Final Reo - Copy

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A

REPORT

ON

PROJECT APPRAISAL

SAHARA CITY HOMES JAIPUR

by

TAVNEET SINGH SARNA

[Type the abstract of the document here. The abstract is typically a short summary of the contents of

the document. Type the abstract of the document here. The abstract is typically a short summary of the

contents of the document.]


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A

REPORT

ON

PROJECT APPRAISAL


by

TAVNEET SINGH SARNA

10BSP0218

A report submitted in partial fulfillment of

the requirements of PGPM Program ofIBS GURGAON


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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


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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, factorssuch as the absence of a centralized title registry providing title guarantee, lack of uniformity inlocal laws affecting real estate and their application, the unavailability of bank financing, highinterest rates and transfer taxes and the lack of transparency in transaction values led toinefficiencies in the sector. However, in recent years, the real estate sector in India hasexhibited a trend towards greater efficiency and transparency due to the various laws andregulations that have been implemented to govern the sector. The Indian real estate sector hastraditionally been dominated by a number of small regional players with relatively low levels ofexpertise and/or financial resources.Sahara prime city ltd. is a largest infrastructure developing company in India. Sahara IndiaPariwar 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 ofwell planned, self-sufficient, high quality townships across 217 Indian cities. Meticulous andaesthetic planning & designing, considering varied requirements is the essence of the productmix, which consists of high-rise, mid-rise apartments and independent houses. Sahara Cityhomes at Jaipur is being developed on approximately 200 acre (80.94 hectare) of land out ofwhich 55%-65% area has been exclusively earmarked for open space, roads & landscapedgreenery. An ideal model of modern urban development, Sahara city Homes Township is adestination providing comprehensive peace, comfort and security.

Until last year all the work was handled from lucknow head office, but in the year 2009 companydecided to divide projects under different zones in result to which they estabilished a office inGurgaon. Now the major departments under this zonal office are finance, supply chaindepartment 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


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Introduction of The Project

This project will involve about the following

I. Environmental Analysis

II. Internal analysis

III. Opportunities and threats

IV. Strength and weakness

V. 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 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, and Handicraft Industry. Jaipur is rated as one of the top five

destinations for the growth of real estate industry.


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Per Capita Income In Rs.

Urban Areas- 2006

60282

Market Size In Cr.- 2006 . 16218

H.H Owning 4 Wheelers (%) 2006 7.40

City All India Ranking- 2001 12

City State Ranking - 2001 1

City Category- 2001 A

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 inthe size of the average household is expected to increase demand for new housing and

mortgages.


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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.

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Residential Commercial Amenities open spaces Road

Distribution of land use


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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.


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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 south-

east 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, doublingit 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.


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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.

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90

2001 2005 2006 2010 2014

59

64

7073

81

HOUSING STOCK(MILLION UNITS)

Large

population inthe earning

bracket

IncreaseUrbanisation

ShrinkingHousehold Sizes


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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


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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 $12 Billion

Real Estate Pie 2008 $50 Billion

Projected Demand Of Residential Property 20 Million houses.

in next five years.

Projected Demand Of Commercial Property 200 Million sq.ft

in next five years.


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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


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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, thecommission 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 approximately10 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


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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


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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)% of total income

Income

Realty income 17153.81 37.00%Income from financial activities 513.63 1.11%

Other income 29.76 0.06%

Increase/(decrease) in inventory 28662.97 61.83%

Total income 46360.17 100%

Expenditure

Purchases 4774.63 10.30%

Exp. On work in progress 32592.43 70.30%

Administrative exp. 282.37 4.92%

Employees cost 872.80 1.88%

Depreciation 27.36 0.06%

Interest and finance charges 906.98 1.96%

Loss from joint venture 4.54 0.01%

Total expenditure 41461.11 89.43%

Profit before tax or return on project 4899.06 10.57%


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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.


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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


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CASH FLOW

The following table below summarizes our consolidated cash flows for the fiscal years 2009 and2008.

( in lacs)

FY 20009 FY 2008

Net cash from operating activities 14664.12 112734.87Net cash flow from investing activities 75833.62 5910.74Net cash flow from financing activities 55427.13 129270.70Change in cash 5742.37 10625.09Cash and cash equivalents as on 31

stMarch 4888.71 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


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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 landreserve or asset block.

Operation cash flow ratio= operation cash flow/total debts


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= 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 relationshipbetween liabilities and assets, which in this case is 34% that means companys creditors are

very well backed by asets of the company.


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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

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

Step IDue dilligence of land and getting all the required information about theland

Step II

Entering into negotiations witht the seller of land or getting landdevelopment rights

Step III

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


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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


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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 throughpatta 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:-


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52%

5%

15%

15%

13%

Residential Commercial Amenities open spaces Road


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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 definedas 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


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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 Building Material 15 Days 30 Days

2 Hardware & Paints 15 Days 45 Days

3 Sanitary ware & C.P. Fittings 20 Days 40 Days

4 Electrical & Electronics 15 Days 60 Days

5 Spares & Tools 15 Days 45 Days

6 Capital Items 45 Days 60 Days

7 Miscellaneous Items 15 Days 45 Days

8 Imported Items 90 days 120 Days


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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

Entering into negotiation

with parties and asking

for final prices

Selecting L1 supplierafter final negotiation

END


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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 stepprocess 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


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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


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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 Areatowards 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.


SALES PROJECTIONS

YEAR PROPOSED UNITS TO BE SOLD

SALES VALUE OF PROPOSED

UNITS

(In Rs. Lacs)

2011 200 8743.29

2012 194 11634.17

2013 276 15502.29

2014 391 20163.05

2015 374 20315.24

2016 265 15228.74

2017 321 25071.02

Property Trends in JAIPUR CAPITAL VALUE


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Total number of residential units to be constructed= 4,366

Total number of residential units sold to end units =1,234

Financial Tie Ups

LOCALITYApartment ( /sq

ft)

Plot ( /sq

yd)

JaipurQuarterly

change (%) Jan'09Quarterly

change (%) Jan'09

North - 40 to 0 1500-6000 -8 to 109 1500-60000

East 20 to 23 1500-2000 20 to 24 1500-25000

West -22 to 18 3000-6000 -30 to -2520000-90000

South - 25 to 5 1000-4000 -50 to -45 7000-60000

Sahara City Homes, Jaipur

Percentage In Crore

Projected sales value 100 1375.82Marketing Budget @ 1.5% of projected sales value 1.5 20.64

Amount spent on Marketing so far 0.18 2.5

Total Available Balance 1.32 18.14Marketing Projections for further expenditure

Year % of Available Balance

Amt.(in Rs.Crores)

2011 20 3.63

2012 10 1.81

2013 10 1.81

2014 15 2.722015 15 2.72

2016 10 1.81

2017 20 3.63


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SPCL has financial tie-up with nationalized banks PNB & UCO Bank is proposed for projectfunding 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.


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BALANCE SHEETLIABILITIES 2007 2008 2009 2010 2011 TOTAL

Promoters Capital 37.50 37.50 37.50 37.50 37.50Fund From FDI 337.50 337.50 337.50 337.50 337.50Advance fromCustomers 19.00 133.27 302.91 1296.60 0.00P & L Accounts 0.00 0.00 72.82 105.76 711.45Provision For Tax 0.00 0.00 37.49 54.46 366.34 458.29Creditors 9.19 23.48 33.32 33.08 0.00Total 403.19 531.75 821.53 1864.90 1452.79 5074.16ASSETSClosing Work-in-Progress 232.32 522.09 754.94 1076.40 0.00Cash in Bank 170.87 9.65 66.59 788.49 1452.79

Total 403.19 531.75 821.53 1864.90 1452.79 5074.16

SALES

PARTICULARS 2007 2008 2009 2010 2011

SALES(RESIDENTIAL) 0.00 0.00 277.30 125.46 1794.60

SALES(COMMERCIAL) 0.00 0.00 0.00 0.00 342.57


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RETURNS FOR THE PROJECT

ROI BEFORE TAX

ROI BEFORE TAX= EBIT / NET ASSETS

EARNINGS BEFORE INCOME TAX 1077.79

NET ASSETS 1931.03

ROI BEFORE TAX 0.56 55.81

ROI AFTER TAX

ROI AFTER TAX = EBIT( 1 - TAX RATE) / NET ASSETS


NET ASSETS 1931.03

TAX RATE 0.34

ROI AFTER TAX 0.37 36.84

RETURN ON EQUITY

ROE = PAT / NET WORTH

PROFIT AFTER TAX 711.45

NET WORTH 1931.03

ROE 0.37 36.84

RETURN ON ASSETS

RETURN ON ASSETS = NET INCOME / TOTAL ASSETS

NET INCOME 711.45

TOTAL ASSETS 2488.40

ROA 0.29 28.59


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PROFITIBILITY RATIOGROSS PROFIT MARGIN

GROSS PROFIT MARGIN= (SALES-COST OF SALES)/SALES

PARTICULARS AMOUNT

SALES 2539.93

COST OF SALES 1462.13

GROSS PROFIT MARGIN 0.42 42.43

NET PROFIT MARGINNET PROFIT MARGIN = PAT / SALES

PARTICULARS AMOUNT


SALES 2539.93

NET PROFIT MARGIN 0.28 28.01

PAT TO EBIT RATIO

PAT TO EBIT RATIO = PAT/ EBIT

PARTICULARS AMOUNT



PAT TO EBIT RATIO 0.66 66.01


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ACTIVITY RATIO

ASSETS TURNOVER RATIO

ASSETS TURNOVER RATIO = SALES / NET ASSETSPARTICULARS 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

.


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LEVERAGE RATIO

DEBT RATIO

DEBT RATIO = TOTAL DEBT / ( TOTAL DEBT + NET WORTH)

PARTICULARS 2007 2008 2009 2010 2011

TOTAL DEBT 337.50 337.50 337.50 337.50 337.50

NET WORTH(FA+CA)-CL 161.68 -13.83 -4.22 700.95 1086.45

DEBT RATIO 0.68 1.04 1.01 0.33 0.24

DEBT- EQUITY RATIO

DEBT - EQUITY RATIO = TOTAL DEBT / NET WORTH

PARTICULARS 2007 2008 2009 2010 2011

TOTAL DEBT 337.50 337.50 337.50 337.50 337.50

NET WORTH(FA+CA)-CL 161.68 -13.83 -4.22 700.95 1086.45

DEBT- EQUITY RATIO 2.09 -24.41 -79.89 0.48 0.31

CAPITAL EMPLOYED

CAPITAL EMPLOYED = PROMOTERS CAPITAL / NET WORTH

PARTICULARS 2007 2008 2009 2010 2011

PROMOTERS CAPITAL 37.50 37.50 37.50 37.50 37.50

NET WORTH(FA+CA)-CL 161.68 -13.83 -4.22 700.95 1086.45

CAPITAL EMPLOYED 0.23 -2.71 -8.88 0.05 0.03


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LIQUIDITY RATIO

CURRENT RATIO

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

PARTICULARS 2007 2008 2009 2010 2011

CURRENT ASSETS 170.87 9.65 66.59 788.49 1452.79CURRENTLIABILITIES 9.19 23.48 70.81 87.54 366.34

CURRENT RATIO 18.59 0.41 0.94 9.01 3.97QUICKRATIO

QUICK RATIO = (CURRENT ASSETS - INVENTORIES ) / CURRENTLIABILITIES

PARTICULARS 2007 2008 2009 2010 2011INVENTORY 0.00 0.00 0.00 0.00 0.00

CURRENT ASSETS 170.87 9.65 66.59 788.49 1452.79CURRENTLIABILITIES 9.19 23.48 70.81 87.54 366.34

QUICK RATIO 18.59 0.41 0.94 9.01 3.97

NET WORKING CAPITAL(NWC) RATIO

NWC RATIO = NET WORKING CAPITAL / NET ASSETS

PARTICULARS 2007 2008 2009 2010 2011

NWC(CA-CL) 161.68 -13.83 -4.22 700.95 1086.45

NET ASSETS 161.68 -13.83 -4.22 700.95 1086.45

NWC RATIO 1.00 1.00 1.00 1.00 1.00


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OUTFLOW PROFORMA

OUTFLOWTOTAL 2007 2008 2009 2010 2011

LAND COST 50.00 50.00

DEVELOPMENT COST 80.00 72.00 8.00CONSTRUCTIONCOST(Re)

1023.96 102.40 204.79 307.19 307.19 102.40

CONSTRUCTIONCOST(Am)

MALL 47.00 0.00 18.80 18.80 9.40 0.00

HOTEL 34.97 0.00 13.99 13.99 6.99 0.00

HOSPITAL 28.32 0.00 11.33 11.33 5.66 0.00SCHOOL 28.60 0.00 11.44 11.44 5.72 0.00CONSTRUCTIONCOST(Am) 138.88 0.00 55.55 55.55 27.78 0.00

ADMINISTRATION COST 46.51 4.10 10.41 14.51 13.40 4.10

MISC EXPENSES 34.89 3.07 7.81 10.88 10.05 3.07ADVERTISEMENTEXPENSES 21.97 0.19 0.80 2.93 9.65 8.41

COMMISSION EXPENSES 65.92 0.57 2.40 8.78 28.95 25.22

TOTAL OUTFLOW1462.1

3 232.32 289.77 399.84 397.01 143.19

INFLOW PROFORMA

CASH INFLOW(RES) 2197.36 19.00 80.00 292.79 965.00 840.57

CASH INFLOW(COM) 342.57 0.00 34.27 154.15 154.15 0.00

TOTAL INFLOW2539.9

3 19.00 114.27 446.941119.1

5 840.57

NET INFLOW

TOTAL INFLOW2539.9

3 19.00 114.27 446.941119.1

5 840.57

TOTAL OUTFLOW1462.1

3 232.32 289.77 399.84 397.01 143.19

NET INFLOW1077.7

9-

213.32-

175.50 47.10 722.14 697.38

Cumulative inflow

-

213.32

-

388.83

-

341.73 380.41

1077.7

9


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NET PRESENT VALUE

TOTAL 2007 2008 2009 2010 2011

At 12%

Cash Outflow 1183.50 232.32258.7

6 318.68282.6

7 91.07

Cash Inflows 1808.69 19.00102.0

4 356.21796.8

3 534.60

Net Present Value 625.19Acceptance Rule= NPV should be positive,positive figure shows profit for theproject.

Therefore the NPV @ 12% is acceptable


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PAYBACK PERIOD

2007 2008 2009 2010 2011

Cost of Project1183.5

0 232.32258.7

6318.6

8 282.67 91.07

Cash Inflows1808.6

9 19.00102.0

4356.2

1 796.83534.6

0

Cumulative Inflows 19.00121.0

4477.2

51274.0

81808.

69

3 yrPayback Period

In 2009 477.25

Total Amt needed 706.25

Inflow needed in `10 6.656.65month

Therefore PaybackPeriod 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.


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PROFITIBILITY INDEX

Cash Inflow @ 12% 1808.69

Cash Outlay 1183.50

Profitability Index 1.53

Acceptance Rule(if PI>1)

Therefore Accepted


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INTERNAL RATE OF RETURN

Total 2007 2008 2009 2010 2011

At 12%

Cost of Project 1183.50 232.32 258.76 318.68 282.67 91.07

Cash Inflows 1808.69 19.00 102.04 356.21 796.83 534.60NPV 625.19

At 55%

Cost of project 716.73 232.32 186.90 166.33 106.40 24.77

Cash Inflows 723.98 19.00 73.70 185.93 299.93 145.42

NPV 7.25

At 56%

Cost of project 710.83 232.32 185.74 164.30 104.41 24.06

Cash Inflows 711.44 19.00 73.24 183.65 294.34 141.22

NPV 0.61

At 57%

Cost of project 704.46 232.32 184.29 161.94 102.43 23.48

Cash Inflows 699.28 19.00 72.67 181.01 288.74 137.85

NPV -5.19

Difference

Cost Required 1183.50

Cost @ lower rate, 56% 711.44 -472.06

Cost @ higher rate, 57% 699.28 12.17

r=20%+(21%-20%)*9.30/38.33 0.17

Therefore IRR = 20.24%

Acceptance Rule( if r > k )

k = 20%

r = 20.24%

Therefore Accepted

Final Reo - Copy

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