Annual Report - Kolte Patil Developers - 2009-2010

KOLTE-PATIL DEVELOPERS LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To
The Members,

Your Directors take pleasure in presenting the Nineteenth Annual Report on
the business and operations of the Company, together with the audited
results for the financial year ended on 31st March, 2010.



The Company is engaged in various segments namely Real Estate Development,
Hospitality and Retail. However, in the financial year 2009-10, there was
only one reportable segment namely Real Estate Development.

Financial Highlights

(Rs. In '000)

Particulars 2009-10 2008-09

Net Sales and Other Income 902,195 19,96,414

Less: Expenditure 495,705 870,209

Less: Financial Charges 63,929 70,948

Less: Depreciation/Amortization 11,271 10,401

Profit Before Tax 331,290 10,44,856

Less: Provision for taxation 53,961 338,055

Profit After Tax 277,329 706,801

Add: Prior Period adjustments (549) 152,456

Less: Taxation in Firm (765) (12,893)

Add: Balance of Profit and Loss
Account brought forward from
the previous year 24,65,402 17,24,887

Profit available for appropriation 27,41,417 25,71,252

Appropriations:

Transfer to General Reserve 18,000 17,670

Proposed Dividend (includes
tax on dividend) 88,486 88,180

Balance carried to Balance Sheet 26,34,930 24,65,402

Performance Review

As the real estate sector is striving to come out of the recession
scenario, many Realty Companies are coming up with fascinating projects and
plans catering to almost every category/class.

We have seen a slow but steady recovery in the real estate sector in India
post recession. The demand has hiked for the affordable pocket between
Rs.25-30 Lakhs, for residential apartments in Pune City. Considering the
demand in residential and luxury apartments, the new projects have been
redesigned and are being launched in year 2009-10 which will generate
substantial revenues in the next 2-3 years.

During the financial year under review, the total sales and other income
decreased from Rs. 19,96,414 thousands to 902,195 thousands; a decrease of
54.81% from the previous year. Profit after Tax (PAT) declined from
Rs.706,801 thousands to Rs. 277,329 thousands; a decrease of 60.76% from
the previous year.

Dividend

Your Directors are pleased to recommend a final dividend of Re.1 per equity
share, on 7,56,32,537 equity shares of the Company.

New Initiative

To achieve the objectives set by the Company, the Management has taken
initiatives to accelerate the project execution; by way of restructuring
organization skills e.g. Creating Strategic Business Units (SBU), with a
well defined authority and responsibility.

To establish and maintain a long term relationship with vendors, for better
price and quality, your Company has taken initiatives by way of corporate
tie-ups and direct interaction with manufacturers of steel, cement etc.

To respond to the market demand, the Management has realigned and re-priced
its product mix, to offer better quality homes at right price.

Joint Venture Projects

Corolla Realty Private Limited

A Joint Venture project between your Company; India Advantage Fund of ICICI
Venture Funds Management Company Limited; and Mr. Ishwarchand Goyal has
been initiated, in addition to its affordable housing project namely 'Umang
Homes'; the Company is planning to launch Bungalow Plots, Twin Bungalows,
and Row Houses in an 80 acre township project at Wagholi, Pune.

Kolte-Patil 1-Ven Townships (Pune) Private Limited

The township project at Jambhe, Hinjewadi, Pune has taken off successfully
with land acquisitions underway and now the Company is in the process of
approaching various Government authorities for obtaining approvals in
relation to the project. After all the approvals are in place, the Company
proposes to launch the project on a large scale.

Re-appointment of Whole-Time Directors of the Company

Your Board of Directors at their meeting held on January 29, 2010 subject
to the approval of members, approved the terms of re-appointment and
payment of remuneration thereof, to Mr. Rajesh Patil, Chairman and Managing
Director, Mr. Naresh Patil, Joint Managing Director, Mr. Milind Kolte,
Executive Director and Mrs. Sunita Kolte, Executive Director with effect
from April 15, 2010. The payment of remuneration including Commission to
the Whole-Time Directors - Mr. Rajesh Patil, Mr. Naresh Patil, Mr. Milind
Kolte and Mrs. Sunita Kolte has also been approved by the Remuneration and
Compensation Committee of the Company in their meeting held on January 29,
2010.

Directors

During the year under review, there was a change in the composition of the
Board of Directors of the Company due to the sad and unexpected demise of
Mr. Satish Tandon, Independent Director. The Board of Directors wish to
express their heartfelt sincere appreciation for Mr. Satish Tandon's
valuable contribution in the growth and development of the Company.

Mr. Jayant Pendse was appointed as Director under Section 262 of the
Companies Act, 1956 to fill the casual vacancy w.e.f October 29, 2009.

Pursuant to Section 256 of the Companies Act, 1956 read with the Article
167 of Articles of Association of the Company, Mrs. Sunita Kolte and Mr.
Milind Kolte; Directors retiring by rotation and being eligible, have
offered themselves for re-appointment at the ensuing Annual General
Meeting. The brief profile of the Directors seeking re-appointment has been
mentioned in the explanatory statement to the Notice of the Annual General
Meeting.

Subsidiary Companies

The Company has 12 subsidiaries as on 31s' March, 2010 namely, Regenesis
Project Management Company Private Limited, Yashowardhan Promoters and
Developers Private Limited, Sylvan Acres Realty Private Limited, I-Ven
Kolte-Patil Projects (Pune) Private Limited, Lilac Hospitality Private
Limited, Olive Realty Private Limited, Bellflower Properties Private

Limited, Jasmine Hospitality Private Limited, Oakwoods Hospitality Private
Limited, Regenesis Facility Management Company Private Limited, PNP Retail
Private Limited and Kolte-Patil Real Estate Private Limited.

Particulars under Section 212 of the Companies Act, 1956

As per Section 212 of the Companies Act, 1956, the Company is required to
attach the Directors' Report, Balance Sheet and Profit and Loss Account of
its subsidiaries. However, the Company has received approval from Ministry
of Corporate Affairs, Delhi, via letter No. 47/293/2010-CL-III dated 9th
April 2010 and dated 13th May 2010, exempting the Company from attaching
the Directors' Report, Balance Sheet and Profit and Loss Account of its
subsidiaries. Therefore, the Annual Report does not contain the Financial
Statements of the above subsidiaries. The consolidated accounts present a
full and fair picture of the state of affairs and the financial condition.
This practice is globally accepted. The audited annual accounts and related
information of subsidiaries will be made available upon request. These
documents will also be available for inspection during business hours at
our Registered Office in Pune, Maharashtra, India.

The financial details of the Subsidiary Companies as well as the extent of
holdings therein are provided in Annexure III to the Directors' Report.

A brief summary of the activities carried out by the Subsidiary Companies
are as follows:

Kolte-Patil Real Estate Private Limited is a Joint Venture Company and in
the third quarter of 2009-10 has launched a residential project namely
'Beryl'. Moreover, it also plans to develop premium and Ultra Luxurious
apartments, commercial buildings, shopping arcade, and entertainment
complex and also tie-up with Victorious Kidss Educares School, (IB School).

Bellflower Properties Private Limited is a Joint Venture Company and has
launched a residential project namely 'Margosa Heights', phase - I, at
Mohammadwadi, NIBM annex Pune.

Yashowardhan Promoters and Developers Private Limited is a Joint Venture
Company and has successfully completed residential project namely 'Dew
Drops' and commercial a project namely 'Shoppers Orbit' at Vishranthwadi,
Pune and in same premises, plans to launch a Row House Scheme.

PNP Retail Private Limited is a Subsidiary Company that has been set up
primarily to carry on business through retail formats like hyper markets,
super markets, cash & carry, departmental stores, direct to home etc. The
Company has started its first store on April 24, 2010 in HRBR Layout in
Bangalore. The Company offers customers retail store format - Convenience
store called PNP Retail. PNP Retails are neighbourhood stores that cater to
the daily and weekly top-up shopping needs of customers. The stores stock
an assortment of fruits and vegetables, food and non-food fast moving
consumer goods, staple and frozen food items, personal and home care
products. The Company plans to start a chain of retail stores.

Regenesis Project Management Company Private Limited is a Wholly Owned
Subsidiary which has been set up primarily to provide project management
services.

Sylvan Acres Realty Private Limited is a Joint Venture Company set up for
investment in Township project at Pune.

I-Ven Kolte-Patil Projects (Pune) Private Limited is a Joint Venture
Company set up for developing Residential and Commercial projects at
Kharadi, Pune.

Lilac Hospitality Private Limited is a Wholly Owned Subsidiary set up for
providing hospitality management services to hotel projects.

Olive Realty Private Limited is a Wholly Owned Subsidiary set up, to carry
on the business of real estate development at Phursungi, Pune.

Jasmine Hospitality Private Limited is a Joint Venture Company set up for
developing a hotel at Bangalore.

Oakwoods Hospitality Private Limited is a Joint Venture Company set up for
developing a hotel at Pune.

Regenesis Facility Management Company Private Limited is a Wholly Owned
Subsidiary Company set up to provide facility management and property
maintenance services.

Fixed Deposits

Your Directors had approved and introduced a Fixed Deposit Scheme 2009-10
in their meeting held on January 29, 2010, which has received a good
response, since Shareholders of the Company, Senior Citizens, Handicapped
Persons, Armed Force Personnel and Employees of the Kolte-Patil Group are
entitled to receive an additional 0.50% rate of interest on the deposit
invested with the Company.

During the period under review, your Company has collected Rs. 15,800
thousands as on 31stMarch, 2010.

Employees Stock Option Scheme 2006 (ESOS)

During the year under review, your Company has implemented the Kolte-Patil
Employee Stock Option Scheme, 2006.

Disclosures in respect of the Kolte-Patil Employee Stock Option Scheme,
2006 in compliance with Clause 12 of the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, as amended, are set out in Annexure IV to this Report.

Investors' Relations and Grievances

Investor Relations have been cordial during the year. The Company has
formed Investors' Grievance Committee to address the issues relating to
investors. There were no investor grievances pending as on 31St March,
2010. A confirmation to this effect has been obtained from the Company's
Registrar & Share Transfer Agent. A detailed report on the above appears in
Corporate Governance Report annexed to this Report.

Directors' Responsibility Statement

In accordance with the provisions of Section 217(2AA) of the Companies Act,
1956, your Directors state that:

i) In the preparation of accounts, the applicable accounting standards have
been followed and no significant departures have been made from the same.

ii) Accounting policies selected were applied consistently. Reasonable,
prudent judgments and estimates were made so as to give a true and fair
view of the state of affairs of the Company at the end of 31s' March, 2010
and of the profit of the Company for the year ended on that date.

iii) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding of assets of the Company and for
preventing and detecting frauds and other irregularities.

iv) The annual accounts of the Company have been prepared on a going
concern basis.

Auditors

The Auditors of the Company M/S. S P C M & Associates, Chartered
Accountants, Pune (formerly known as Bora Kasat & Co.) retire at the
ensuing Annual General Meeting. They have confirmed their eligibility and
willingness to accept appointment, if re-appointed. Your Directors
recommend their appointment.

Human Resources

Employees are the most important assets of the Company. The Company
endeavors in encouraging innovation and meritocracy. We have also set up
scalable recruitment, performance appraisal system, to retain key employees
and to offer them stock options, and Human Resource Management Processes,
which enables us to attract and retain the high caliber employees. The
total employees strength as on 31st March, 2010 was 358 as compared to 326
in the previous year.

Conservation of Energy, Technology absorption, Foreign Exchange Earnings &
Outgo

A statement giving information of Conservation of Energy, Technology
absorption, Foreign Exchange Earnings & Outgo as required under Section 217
(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988 is annexed
hereto - Annexure I and it forms part of this Report.

Particulars of the Employees

A statement required under Section 217 (2A) of the Companies Act, 195 has
been furnished herein Annexure II and forms part of this Report.

Management Discussion and Analysis Statement

Management Discussion and Analysis Report as stipulated under Clause 49 of
the Listing Agreement is annexed hereto and forms part of this Report.

Corporate Governance Report

Your Directors adhere to the requirements set out in Clause 49 of the
Listing Agreements with the Stock Exchanges. Report on Corporate Governance
as stipulated in the said Clause is annexed and forms part of this Report.

Acknowledgments

The Directors would like to express their appreciation for the assistance
and co-operation received from customers, vendors, stakeholders, Central
and State Government Authorities, business associates, and bankers of the
Company. Your Directors take this opportunity to thank all the employees
for rendering high quality service to all the Company's customers. The
employees have worked with the principles of honesty, integrity, fair play
and helped ensure a sustained excellence in performance of the Company.
Finally, the Directors would like to convey their gratitude to the members
and look forward to their continued support in future.

For and on Behalf of the
Board of Directors

Rajesh Patil
Chairman and Managing Director

Place: Bangalore
Date : May 28, 2010

Annexure to Directors' Report

ANNEXUREI

Statement of Particulars under Section 217 (1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988 forming part of Directors' Report for the
year ended 31st March, 2010.

1. Conservation of Energy:

The Company's Energy consumption is minimum. The Company is striving to
reduce energy consumption in the buildings developed by the Company, by
taking energy conservation measures.

2. Technology Absorption:

The Company has not undertaken any Research & Development Activity in
Development of Technology in the area of Construction.

3. Foreign Exchange Earnings and Outgo:

Disclosure of information relating to foreign exchange earnings and outgo
as required under Rule 2(c) is already given in point no.7 in Notes to
Accounts' forming part of the Audited Annual Accounts.

For and on Behalf of the
Board of Directors

Rajesh Patil
Chairman and Managing Director

Place: Bangalore
Date : May 28, 2010

Annexure-IV

Disclosure in compliance with provisions of Clause 12 of the Securities and
Exchange Board of India (Empolyees Stock Option Scheme and Employee Stock
Purchase Scheme) Guideines, 1999.

Description : Details

1. Name of the Scheme : Kolte-Patil Employee Stock Option
Scheme-2006

2. Total Number of options to
be granted under the plan : 7,80,000 Equity Shares

3. Options granted during the year : N.A.

4. Pricing formula : The Remuneration and Compensation
Coomittee decides exercise price
based on Book Value of shares
calculated by the Statutory Auditors
of the Company, on the basis of
audited annual accounts of the
financial year 2005-06 of the Company.

5. Options vested as of 31st : 338,887 Equity Shares
March, 2010

6. Options excercised during : 110,144 Equity Shares
the year

7. Total number of shares : 228,277 Equity Shares
arising as a result of exercise
of options till 31st March, 2010

8. Options lapsed/cancelled
during the year : 10,775 Equity Shares

9. Variation of terms of options : N.A.

10. Money realised by exercise
of options during the year : Rs. 44,05,760/-

11. Total Number of options in
force at the end of the year : 338,887 equity shares

12. Employee wise details of stock options granted to Senior Managerial
Personnel as on 31st March, 2010:

Mr. Girish Lakhe -63750*;
Mr. Vasant Gaikwad-30000*;
Mr. Pramod Nemade-25000*;
Mr. Pravin Parandekar-25000*;
Mr. Abhay Patil-25000*;
Mr. Shahaji Ranaware-10000*;
Mr. Vinod Patil-10000*;
Mr. Hitendra Chaudhary-10000*;
Mr. Nelson Misquith-25000*;
Mr. Milind Pendse-19750*;
Mr. Vijay Bhide-10000*;
Mr. Dilip Borade-10000*;
Mr. Nitin Patil-10000*;
Mr. S.K. Prasanna-30000*;
Mr. Shodhan Lokhande-12060*;
Mr. Shashidhar K.-10635*

* Of these certain stock options have been exercised

13. Employees who were granted options amounting to 5% or more of the
options granted during the year:

Nil

14. Employees who were granted options in any one year equal to or
exceeding 1% of the issued capital of the Company at the time of grant:

NA

15. Diluted Earning Per Share (EPS) pursuant to issue of shares on exercise
of option calculated in accordance with Accounting Standard 20 (AS-20):

Rs. 3.67

MANAGEMENT DISCUSSION AND ANALYSIS

Economic Overview:

The fiscal year 2009-2010 started as a challenging one. Indian economy
experienced significant slowdown in the growth rate in the second half of
2008-2009 as a result of the financial crisis that began in the developed
nations in 2007 and spread to the economies across the world. After
experiencing a distinct moderation in growth at 6.7 per cent in 2008-09, an
apprehension took over that, this trend would persist for some duration.
However, the Indian economy recovered in 2009-10 with a growth of 7.2 per
cent (as per Central Statistical Organization (CSO) advance estimates). The
Index of Industrial Production (IIP) has shown double digit growth in
recent months. Lead indicators for service activities point to overall
improvement since the third quarter of 2009-10. Corporate sales growth
witnessed major rebound in the third quarter of 2009-10. Exports recovered
from 12 months of consecutive decline and posted an average growth of 20.5
per cent during November 2009-February 2010. Imports also turned around and
exhibited an average growth of about 43.0 per cent during December 2009-
February 2010, mirroring the impact of strong recovery in growth. However,
a prolonged and widespread current debt crisis in Europe could have a
substantial adverse impact on the Indian economy.

Developments in Real Estate Industry:

Asian markets, which were resilient to the global economic downturn,
continue to offer lucrative opportunities that will drive the growth. As a
result of economic stabilization, property markets in India began to show
signs of revival in the later part of the year. However, because of the
oversupply in some of the micro markets and the high inventory of quite a
few developers, neither volumes nor price saw any significant appreciation
during the year. The residential market, which had seen a decrease in
demand in 2008, saw a revival of interest from homebuyers, as a result of
economic recovery, job security and lower interest rates on home loans. The
residential segment has stronger fundamentals and is propelled by domestic
demand, not really depending on the external demand. Developers began to
focus on affordable as well as mid-income housing segment, where there was
a potential demand. Developers have now come up with right size product at
a right price, tailored to the requirement of the mid income group (MIG)
segment. Quite a few launches, in particular in affordable segment and MIG,
received a good response from home buyers. Also there seems to be a good
demand for luxurious housing projects in some specific locations. The
success of the projects will depend on the developer's ability to meet
their commitment to provide houses at the promised price and on scheduled
time. Many developers have now focused on strengthening their execution
capability and taken strategic initiatives in order to ensure efficient
execution of the projects. Also by looking at the recovery of the real
estate scenario, many private equity funds have started looking at
investment opportunities in the residential sector. Integrated townships
and Urban Infrastructure development is also attracting the developers
which involves huge planned investments for a longer duration. Integrated
Township and Urban Infrastructure Development are likely to reduce the
pressure on the existing infrastructure of Indian cities. Opportunities &
Risks:

Opportunities:

* MIG Housing:

As a result of revival of Indian economy and job security; homebuyers have
now started showing interest in property. There is good potential in terms
of demand for mid-income housing. Developers are also now more cognizant of
affordability and are reducing unit sizes and the scale of amenities in
order to reach out to the sizeable middle income consumer segment.

* Integrated Townships:

Integrated townships are today's real estate mantra. Townships are gaining
significant importance as it improves qualitative living and social
integration. Integrated townships include all the necessary facilities i.e.
school, hospital, resorts, cafes, multiplexes, shopping centers,
transportation service in the same campus, thus offering convenience to the
residents and the workforce within it. We have proposed to develop one
township on approximately 400 Acres of land at Jambhe, near Hinjewadi,
which is in planning process.

* Redevelopment of Societies:

Locations in the old PMC limits are very prime and thus valued at very high
cost; however there is a shortage of land in the old PMC limits.
Considering the tremendous pace of growth of Pune City, it is the need of
today to redevelop the old societies which are located in old PMC limits.
Redevelopment of the existing societies is a win-win situation for both;
residents of the society as well as the developer. It offers benefit to the
residents of the existing societies in terms of better amenities and
improved quality of living but from developer's perspective also, it is
beneficial as the developer need not invest huge amount in land but invests
only in construction cost and sells the product at the current market
price. Moreover, the developer can utilize current PMC rules, get more FSI
& TDR, if applicable, thereby increasing saleable area of the development.

* Opportunities in School:

The recent global economic crisis and real estate slowdown has necessitated
change in the business models. Education infrastructure is an emerging
asset class, favored by many investors and developers. In this decade,
education has seen tremendous growth and has been one of the few sectors
not adversely affected by the downturn. As it is well known, Pune is called
'the Oxford of the East'; hence many well reputed schools are eager to set
up their school campus in Pune. It offers a very good opportunity for the
developer to enter into a strategic tie-up with these schools in terms of
various business models.

* Infrastructure:

India is rapidly emerging as 'a land of opportunities' for the
Infrastructure sector. Today it has become a favorable investment
destination. Many of the MNCs are setting up their facilities in India.
Indian companies are also ambitious about expansion plans in future.
Looking at the growth pace of Indian cities, it is necessary to create an
infrastructure to sustain this economic growth. In the union budget 2010-
2011, considerable amounts have been allocated towards infrastructure,
urban development and education.

* Hospital:

The market for services in hospitals in India has shown immense potential
for growth over the last few years. The market has attracted many investors
from across the world on the back of economy growth, growing population and
infrastructure development. Government has offered five year income tax
benefits to run the hospitals in some of the non-metro cities including
Pune.

Risks:

* Increase in interest rates: RBI has introduced hike in Cash Reserve Ratio
(CRR) as well as policy rates (repo & reverse repo rate). As a result of
this, Banks might increase the home loan interest rates in future which
might affect the demand for housing.

* Prices of residential flats are likely to go up in a couple of months,
notwithstanding the recent relaxation in the service tax. The latest Union
Budget had imposed a 3% service tax on builders, while the state would
impose VAT of 1% (in some states including Maharashtra) on a flat's price.

* Availability of Suitable Land parcels: Scarcity of land and increase in
demand for residential and commercial properties leads to escalation in
land prices. This is likely to have an adverse impact on operations.

* Surge in cost: Profit margins in the real estate sector could be
adversely affected due to increase in cost of core raw materials like
steel, cement, etc. as well as additional burden of excise tariff. Post
recession, construction activity has increased considerably; however,
scarcity of quality labor might delay project execution.

* Delay in the project execution: The big challenge in this volatile
property market is to deliver projects within schedules and budget
constraints. If developers do not get attractive price for projects,
margins will be squeezed due to increase in input costs and cost of delay.
Therefore, developers must increase their execution capability.

Pune: Market Overview:

Currently, Pune's residential market can be divided into 5 zones. The North
and North- Western Zone, the West and South-Western Zone, the South and
South-Eastern Zone, the East and North-Eastern Zone and the Central Zone.
North-western locations are close to the Mumbai-Bangalore Highway. In the
eastern and southern part of the city, locations like Kharadi, Hadapsar,
Vimannagar, NIBM have witnessed substantial growth. Pune will witness
large amount of infusion of residential space in near future. Main
commercial drivers in Pune include, IT/ITES industry, engineering and
automobile industry. Pune's residential market has witnessed increased
activity in the past few years. The increasing importance of the city,
coupled with the initiation of several infrastructure projects, is expected
to further increase residential development in the city.

Bengaluru Market Overview:

The residential market in Bengaluru is currently stabilising. Most of the
projected supply would be a result of the spillover from earlier
residential developments. Bengaluru is residential market can be divided
into the following zones namely the CBD (Central Business District),
Bengaluru North, Bengaluru South, Bengaluru East and Bengaluru West. The
CBD represents the most prime locations in the city. This zone is largely
saturated. Majority of the demand in this zone is from the high income
segment. Bengaluru West comprises of well established old residential
pockets in the city. Bengaluru North is the zone where most residential
development activity is being focused. The residential demand for this zone
is primarily from investors. Bengaluru South and Bengaluru East are the
fastest developing zones in the city. The high population density in these
zones is because of the presence of IT hubs in these locations. The
residential market of Bengaluru has witnessed growing activity in the past
few years. Major emerging residential markets are located towards the
eastern and southern parts of the city.

Segment wise and product wise performance:

Kolte-Patil Developers Limited is one of the most reputed, professionally
managed, established construction groups in Pune. The Company has a
reputation for quality, uniqueness in design and transparency. Incorporated
initially as a private limited company in 1991, the Company is primarily
focused on the development of residential projects, commercial projects, IT
parks, integrated townships and hospitality projects mainly in Pune and
Bengaluru. Till 31st March, 2010, the Company has completed 34 projects
including 31 in Pune and 3 in Bengaluru. This includes 20 residential
complexes, 7 commercial complexes, 3 commercial cum residential use and 4
IT parks.

Outlook:

There were early signs of real estate revival last year following
considerable price correction. Consequently, prices stabilized leading to
substantial improvement in sales. The Indian economy is expected to
strengthen further as the professional forecasters' survey of the Reserve
Bank of India (RBI) suggests an overall (median) GDP growth of 8.2 per cent
for 2010-11. Inflationary pressures may remain at the top of the agenda for
India in 2010, along with sustained economic growth. To control the
inflation, RBI has already raised Cash Reserve Ratio (CRR). In a gradually
recovering economic scenario, backed by revival in investment and private
consumption demand, India's real estate sector is anticipated to witness an
increase in business activities. A slower corporate/economic recovery
process in the real estate sector can instead ensure a sustained growth
phase in the months ahead. Leasing activities in commercial and retail
markets are likely to take more time to recover. Residential segment has
already begun to move towards turnaround. Majority of the investors are
keen on investing in residential properties, believing that the prices will
increase in the next few months. The year 2010 is expected to be stronger
year for real estate investment.

Risks and Concerns:

Economic Risk:

Any slowdown in the global and/or Indian economy could adversely affect our
business.

Geographical Risk:

We are currently geographically concentrated and our projects portfolio is
relatively concentrated in and around Pune. Any adverse events in and
around Pune, can make our projects economically less beneficial. As a
result of which our business, financial condition and results of operations
could be adversely affected.

We undertake some of our projects in joint ventures with third parties,
which entail certain risks.

At present, some of our projects are developed through joint ventures with
real estate development funds. To the extent of any liability or losses
incurred by a joint venture resulting from the realization of any of the
risks, our share of the liability or losses incurred would be proportionate
to our equity interest in the relevant joint venture. Further, there are
some risks peculiar to Joint Ventures like joint venture partners failing
to meet their financial obligations, breach of obligations under the joint
venture agreement, joint venture partners having business interests or
goals that are inconsistent with our business interests or goals. All these
risks may affect the performance of the Company.

We may not be able to acquire or register all or any of the lands for which
we have entered into agreements to sell or MOUs.

We enter into agreements to sell or MOUs prior to acquiring any property.
We cannot assure that we will be successful in acquiring them or that we
will be successful in registering them in our name or the name of one of
our subsidiaries. We may not be able to keep our MOUs with the land owners
alive.

Terrorist attacks, civil unrest and other acts of violence or war

Terrorist attacks and other acts of violence or war may negatively affect
the Indian markets. These acts may also result in a loss of business
confidence, make travel and other services more difficult and ultimately
adversely affect our business. It is possible that future civil unrest as
well as other adverse social, economic and political events in India could
have a negative impact on the performance of the Company.

Natural calamities could have a negative impact on the Indian economy and
cause our business to suffer.

Internal control systems and their adequacy:

The Company has internal control systems, which are adequate, considering
the size and nature of its operations. From time to time, the Company is
increasing the scope of internal auditors to improve efficiency and
introducing greater controls over various aspects of the Company's
procedures and systems. The Company is also utilizing new techniques and
data systems for its management information systems. The internal control
system is supplemented by extensive internal audits, regular reviews by
management and standard policies and guidelines to ensure the reliability
of financial and all other records. The Company has also implemented ERP
system to have better internal control over the system.

Financial and Operational Performance (Consolidated)

Income: The Company recorded total income of Rs. 10,82,524 thousands as
compared to Rs. 23,58,088 thousands for the previous year, a down by
54.09%. EBIDTA: The Company's EBIDTA stood at Rs. 467,472 thousands against
Rs. 11,97,416 thousands in 2008-09, and decrease by 60.96%.

PAT: The Profit After Tax (PAT) of the Company has decreased from Rs. 713,
607 thousands in 2008-09 to Rs. 309,959 thousands in 2009-10 and the
decrease by 56.56%.

Material developments in Human Resources:

The Company appreciates its human capital and believes that its employees
are one of the key elements to its business success. The Company believes
in continuous learning process and hence focuses towards streamlining
existing processes and systems for better productivity. Our workforce
consists of (i) Our permanent employees (ii) Consultants who are engaged by
us on a contractual basis and (iii) Contractors who are engaged by us on a
contractual basis and who employ laborers to work on project sites. As of
March 31, 2010, the Company had 358 permanent employees working at its
several sites, Bengaluru Office and corporate office at Pune and previous
year employees were 326. With a comprehensive implementation of Performance
Management System in place, the Company has a performance-based incentive
program and boasts of a benchmarking compensation structure matching up to
the best in the industry. To support the business requirements, we have
also in place rigorous recruitment & selection procedure which ensures the
BEST fit for current Business needs. To ensure Corporate Social
Responsibility, we have GPA policy and mediclaim policy for our employees
and also workmen compensation policy for contractor's employees. As a part
of good Corporate Governance, we strictly adhere to the corporate and
labour law compliances. Our employees have helped raise the performance bar
in professionalism, opportunity, responsibility, belongingness and
accomplishment.

Cautionary Statement:

In the case of data and information external to the Company, no
representation is made on its accuracy or comprehensiveness though the same
are based on sources believed to be reliable. Statements in the Management
Discussion and Analysis describing the Company's objectives, projections,
estimates, expectations may be 'forward looking statements' within the
meaning of applicable securities, laws and regulations. Actual results
could differ materially from those expressed or implied. Important factors
that could influence the Company's operations include economic developments
within and/or outside the country, demand and supply conditions in the
market, input prices, changes in Government regulations, tax laws and other
factors such as litigation and industrial relations, etc. over which the
Company does not have any direct control.