimum Lead Time

Maximum Lead Time

1 2 3 4 5 6 7 8

Building Material Hardware & Paints Sanitary ware & C.P. Fittings Electrical & Electronics Spares & Tools Capital Items Miscellaneous Items Imported Items

15 Days 15 Days 20 Days 15 Days 15 Days 45 Days 15 Days 90 days

30 Days 45 Days 40 Days 60 Days 45 Days 60 Days 45 Days 120 Days

After the land and project has been finalized by the top level management the actual work on project is started which is done through indents which is a step by step process as explained by following flowchart

START

Description of requirement

Asking for quotations from various parties

Defining each quotation as L1 L2 Entering into negotiation with parties and asking for final prices

Selecting L1 supplier after final negotiation

END

INVENTORY MANAGEMENT

After raw materials are procured for the site project next step is to manage this huge stock of inventories which is quite a task. For a project like Sahara city homes Jaipur its very important to have proper set guidelines and instructions to handle it. In Sahara this goes as a step by step process as :-

First step Receipt of indent Indent is checked carefully before signing for: Complete specification Dimension / Size Unit of measurement Quantity etc. BOM ( Bill of materials) in construction material

Second step Material receipt at store Checklist for documents upon approval for material Challan / Invoice/Bill Name of the Consignee Name of the Consigner

Third step Process for issue of material. Material issued can be grouped under five heads:-

Issues against indent. Issues to other sites i.e Stock Transfer Issue for repair/ redesign / value addition i.e for Job Work Issue due to rejection Others Issues Materials will be issued from store only against SIV (Store issue voucher).

Store is recommended to issue material mainly by the FIFO method. According to this method material received first are issued first and so it ensures quality as material is being issued as per date of receipt at stores. However, stores can use discretion if any material has to be issued by LIFO or weighted average method if the material is being damaged there is lack of space, high value of item etc.But any deviation / decision must be conveyed to Head SCM at site or HO through proper channel.

MARKET ANALYSIS

Jaipur, the capital of Rajasthan, is a major destination for tourists. Because of its close proximity to Delhi and NCR where real estate prices are skyrocketing, Corporates are planning to move to Jaipur. Easy connectivity to the prominent cities and international destinations makes it a favourable business destination. As IT and BPO industry continue to flock into the city, there has also been an inflow of large workforce, creating a dearth of residential spaces in the city.Prominent Industrial Areas are - Vishwakarma Industrial Area & Jhotwara Industrial Area towards North west of the city. Bais Godam & Sudarshanpura Industrial Area Sanganer & Sitapura Industrial towards South. Malviya Industrial Area towards South- east. Prominent Industries are - RICO, Gems & Jewelleries Industry, Handicraft Industry. Rated as one of the top five destinations for the growth of real estate industry.

SAHARA CITY HOMES JAIPUR SALES PROJECTIONS SALES VALUE OF PROPOSED UNITS (In Rs. Lacs) 8743.29 11634.17 15502.29 20163.05 20315.24 15228.74 25071.02

YEAR 2011 2012 2013 2014 2015 2016 2017

PROPOSED UNITS TO BE SOLD 200 194 276 391 374 265 321

Property Trends in JAIPUR

CAPITAL VALUE

LOCALITY Jaipur North East West South Quarterly change (%) - 40 to 0 20 to 23 -22 to 18 - 25 to 5

Apartment (/sq ft) Jan'09 1500-6000 1500-2000 3000-6000 1000-4000 Quarterly change (%) -8 to 109 20 to 24 -30 to -25 -50 to -45

Plot (/sq yd) Jan'09 1500-60000 1500-25000 2000090000 7000-60000

Total number of residential units to be constructed= 4,366 Total number of residential units sold to end units =1,234 Sahara City Homes, Jaipur Percentage Projected sales value Marketing Budget @ 1.5% of projected sales value Amount spent on Marketing so far Total Available Balance 100 1.5 0.18 1.32 Marketing Projections for further expenditure Amt. (in Rs. Crores) 3.63 1.81 1.81 2.72 2.72 1.81 3.63 In Crore 1375.82 20.64 2.5 18.14

Year 2011 2012 2013 2014 2015 2016 2017

% of Available Balance 20 10 10 15 15 10 20 Financial Tie Ups

SPCL has financial tie-up with nationalized banks PNB & UCO Bank is proposed for project funding for SCH Jaipur. Other Banks and financial institutions are also being pursued for project funding. The means of finance in the coming days against the project cost will be arranged in the following manner: Loan from Banks & Financial Institutions Loan from Capital / Share Holder Funds Realization from Customers

Repayment of Loans: Repayment of loans shall start after the completion of particular phase of construction at site which will be approximately for a period of three years. The funds for repayment of loans shall be arranged by way of internal accruals in the form of advances and sales realization from the customers of the said project.

LIABILITIES Promoters Capital Fund From FDI Advance from Customers P & L Accounts Provision For Tax Creditors Total ASSETS Closing Work-inProgress Cash in Bank Total

BALANCE SHEET 2007 2008 2009 37.50 37.50 37.50 337.50 337.50 337.50

2010 37.50 337.50

2011 TOTAL 37.50 337.50

19.00 133.27 302.91 1296.60 0.00 0.00 0.00 72.82 105.76 711.45 458.29 0.00 0.00 37.49 54.46 366.34 9.19 23.48 33.32 33.08 0.00 403.19 531.75 821.53 1864.90 1452.79 5074.16

232.32 522.09 754.94 1076.40 0.00 170.87 9.65 66.59 788.49 1452.79 403.19 531.75 821.53 1864.90 1452.79 5074.16

SALES

PARTICULARS SALES(RESIDENTIAL) SALES(COMMERCIAL)

2007 0.00 0.00

2008 0.00 0.00

2009 277.30 0.00

2010 125.46 0.00

2011 1794.60 342.57

RETURNS FOR THE PROJECT ROI BEFORE TAX ROI BEFORE TAX= EBIT / NET ASSETS EARNINGS BEFORE INCOME TAX NET ASSETS ROI BEFORE TAX 1077.79 1931.03 0.56

55.81

ROI AFTER TAX ROI AFTER TAX = EBIT( 1 - TAX RATE) / NET ASSETS EARNINGS BEFORE INCOME TAX NET ASSETS TAX RATE ROI AFTER TAX 1077.79 1931.03 0.34 0.37

36.84

RETURN ON EQUITY ROE = PAT / NET WORTH PROFIT AFTER TAX NET WORTH ROE 711.45 1931.03 0.37

36.84

RETURN ON ASSETS RETURN ON ASSETS = NET INCOME / TOTAL ASSETS NET INCOME TOTAL ASSETS ROA 711.45 2488.40 0.29

28.59

PROFITIBILITY RATIO
GROSS PROFIT MARGIN GROSS PROFIT MARGIN= (SALES-COST OF SALES)/SALES PARTICULARS AMOUNT SALES 2539.93 COST OF SALES 1462.13 GROSS PROFIT MARGIN 42.43 0.42 NET PROFIT MARGIN NET PROFIT MARGIN = PAT / SALES PARTICULARS AMOUNT PROFIT AFTER TAX 711.45 SALES 2539.93 NET PROFIT MARGIN 0.28 28.01 PAT TO EBIT RATIO PAT TO EBIT RATIO = PAT/ EBIT PARTICULARS AMOUNT PROFIT AFTER TAX 711.45 EARNINGS BEFORE INCOME TAX 1077.79 PAT TO EBIT RATIO 0.66 66.01

ACTIVITY RATIO ASSETS TURNOVER RATIO ASSETS TURNOVER RATIO = SALES / NET ASSETS PARTICULARS 2007 2008 2009 2010 2011 SALES 0.00 0.00 277.30 125.46 1794.60 NET ASSETS 161.68 -13.83 -4.22 700.95 1086.45 NET ASSET TURNOVER 0.00 0.00 -65.64 0.18 1.65 .

LEVERAGE RATIO DEBT RATIO DEBT RATIO = TOTAL DEBT / ( TOTAL DEBT + NET WORTH) PARTICULARS TOTAL DEBT NET WORTH(FA+CA)-CL DEBT RATIO 2007 337.50 161.68 0.68 2008 337.50 -13.83 1.04 2009 337.50 -4.22 1.01 2010 337.50 700.95 0.33 2011 337.50 1086.45 0.24

DEBT- EQUITY RATIO DEBT - EQUITY RATIO = TOTAL DEBT / NET WORTH PARTICULARS TOTAL DEBT NET WORTH(FA+CA)-CL DEBT- EQUITY RATIO 2007 337.50 161.68 2.09 2008 337.50 -13.83 -24.41 2009 337.50 -4.22 -79.89 2010 337.50 700.95 0.48 2011 337.50 1086.45 0.31

CAPITAL EMPLOYED CAPITAL EMPLOYED = PROMOTERS CAPITAL / NET WORTH PARTICULARS PROMOTERS CAPITAL NET WORTH(FA+CA)-CL CAPITAL EMPLOYED 2007 37.50 161.68 0.23 2008 37.50 -13.83 -2.71 2009 37.50 -4.22 -8.88 2010 37.50 700.95 0.05 2011 37.50 1086.45 0.03

LIQUIDITY RATIO CURRENT RATIO CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES PARTICULARS 2007 2008 2009 2010 CURRENT ASSETS 170.87 9.65 66.59 788.49 CURRENT LIABILITIES 9.19 23.48 70.81 87.54 CURRENT RATIO 18.59 0.41 0.94 9.01 QUICK RATIO QUICK RATIO = (CURRENT ASSETS - INVENTORIES ) / CURRENT LIABILITIES PARTICULARS 2007 2008 2009 2010 INVENTORY 0.00 0.00 0.00 0.00 CURRENT ASSETS 170.87 9.65 66.59 788.49 CURRENT LIABILITIES 9.19 23.48 70.81 87.54 QUICK RATIO 18.59 0.41 0.94 9.01 NET WORKING CAPITAL(NWC) RATIO NWC RATIO = NET WORKING CAPITAL / NET ASSETS PARTICULARS 2007 2008 2009 2010 NWC(CA-CL) 161.68 -13.83 -4.22 700.95 NET ASSETS 161.68 -13.83 -4.22 700.95 NWC RATIO 1.00 1.00 1.00 1.00

2011 1452.79 366.34 3.97

2011 0.00 1452.79 366.34 3.97

2011 1086.45 1086.45 1.00

OUTFLOW LAND COST DEVELOPMENT COST CONSTRUCTION COST(Re) CONSTRUCTION COST(Am) MALL HOTEL HOSPITAL SCHOOL CONSTRUCTION COST(Am) ADMINISTRATION COST MISC EXPENSES ADVERTISEMENT EXPENSES COMMISSION EXPENSES TOTAL OUTFLOW

OUTFLOW PROFORMA TOTA L 2007 2008 50.00 50.00 80.00 72.00 8.00 1023.9 6 102.40 204.79

2009

2010

2011

307.19

307.19

102.40

47.00 34.97 28.32 28.60 138.88 46.51 34.89

0.00 0.00 0.00 0.00 0.00 4.10 3.07

18.80 13.99 11.33 11.44 55.55 10.41 7.81

18.80 13.99 11.33 11.44 55.55 14.51 10.88 2.93 8.78 399.84

9.40 6.99 5.66 5.72 27.78 13.40 10.05 9.65 28.95 397.01

0.00 0.00 0.00 0.00 0.00 4.10 3.07 8.41 25.22 143.19

CASH INFLOW(RES) CASH INFLOW(COM) TOTAL INFLOW

TOTAL INFLOW TOTAL OUTFLOW NET INFLOW Cumulative inflow

21.97 0.19 0.80 65.92 0.57 2.40 1462.1 3 232.32 289.77 INFLOW PROFORMA 2197.3 6 19.00 80.00 342.57 0.00 34.27 2539.9 3 19.00 114.27 NET INFLOW 2539.9 3 19.00 114.27 1462.1 3 232.32 289.77 1077.7 9 213.32 175.50 213.32 388.83

292.79 154.15 446.94

965.00 154.15 1119.1 5 1119.1 5 397.01 722.14 380.41

840.57 0.00 840.57

446.94 399.84 47.10 341.73

840.57 143.19 697.38 1077.7 9

NET PRESENT VALUE TOTAL 2007 2008 At 12% Cash Outflow 1183.50 232.32 258.7 6 102.0 4

2009

2010

2011

318.68

Cash Inflows 1808.69 19.00 356.21 534.60 Net Present Value 625.19 Acceptance Rule= NPV should be positive,positive figure shows profit for the project. Therefore the NPV @ 12% is acceptable

282.6 7 796.8 3

91.07

Cost of Project Cash Inflows Cumulative Inflows Payback Period In 2009 Total Amt needed

PAYBACK PERIOD 2007 2008 1183.5 258.7 0 232.32 6 1808.6 102.0 9 19.00 4 121.0 19.00 4

2009 318.6 8 356.2 1 477.2 5 3 yr

2010 282.67 796.83 1274.0 8

2011 91.07 534.6 0 1808. 69

477.25 706.25

6.65 Inflow needed in `10 6.65 month Therefore Payback Period 3 yrs 7 months PB period is accepted if it is less than max. or standard PB period set by the mgt. Payback Period is acceptable as 3years 7 months is less than 6 years project as set by the mgt.

PROFITIBILITY INDEX

Cash Inflow @ 12% Cash Outlay Profitability Index

1808.69 1183.50 1.53

Acceptance Rule(if PI>1) Therefore Accepted

INTERNAL RATE OF RETURN Total At 12% Cost of Project Cash Inflows NPV At 55% Cost of project Cash Inflows NPV At 56% Cost of project Cash Inflows NPV At 57% Cost of project Cash Inflows NPV 1183.50 1808.69 625.19 716.73 723.98 7.25 710.83 711.44 0.61 704.46 699.28 -5.19 2007 232.32 19.00 2008 258.76 102.04 2009 318.68 356.21 2010 282.67 796.83 2011 91.07 534.60

232.32 19.00

186.90 73.70

166.33 185.93

106.40 299.93

24.77 145.42

232.32 19.00

185.74 73.24

164.30 183.65

104.41 294.34

24.06 141.22

232.32 19.00

184.29 72.67 Difference

161.94 181.01

102.43 288.74

23.48 137.85

Cost Required 1183.50 Cost @ lower rate, 56% 711.44 Cost @ higher rate, 57% 699.28 r=20%+(21%-20%)*9.30/38.33 Therefore IRR = 20.24% Acceptance Rule( if r > k ) k = 20% r = 20.24% Therefore Accepted

-472.06 12.17 0.17