Prozone Realty Chairman Speech

Message from the Managing Director

Dear Shareholders,

I am delighted to present the Annual Report for FY2018, which was a successful year for Prozone Intu in terms of our expectations and objectives. Most significantly, we emerged as a multi retail asset company with the launch of our Coimbatore Mall, and at the same time showcased our ability to grow across sectoral cycles.

India''s real estate sector saw two major radical reforms come into force - the Real Estate Regulatory Authority (RERA) and the Goods and Services Tax (GST). The landmark GST tax is expected to have far-reaching implications for the real estate sector and the complete impact is likely to unfold over the coming years. Undoubtedly in the long term, it is likely that the benefits of efficient supply chains and lower compliance costs will eventually positively aid businesses in India. We are now observing signs of recovery as the triple effects of demonetisation, RERA and GST have begun to shape up the sector with new standards of delivery, accountability and transparency.

With these measures and progressive intent in place, the real estate industry is estimated to grow at a healthy pace, providing various growth opportunities for your Company. In addition to this, rapid urbanisation, growing personal income and the Government''s focus on infrastructure should further drive the sector positively, going forward.

The retail real estate industry in India is also gradually maturing and moving towards its next phase of evolution. With the tastes of Indian consumers rapidly maturing, coupled with the influx of international brands, we sense a growing confidence in the future trends of Indian retail real estate. At Prozone Intu, we have always been sensitive to consumer sentiments. Through our continuous brand churning and upgrading, we have ensured that we are aligned to the important emerging retail trends. This has reflected well on our performance metrics, meaningfully improving our KPIs. For FY2018, I am pleased to inform you that we reported the highest ever annual revenue with a growth of 46% from Rs. 73.92 crore in the previous fiscal to Rs.107.71 crore in FY2018. We also produced record high EBITDA at Rs.49.19 crore with EBITDA margin of 46%. We have delivered EBITDA growth of 214% over previous year during the year. Our numbers also reflect our tight control on costs and improved operational efficiencies introduced during the year.

Our Strategic Reinforcements

As a highly focused developer, owner and operator of mixed-use properties, we are always looking for better ways of delivering sustainable growth in shareholder value.

Firstly, we are increasingly convinced that our strategy for developing transformational mixed-use projects primarily in Tier 1 and Tier 2 geographies is the right one. With this strategy, we have created projects which we believe have the necessary scale, mix of uses and favourable locations, to become key destinations that can transform the areas in which they operate.

Furthermore, we are maximising the earnings and value out of our completed properties through active asset management, and by reinforcing these assets through enhancements, re-layouts and new additions. During the year, our Aurangabad Mall underwent strategic alterations in brand mix and mall layout.

As a result, this property continues to enjoy its preeminent position as the most attractive and relevant retail destination in the city.

Additionally, we concentrated on management of our completed properties actively. We achieved this by optimising the mix of retail occupiers at both our malls. With a long term view, we consistently maintained high levels of consumer service at our malls to enhance and reinforce our brand. In doing so, we hope to maximise the consumption, occupancy and earnings potential of each of our properties.

We also aim to be at the forefront of sustainable development by designing energy efficient buildings through the innovative use of design, materials and new technology. With this view, we installed solar panels on our Aurangabad Mall to increase energy efficiency, reduce our carbon footprint, and simultaneously reduce our total energy bills.

Our measured approach for land purchases in the past also gives us a competitive edge. Having potential of developing 17.79 mn sq. ft., 88% is still available for future monetisation. We intend to do this at appropriate junctures in time by leveraging the benefits that come from developing large-scale mixed-use projects.

In following all these strategies, we continue to manage our capital base conservatively and prudently. We intend to maintain a strong balance sheet with a view to invest and finance our projects in a disciplined manner. This has helped us in maintaining our debt equity ratio at 0.40x, which is one of the lowest in the sector. As we look at new opportunities in the future, our balance sheet strength provides us a good headroom to raise capital as and when we need it.

Way Forward

With strong strategies already in place to create long-term value, our emphasis will be on project execution and asset monetisation. Looking ahead, we also see the horizon of our opportunities expanding at fast pace. With the launch of our Coimbatore Mall, we expect strong revenue traction from the asset going forward. We also have a strong pipeline of residential properties under development. We have progressed well on our residential projects in Nagpur, Coimbatore and Indore; and they are in the different stages of execution. We expect to see consistent free cash flow generation over the next few years from these projects. Our future growth will be backed by our fiscal prudence; strong balance sheet with low debt; and ample liquidity in form of cash and cash equivalents.

Over the years, we have created a legacy of trust - and we will continue to build on it. We will continue to create spaces that are aspirational and set benchmark for the industry. The foundation of our core existence is composed of many enablers, such as our strong investors, supporting bankers, focused employees and supportive retail partners. I take this opportunity to thank each of you for being highly supportive pillars of this organisation. With your constant backing, we are sure to witness further growth in customer delight and shareholder value in the years to come.

Sincerely,

Nikhil Chaturvedi

Managing Director