PART-1

Project Objectives and Overall Research Approach

Introduction

This RAP is the requirement for getting BSc (Hons) in Applied Accounting set by Oxford Brooks

University. After completion of part 2 of ACCA a student will be eligible for doing RAP. This

thesis paper helps to implement knowledge on accounting and business techniques, which is

gained throughout ACCA. Besides, this thesis paper will help to learn and implement

information regarding referencing that assure to my employers that I have all relevant skill and

knowledge in accounting and finance.

Reasons for Choosing the TopicBefore selecting the topic I went through a detail analysis of each possible option given by

Oxford Brooks University. Each of the topic is equally interesting but I have to choose only one

among 20 options. During this cross out process I have considered few information, which are

mentioned bellow-

Available information

I can easily use my knowledge and learned techniques during the

research works

Chance to learn more about business techniques.

Get to know financial conditions of a particular company and

Interpretation of information will also be improved

Know about industry situation

Chosen Organization & Rationale behind choosing Oberio Real Estate

To conduct the research Oberoi Real estate has been chosen the selection of Oberio Real Estate

indicate my research interest, which is Indian Real Estate sector. In this regard i need to choose

another company from the same industry. Selection of another company from same industry

other than Oberoi is for fair business and financial comparison.

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It is important to mention that, I have to use Annual Report (2013-2015) of both of the

companies. Here it is also significant to declare that i use Standalone Annual Report (2013-

2015) to get a clear picture about the industry as a whole along with financial performance and

business performance of Oberoi Real estate.

To attain the objective ACCA textbook help me a lot. l apply my knowledge which i gained from

my course of ACCA.

The rationale behind the selection of Oberoi Reality for analysing the business and financial

performance are as follows:

Oberoi Reality is top ranked company in real estate sector in India influence me to choose

Oberoi Reality for research and analysis. In addition to this, Oberoi Reality made many

significant construction works for expanding their business. Moreover being a public listed

company Oberoi Reality it is easy to get all required information. Shareholders, investors have

the legal right to know about financial information as a result Oberoi Reality provides detailed

financial information to them.

Oberoi Reality Profile

Oberoi Reality Ltd. is a top real estate developer firm which has focus on constructing premium

developments in Mumbai. In early 1980, it was incorporated as Oberoi Constructions which later

changed to Oberoi Realty Limited and was listed on Bombay Stock Exchange in 2010 (Wikipedia).

o Projects:

Most of the Projects of Oberoi Reality constructed in various location of Mumbai. Projects of

Oberoi Reality is divided into five parts as per the types of the projects which are-

Residential

Commercial

Retail

Social Infrastructure

Hospitality

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The company has already completed 39 projects, among which most of them are residential

projects.

Aim of this Project

Project aim of the research is to get the insight of the company’s business and financial

performance in last three financial years. By using financial ratio we try to get the financial

situation of the company and using various business model it is try to be understand the

external and internal business environment the of the company and comparative analysis we

will help us to recognize actual position of the company in the industry. Besides, in this

research report we try to find out the future prospect of the company. In addition to this,

during conducting this research works, overall situation of the industry will also be analysed.

Using effective business analysis tools we can get to know whole industry situation. In precise

manner, it can be said that, this report will try to obtain the answer of the following question-

Financial performance of the company

Internal strength and external strength of the company

Brief overview of Industry

Get to know the overall external environment where this company is

doing business.

For attaining these objectives we collect data from the last three annual reports of the business

and other publications, Newspapers.

Financial performance:

We collect and analyse the information from company’s annual report to know the financial

performance of Oberoi Reality, which reflected through company’s return on capital employed,

profitable ratio, Earnings per shares etc. Financial performance will be measured by answering

the following questions:

i. How profitable the company is?

ii. Liquidity position of the company?

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iii. Performance comparison with its competitor

Business performance:

For getting the overall business performance of the company using suitable business models. It

would be determined by answering the following questions:

i. What are the major opportunities and threats for the

company

ii. What are industry situation and company’s capability to

cope up with it?

iii. What are strength and weakness of the company, which

must require attention?

Background of research approach:

After the selection of the topic i have gathered all necessary information to do my research .As

Oberoi reality is a public listed therefore information is readily available in the internet,

newspapers and magazines and other sources of database.

To get the clear picture of Oberoi reality I would try to calculate the financial ratios of this

company, which are-

Profitability

Liquidity

Gearing

Investor ratios

Then comparison of the ratios of both the companies and evaluate their performance. This will

help me to conclude the companies’ position in the industry.

Finally, I use PESTEL, and SWOT analysis to find out the company’s both external and internal

competitive environment, after reading through the company’s business nature and structure.

Limitations of the models also considered when selecting the appropriate model.

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PART-2

Information gathering and accounting and business Techniques

Sources of information

To do any type of research reliability and accuracy of source of information is highly mandatory.

Therefore collecting right information from right source is very crucial for conducting research.

Primary Source

Primary source of information is one the method to collect information. It includes conducting

survey, interviewing people from respective sector. As the nature of my research is required

information from secondary sources which includes- newspaper, various article, journal etc. So

that necessity of using primary source is not needed.

Secondary Source

Secondary sources of information is very crucial for any research work. It helps a researcher to

get information from various source which ensure good quality of a research paper.

According to the University of Maryland Libraries-

“Secondary sources are less easily defined than primary sources. Generally, they are accounts

written after the fact with the benefit of hindsight. They are interpretations and evaluations of

primary sources.”

In this report I mostly depend on the secondary sources of information, as this information is

easily available. In this regard I would like to mention that I use various online newspaper,

online article published in newspaper and journal. In addition to this, various business journal

also used.

Reason of using Secondary Sources-

Ease of Access

There are many advantages to using secondary research. This includes the

relative ease of access to many sources of secondary data. In the past

secondary data accumulation required marketers to visit libraries, or wait for

reports to be shipped by mail. Now with the availability of online access,

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secondary research is more openly accessed. This offers convenience and

generally standardized usage methods for all sources of secondary research.

Low Cost to acquire

The use of secondary data has allowed researchers access to valuable

information for little or no cost to acquire. Therefore, this information is

much less expensive than if the researchers had to carry out the research

themselves.

Methods used to collect information

Annual Reports of Oberoi Reality and Godrej properties

I have used official website of Oberoi Reality, to gather information related to company’s

background, last three financial years annual reports. In this report information from Annual

Report are used to get result of various financial ratios. We gather three years data to do the

trend analysis.

Electronic research

I collected majority of the information from internet for doing this report. As there is load of

information it is very important to careful sorting of information. In this report which sources

were more reliable, information were taken from there. For my better understanding and for

achieving the research goal I have browsed through other web pages. I also used some of their

contents for clear definition in my project.

ACCA Text books

My report may in complete if not paper F7 Financial Reporting will not help. It leads me through

the whole project for conducting financial analysis of the project. My knowledge of Business

analysis enhance by Paper F9. It also helps me to the application of business models.

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Limitations in information gathering

Company’s annual reports, newspaper articles, and websites are the main source for gathering

the information. I depend on these sources to complete the project. . I have tried my level best

to provide precise and applicable information considering the following:

Sometimes the exact information may not be possible to collect from various websites.

So considering this issue and ensure the reliability, data was obtained from various

government sites.

Limitations of the financial ratios include:

o Ratios are only useful when comparison take place within similar industry and

two or many comparable company and performance over a long period – but

this information is not always available.

o Ratio calculation cannot provide accurate information unless the financial

statement provides right information. Hence, it might give altered justification.

o Ratios deal with quantity rather than quality – ratio does not address issues like

product quality, customer service and so on (though those factors play an

important role in financial performance)

Limitations of the SWOT Analysis include:

o SWOT unable to set issues on main concern basis

o SWOT analysis cannot provide solutions or provide any other alternative

solutions

o SWOT analysis generate too many ideas but not help to choose the best one

o SWOT produce burden of information many of these are not useful.

Limitations of the PESTEL Analysis include:

o time and cost are the main obstacle for users to the accessibility of the data

o External environment is not constant it changes every moment. As its regularly

changing, PESTL analysis must also conduct in regular basis because it depends

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on it. Due to time and cost constraints, companies are not doing this analysis

regularly. So the ultimate benefit of PESTL analysis is not possible to achieve.

o PESTL analysis sometimes leads huge loss for company. Because the results of

PESTL are subjective so that people can misinterpret in many ways. So in the

long run company can face massive damage in its growth rate.

Ethical issues

As I have attempted the ACCA Professional Ethics Module, which was, a prerequisite to

beginning work on my project. Ethics is significant to everyday life in general and also applying

ethical issue in the accounting field in particular is very much crucial.

o Integrity:

Considering the issue of plagiarism, I have tried to reference others work, report, ideas

accordingly in order to safeguard against this threat. For completing my research, I have relied

mostly on secondary information, which I have stated clearly.

o Objectivity:

Accordingly, in the R.A.P preparation guide, I have tried to be unbiased when undertaking my

research. I never try to provide only that information that supports my view of the company

have selected. According to me, neatly sums up the other ethical issue I faced. Undoubtedly

Oberoi Reality is doing well than its rivals therefore I could run the risk of slanting my research.

An Explanation of the accounting and business techniques

o Financial Ratios

Financial statement analysis refers to: (1) comparing the firm’s performance with that of other

firms in the same industry, (2) evaluating trends in the firm’s financial position over time. For

analyzing and summarizing large quantities of financial data calculating, the f financial ratios are

the most convenient way.

Gross Profit Margin: This is a profitability indicator for a company. It

measured by dividing Gross profit by Revenue and present through

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percentage. The higher the margin is, the better the company

performance is.

Operating Profit Margin: This profitability indicator indicates the

operating profit percentage over revenue. This ratio is representing by

percentage.

Net Profit Margin: This is a profitability indicator measurement tools. The

ratio measured by dividing Net profit by revenue. It is representing by

percentage of revenue.

Current Ratio: current ratio is liquidity measure indicators. This ratio

indicates how much a company is liquidating to pay off its current

obligation. This liquidity ratio measures a company’s capability to pay off

its short-term obligations by short-term asset. The higher the ratio, the

more liquid the company is.

Quick Ratio: Quick ratio is another form of liquidity measurement

indicator. This ratio is also known as acid ratio, this ratio mainly a testing

measurement to test the company’s ultimate capability to pay off its

current liabilities.

Gearing Ratio: This ratio show the financial leverage. it explain the

degree to which a firm’s activities are funded by owner’s funds versus

creditor’s funds

Return on Capital Employed: this ratio measures a company’s

profitability. As well as profitability with the efficiency of its capital is

employed.

Asset Turnover: This is calculated as a ratio by dividing Revenue by

Capital employed. The higher the ratio, the more efficient management

is.

Report Page 9

Business Techniques

o SWOT Analysis:

SWOT is a critical method for analysing the internal and external environment of the company.

We can try to find out whether the internal and external environment favourable or non-

favourable for the growth of the company or not.

Strengths: Strength of the company mainly analyzes the internal

strength, which is an advantage over its competitor.

Weaknesses: Weaknesses of a company indicate internal

disadvantageous part of the company. It shows the company’s

overall weak management policies, infrastructure.

Opportunities: it refers to the external factors that can help a

company to achieve its mission. It presents the untapped sectors,

ability to converge existing platforms, growing opportunities in

emerging Sectors. Therefore, it directly enhances the success of

the company. Therefore, the essential purpose of this section is to

identify strategic opportunities, so that company can increase its

profitability and sustainability.

Threats: It identifies the external factors, which can create barrier

to achieve the company’s goal. It demonstrates that competitor’s

power, so they can gain advantage by developing holistic system,

increasing presence of independent service provider. it also affect

the company’s internal operating system.

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o PESTEL Analysis:

PESTEL analysis Stands for "Political, Economic, Social, and Technological analysis" and

describes a framework of macro-environmental factors used in the environmental

scanning component of strategic management. PESTLE is a mnemonic which in its expanded

form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and

E for Environmental. It gives a bird’s eye view of the whole environment from many

different angles that one wants to check and keep a track of while contemplating on a

certain idea/plan (PESEL Analysis) Inserting Environmental factors expanded it to PESTEL or

PESTLE, which is popular in the United Kingdom. It is a part of the external analysis when

conducting a strategic analysis or doing market research, and gives an overview of the

different macro environmental factors that the company has to take into consideration. It is

a useful strategic tool for understanding market growth or decline, business position,

potential and direction for operations. The growing importance of environmental or

ecological factors in the first decade of the 21stcentury have given rise to green business

and encouraged widespread use of an updated version of the PEST framework. STEER

analysis systematically considers Socio-cultural, Technological, Economic, Ecological, and

Regulatory factors.

Political: Factors are how and to what degree a government

intervenes in the economy. Specifically, political factors include

areas such as tax policy, labor law, environmental law, trade

restrictions, tariffs, and political stability. Political factors may also

include goods and services which the government wants to provide

or be provided (merit goods) and those that the government does

not want to be provided (demerit goods or merit bads).

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Furthermore, governments have great influence on the health,

education, and infrastructure of a nation.

Economic: Factors include economic growth, interest rates,

exchange rates and the inflation rate. These factors have

major impacts on how businesses operate and make decisions. For

example, interest rates affect a firm's cost of capital and therefore

to what extent a business grows and expands. Exchange rates

affect the costs of exporting goods and the supply and price of

imported goods in an economy

Social: Factors include the cultural aspects and include health

consciousness, population growth rate, age distribution, career

attitudes and emphasis on safety. Trends in social factors affect the

demand for a company's products and how that company

operates. For example, an aging population may imply a smaller

and less-willing workforce (thus increasing the cost of labor).

Furthermore, companies may change various management

strategies to adapt to these social trends (such as recruiting older

workers).

Technological: Factors include technological aspects such as R&D

activity, automation, technology incentives and the rate

of technological change. They can determine barriers to entry,

minimum efficient production level and influence outsourcing

decisions. Furthermore, technological shifts can affect costs,

quality, and lead to innovation.

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Environmental To sustain in this competitive market in the end an

industry need to be environment friendly. So like the previous

factors we examine whether the authority is friendly or not.

Legal Favourable legal frame works to the industry are badly

important to the growth of the industry as well as company. Again,

in that case, we examine whether law and regulation is favourable

to the industry or company or not.

PART -3

Results, Analysis, Conclusions and Recommendations

Financial Performance Analysis

Financial Ratios always provide the in-depth view about financial scenario of a company.

However performance of a company not only judged by quantitative performance, assessment

of qualitative performance is also required, which is often ignored during financial ratio

analysis. However, in this report, I largely depend on financial ratio analysis to get the real

picture of my selected company Oberoi Reality and use it as a mechanism for comparative

analysis with Godrej.

I have also done business performance by analysing PESTEL, SWOT and Porter’s five forces to

get a qualitative view of the company. Eventually I have looked at the amount of R&D

expenditure Oberoi Reality has made in the last 3 years to measure an understanding of what

importance the company is giving in case of advance technologies.

o Profitability Ratios

Profitability is a company’s ability to generate revenues in excess of the costs incurred in

producing those revenues.

Profitably is analysed as follows:

Report Page 13

Gross Profit Margin (%)

Oberoi Godrej0

20

40

60

80 70.4653.27

70.88 35.88

71.3756

201320142015

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

The company has experienced almost stable Gross profit margin (GPM) is throughout three

financial year. The stable trend of Oberoi’s GPM is a result of stable revenue generating

capacity of the company throughout three financial years. There is so such tectonic shift has

been observed which may harm the GPM. On the other hand, there is unstable movement

observed in Goderj GPM.

Operating Profit Margin (%)

2013 2014 20150

10203040506070 59.8 58.23

56.0740.74

28.0241.92

Oberoi Godrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

Operating Profit Margin (OPM) of Oberoi is tending to reduce year to year. In FY2015 OPM of

the company declined nearly 1%. Due to increase in Operating cost, the company is facing this

decline in FY2015. Component of the operating cost increasing year to year such as employee

cost increased by 4.07%, dep. Cost increased by 44% and Administrative expense increased by

0.74%. On the other hand, Godrej has faced instability in OPM throughout three financial years.

Net Profit Margin (%)

Report Page 14

Oberoi Godrej05

1015202530354045

44.1

25.06

41.81

12.74

40.05

17.82013

2014

2015

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

Net Profit Margin of Oberio Reaity is stable in FY 2013 to FY2015. Stable finance cost as well as

net operating profit cause of this result. Higher tax payment caused slight decline in NPM. On

the other hand, Godrej has experienced lower net profit margin compare to Oberoi Reality

throughout three financial years.

Return On Capital Employed

2013 2014 201502468

10121416

12.79

7.21

13.7813.77

6.487.9

OberoiGodrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

It is method of getting the situation of the company regarding its employed capital efficiency

against profitability of the company. Oberoi Reality performance in this regard is satisfactory.

Efficiency of capital employed to generate EBIT is satisfactory. Due to improving operating

profit year to year put employed capital at safe zone. Moreover, capital employment of the

company is increasing (total asset).

Asset Turnover (%)

Report Page 15

2013 2014 20150

5

10

15

20

10.775.02

18.158.84

5.52

15.69

Oberoi Exponential (Oberoi) Godrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

This ratio measures management’s efficiency in generating revenue from its net assets. The

higher the ratio, the more efficient management has been. In FY 2015, Oberoi Reality has

ensured improvement compare to last two financial year. On the other hand, compare to

Oberoi Reality, Godrej appeared low.

Liquidity Ratio

Liquidity ratio, expresses a company's ability to repay short-term creditors out of its total cash.

The following liquidity ratios would be analyses for the research work.

Current Ratio

2013 2014 20150

0.5

1

1.5

2

2.5

3

2.142.61 2.342.32

1.66 1.4

OberoiGodrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

A company is using current ratio to get the view of its capability to pay off its short term liability

by using its current asset. Oberoi Reality current asset is mainly comprise of inventories which

is 38.34% in FY2015 and 43.26% in FY2014 this indicates that inventory portion in current asset

slight decline year but one of the major component is short term loan and advances is

Report Page 16

comprised of 53.59% in FY2015 and 31.78% in FY2014 which increased by 5% from last financial

year. Therefore current asset base of the company increased by 33.34% from last financial

years and put the business in secured position to pay off its short term liability of the company

as. On the other hand, Godrej’s current ratio is also more than the norm, which indicates that

the company is capable in paying its short term obligation at any given time.

Acid Test Ratio

2013 2014 20150

0.51

1.52 1.48 1.48 1.44

1.711.24

1.01OberoiGodrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

Acid test ratio indicates the company’s capability to pay off its current liability by using it

current asset excluding inventories. Acid test ratio indicates that oberoi in secure position to

pay off its debtor at any point in time as acid test ratio is more that Comparing with current

ratio, acid test shows that there is lower contribution of inventory in current assets for Oberoi

Reality. As mentioned above, inventories of Obeori is stable year to year, which is 38.38% in

FY2015 and 43.26% in FY2014 of total current asset. This indicates that the company is under

secured position of not being default to pay off short term debts. However, Godrej is also in

comfortable zone compare to Oberoi Reality.

Receivables Days

2013 2014 20150

10

20

30

40

50

17.32 24.4113.24

47.1 42.71 45.75 OberoiGodrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

Report Page 17

Receivables days indicate about the fact how well a company manages its debtor and efficiency

of debt collection team in collecting debt. Oberoi Reality is taking fewer days in collecting

receivables. The company is trying to maintain stable pattern in receivables. Analysis of three

years data gives the impressive impression about the company. In FY 2015 it is 13.24 days,

24.41 days in FY2014 and 17.32 days in 2013 took to realize working capital tied up with

receivables. Receivable of the company is always in a acceptable manner. It shows strong credit

control policy of the company. On the other hand, Godrej doing relatively poor compare to

Oberoi Reality.

Payables Days

Oberoi Godrej0

50

100

150

200

31.24

173.62

31.76

81.84

44.2272.12

2013

2014

2015

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

Payables days are indicating company’s capability to pay of its suppliers. In the graph it is clearly

represent that Oberoi is taking less time to pay off its suppliers. However payables are

increasing in FY2015 compare to FY2014, it is still at suitable range. Though payables days of

Oberoi increased in FY2015 compared to FY2014, there is no severe potential threat exist that

Oberoi might harm the good relations with suppliers in future, but in long run if this increasing

trend continues it may harm the relationship with the suppliers. On the other hand, payables

days of Godrej showing improving trend all over three financial years.

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Inventory Holding Days

2013 2014 20150

200400600800

10001200140016001800

978.96

1299.44

1730.37

1038.34586.270000

000001

1199.21 Oberoi

Godrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

Inventory holding days of Oberoi Reality is gradually increasing year to year. According to the

business nature the company need to hold inventory at large scale to meet the demand of

ongoing project. In FY2015 it is 38.80% higher compared to FY2014.

Inventory holding days is indicating the company’s capability to consume it inventory which

held up in godown. Taking up more projects caused for, inventory consumption days of the

increased year to year. For Oberoi higher inventory holding up is a reason for lower acid test

ratio. On the other hand, Godrej is managing its inventory better than Oberoi.

Gearing Ratio

2013 2014 20150

0.20.40.60.8

11.2

0.01 0.02 0.02

0.57

0.85000000000000

10.99

OberoiGodrej

Source: Annual Report 2013, 2014 & 2015 of Oberoi Reality (Standalone) & Godrej (Standalone)

Gearing ratios essentially tells us the amounts of risk associated to the company. A highly

geared company is more unpredictable. but in this scenario, Oberoi Reality is not a highly

geared company. Gearing ratio is stable which is because of company policy to low debt

financing. Therefore small gearing is actually meeting company’s objective.

Investor Ratio

EPS

Report Page 19

20132014

2015

02468

109.98

8.99

9.29

7.28

5.28 6.42OberoiGodrej

EPS is very crucial and important figure for common stockholders, because through this they

get to know earning of the company in future and based on this value of the stock may

increase, Oberoi Reality EPS figure is comparatively high which indicates higher earning and

strong financial position of the company. Therefore common people attracted to the Oberoi

share compare to Godrej

Brief Overview of Indian Real Estate Sector

Real Estate sector is the backbone of the Indian economy. It is one of the major contributors to

the Indian economy. It is contributing 8.5% in total gross domestic production of India (Agarwal

A).According to the Department of Industrial Policy and Promotion (DIPP), India has received

RS 24097.91 million from April 2000-June 2015 in construction development sector (Townships,

housing, built-up infrastructure, and construction-development projects). This sector is divided

into four sub sector-

a. Housing

b. Retail

c. Hospitality

d. commercial

The housing sub-sector contributes 5-6% in GDP while contribution of other sub-sectors is

growing significantly (Corporate Catalyst (PVT) Ltd 2015). Therefore, for the analysis of PESTEL

will give a broad view regarding overall situation of entire industry.

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PESTEL Analysis

Political- Development and growth of any industry largely depend on stable political environment.

Political instability or reluctance or indifference of political parties precisely ruling party to any

particular industry will deter the growth of that particular industry. In this case, Indian real

estate sector is getting sufficient support from government. The Indian Government is showing

its keen interest for further development and cooperation towards the real estate sector of

India. I addition to this, Government is taking proactive measure to resolve the political

stalemates and introduce timely economic reforms that are posing to be major interruptions in

the development of this sector. Government is enacting rules and regulation for the balanced

growth of this sector. Such as-

Real Estate Investment Trust (REIT)

Open up Foreign direct investment

Real Estate Regulatory Bill

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All of these measures have been taken by the government for the growth of this sector. So that

it can be said, government has firm willingness to ensure sustainable development of this

sector.

Economic-Economic environment is very crucial for growth of any particular industry. Favourable

economic policy, stimulation package for investor, low interest rate, various financing source,

investment fund for investors, in recent time policy regarding foreign direct investment boosts

the confidence of investors and help the industry flourish. Indian real estate industry is

bestowed with various positive economic policy changes. In this regard, we can name-

Real Estate Investment Trust (REIT) and Infrastructure Investment Trust

(InvIts) is formed to attract investment, foster growth and development

real estate and infrastructure industries. key advantages of the trust

structure are mentioned below (Bera, Shah, Valsan, Fong & Limaye

2015)-

A. Increased transparency, professional management, a steady

stream of dividends

B. Access to an alternative source of capital.

C. Increased requirements for public disclosures

D. likely rise in institutional investors should see transparency and

governance improve,

E. Necessitate the need for professional management.

FDI: The Indian Government allow foreign direct investment in

construction sector by relaxing the established norms. Capital

requirement for foreign direct investment was USD 10 million which is

reduced to USD 5 million and minimum floor area requirement also

reduced to 20000 sq meter from 50000 sq meter (Business Standard 4

January 2014). In addition to this, government complete removed

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minimum land requirements for serviced plots, which was 10 hectares

(The Indian Express 29 October 2014).

Social-Social environment of any country composed of society’s beliefs, values, customs, practices and

behaviours. A business operates in a society, where people from different walks of life live

together. A business operates in an ever changing social environment so the social environment

is always complicated for any industry to operate.

Growing Urbanization: Rapid increase in urbanization is playing vital role

for the growth in Real Estate sector. As increasing number of living in

urban than it is inevitable to ensure better habitat, metros, hospitality

and commercial space.

Urbanization to Fuelling Housing Demand in Leading Cities-

2001 2011 2021 20260

100200300400500600

286357

432534

Urban Population (in Million)

Urban Population (in Million)

Note from: Population Projection in India, Register General of India

Indian Population increased at an unprecedented rate, with almost 71

million people added to urban population from 2001-2011. If Indian

population increased at this rate then it is expected to reach 534 million

in 2026.This offer tremendous opportunity for real estate development,

precisely housing.

Report Page 23

Housing for ALL by 2022: In addition to this, Prime Minister of India

Narendra Modi launches Housing for All by 2022 initiative (Housing for all

by 2022, 2015). This massive development program known as – “Housing

for All by 2022”, which will therefore necessitate a dynamic public-

private partnership. Private sector firms have shown a burgeoning

interest in the lower-income housing landscape, mostly in the urban

context. The government also made some policy in this regard which

declared in the 2014-15 Budget. It is mentioned in 2014-15 Budget that-

borrowing costs for developers will be lower, and increasing homebuyer

loan limits for affordable housing from INR 2.5 million (USD 39,000) to

INR 6.5 million (USD 100,000) in metropolitan cities and to INR 5 million

(USD 78,000) in other cities (Bera, Shah, Valsan, Fong & Limaye 2015).The

Government of India will construct 30 million houses by 2022 for weaker

section and lower income group through public – private partnership and

interest subsidy (Indian Brand Equity Forum 2015).

SMART CITY: Indian government is going to build up 100 smart cities in

India. Indian government want to ensure housing for all by 2022 in

addition to this, government want to construct smart cities around India.

Smart city mainly promote core infrastructure and give a decent quality

of life to its citizen, a clean and sustainable environment an application of

Smart Solution (Ministry of Urban Development, Government of India,

2015). Ministry of Urban Development has already allocated RS 7060

crore rupee for the development of 100 smart cities in Union Budget

2014-2015 (Grant Thornton 2015).

Technology-

Report Page 24

Suitable technological environment is very much crucial for the development and progress of

any sort of industry. Real estate sector largely depends on construction technology. Indian real

estate sector is coping up with fast paced changing construction technology. Conventional

technology is time consuming and caused to escalate the project cost therefore realtors are

look at alternate technologies (Kharakhanis, N 2013).

Environment- Environment is become much uttered word in the world of business. All sectors regardless its

size are concern about environmental protection. Therefore in many cases, establishing ETP is

mandatory. In addition to establishing ETP, increasing use of renewable energy, conservation of

energy ensures to protect environment. Government of India initiates to promote Green

Affordable housing with the collaboration of State Government.

According to Anita Agnihotri, Secretary, Housing Ministry-

“With increased urbanization, there is a growing need to develop and promote housing

structures which are not only affordable but also sustainable and scalable.” (Business Line,

September 7, 2014)

Indian Green Building Council (IGBC), which is the integral part of Confederation of Indian

Industry (CII) formed in the year 2001, to enable a sustainable built environment for all and

facilitate India to be one of the global leaders in the sustainable built environment by

2025.IGBC set the target to establish 10 billion sft green building base in the country by 2022

(BS Reporter 2014). In addition to this, IGBC is also engage in rating of green building.

Legal:Legal environment of any country need to be favourable for expansion of any particular

industry. Government need to formulate or enact law in such manner which facilitates the

growth of an industry. Indian Real Estate Sector has been supported by the enactment of new

law, which is widely known real Estate Bill (Development & Regulation). The government of

India enacts the Real estate Bill (Development &Regulation) which aims to protect consumer

interest and introduce standardization business practice and transaction in the sector. This bill

also enables inflow of foreign direct investment (Corporate Catalyst (PVT) Ltd 2015).

Report Page 25

SWOT Analysis

Financial and Strategic SWOT Analysis provides a comprehensive insight into the company’s

history, corporate strategy, business and financial structure, management and operations. The

report contains a detailed SWOT analysis, information on the company’s products and services,

key competitors, as well as detailed financial information. Data on this page may have come in

part, or entirely, from one or more data providers. Please contact us for further information.

We are not responsible for any errors or omissions on this page. This website is for information

purposes only

Strength

High profitability and revenue – Oberoi Reality is generating high return

as the business eyes on premium developments. The company ensure

high quality of products use of high quality of about new acquisitions,

Oberoi Reality is doing best in terms of maintaining healthy balance

sheet, access to finance, and superior land bank quality with no debt,

high returns and strong cash flow (KARVY 2014).

Skilled workforce - The Company has a strategy to improve its workforce

capacity and company already started various training program for its

workforce. In addition to this, company also provide various benefit

scheme for its employees at various level.

Brand portfolio- Obroi Reality establish itself aas high end relators among

customers. Oberoi Reality emphasize on premium developments for its

customers. Oberoi reality has been awarded as Master Brand in 2012 by

CMO Council, CMO Asia and Asian Confederation on Business (Press

Release 2012). According to the Reem Kundani (Vice President,

Marketing & Corporate Communications)-

Report Page 26

“Brand ‘Oberoi Realty’ encompasses the entire universe of its purpose,

principles, products, expressions and perceptions and we try to bring the

brand alive innovatively through all its experiences. Having created

several landmark developments over the last three decades, Oberoi

Realty has endeavoured to enhance the quality of life of its customers

and constantly striven to build trust with its stakeholders”(press Release

2012).

Weaknesses

Less Locational Diversification- Locational Diversification is very

important to the sustainable growth, revenue generation or in another

way it is crucial mechanism for strong balance sheet. Oberoi Relaity, is

mainly Mumbai based company and most of its project situated in

aristocratic area of Mumbai. Less locational diversification may hamper

revenue generation in future. So that the company need to take initiative

to diversify its project location in near future. However Oberoi Reality is

moving out from home market (Mumba ) at slow pace. In next 2-3 years

competitive positioning is expected to change in NCR outside Mumbai

and new markets will contribute 10-15% in volumes (KARVY, 2014).

Opportunities

Demography - 64.9% of the India population is between 15 and 64 years

which, in other words, states that over 700 million are legal candidates to

have a car. (Index Mundi) This number is growing.

Economy - The eyes of the world are on India’s economy. There is a lot of

demand for Indian products. Many journals such as The Economist and

India is growing economic power house. Indian economy will grow by

7.4% this fiscal year, outpacing China to become world’s fastest growing

economy (The Times of India 9 February 2015).  The per capita net

Report Page 27

national income raised by 10.1% to RS. 88,538 from RS. 80,380 compare

to previous year (The Times of India 9 February 2015). This is an

opportunity for the company to have trustworthy providers as well as

employees.

Threats

Economy – A fast growing economy could mean more competitors. At

the same time, high demand of products could bring inflation that affects

the company’s potential clients budged. The following statement was

taken from bbc.co.uk: “Raging inflation and a gradual increase in

borrowing costs has dampened domestic demand, alongside lackluster

investment sentiment,” said Radhika Rao of Forecast Pte.

Highly Segmented –Oberoi Reality highly concentred to the highly

segmented market or in other way it can be said, Oberoi Reality focused

on premium product developments. Oberoi Reality highly concentrated

in premium segment which is susceptible to economic slowdown.(Care

Ratings July 20,2015).

Conclusion and Recommendations:

As it is mentioned earlier, in this report for analysis purpose, Annual Report (standalone) has

been used. It is also important to mention that product category of both of the company almost

identical. It clearly stated the rationale behind selecting Oberoi Reality Limited for my analysis.

In this report business performance and financial performance of Oberoi Reality Limited is

analysed. Here for financial purpose ratio analysis is used, so that financial performance of

Oberoi Reality Limited can be understand and evaluate. In this analysis, it is found; Oberoi

Reality Limited is maintaining stable and high Gross Profit Margin (GPM) throughout three

financial years, along with GPM, other profitability ratio is showing stable over the years and

attained tremendous performance over its competitor Godrej. If Oberoi Reality Limited could

have maintain the momentum of this high return then profitability will get better much in

Report Page 28

coming years. Return on Capital Employed (ROCE), (calculate based information collected from

standalone annual report) also give improve scenario of the company. Liquidity position of the

company is satisfactory. Oberoi Reality Limited has sufficiency in terms of paying current

liability by using its current asset. According to the Standalone Annual Report 2015, investors

are likely to be optimistic and net profit left high EPS.

Being top ranked real estate developers in India Oberoi Reality Limited has to abide by laws and

restrictions, corporate governance code, which the company is meeting successfully. Moreover

Indian overall real estate sector is getting favourable environment for doing business.

Government of India is trying its level best to ensure best possible facilities to stimuli the

industry. Government of India have already formulated industry friendly regulations which

protect the interest of both parties (Customers & sellers). Oberoi reality Limited is capable

enough to utilize the facilitation of the government and move forward with pride and dignity.

REFERENCE

1. Obeori Reality, (WikiArticle),June 15, 2015 Available From: https://en.wikipedia.org/wiki/Oberoi_Realty (Accessed: 22 September 2015)

2. Available from: http://pestleanalysis.com/what-is-pestle-analysis/ (Accessed: 22 September 2015)

3. Agarwal, A. 2013, Real estate: Propeller of growth for Indian economy, Money Control. Availablefrom:www.moneycontrol.com/master_your_money/stocks_news_consumption.php?

autono=1073556 (Accessed: 22 September 2015)

4. Ministry of Commerce & Industry, Department of Industrial Policy & Promotion, Fact Sheet on Foreign Direct Investment (FDI) APRIL 2000 to JUNE 2015, Available From: http://dipp.nic.in/English/Publications/FDI_Statistics/2015/india_FDI_ June2015.pdf (Accessed: 22 September 2015)

Report Page 29

5. Corporate Catalyst India (PVT) Ltd., A Brief Report on Real Estate Sector in India. Available From: http://www.cci.in/pdfs/surveys-reports/Real-Estate-Sector-in-India.pdf(Accessed: 23 September 2015)

6. JLL ,Indian Real Estate: The Modi Impact, Available from: http://www.ap.jll.com/asia-pacific/en-gb/Research/IndiaPaper-ModiFirstYr-Final.pdf?630f252e-4857-4ed5-bf2e-55bb1234b977 (Accessed: 22 September 2015)

7. Office Of The Registrar General & Census Commissioner, Census of India 2001: Population Projections for India and states 2001-2026, Available from: https://nrhm-mis.nic.in/Part%20B%20Demographic%20and%20Vital%20Indicators/Population%20Projection%20Report%202006%20by%20RGI.pdf (Accessed: 22 September 2015)

8. PM INDIA, Housing for All by 2022" Mission - National Mission for Urban Housing, Available from:http://pmindia.gov.in/en/news_updates/housing-for-all-by-2022-mission-national-mission-for-urban-housing/?comment=disable (Accessed: 22 September 2015)

9. Bera, S, Shah A, Valsan, S Fong, L & Limaye A, Indian Real Estate: The Modi Impact, September 2015, Available from: http://www.ap.jll.com/asia-pacific/en-gb/Research/IndiaPaper-ModiFirstYr-Final.pdf?630f252e-4857-4ed5-bf2e-55bb1234b977 (Accessed: 22 September 2015)

10. BS Reporter 2014, Govt relaxes FDI policy for real estate sector. Business Standard 4 December 2014.Availbale from: http://www.business-standard.com/article/economy-policy/govt-relaxes-fdi-policy-for-real-estate-sector-114120300710_1.html [Accessed 7 October 2015]

11. PTI 2014, Government relaxes FDI norms for construction, real estate sector. The Indian Express 29 December 2014. Available from: http://indianexpress.com/article/business/economy/government-relaxes-fdi-norms-for-construction-real-estate-sector/ [Accessed 7 October 2015]

12. Indian Brand Equity Forum 2015, Real Estate Industry India, Government Initiatives. Available from: http://www.ibef.org/industry/real-estate-india.aspx [7 October 2015]

13. Ministry of Urban development , Government of India 2015, Available from: http://smartcities.gov.in/writereaddata/SmartCityGuidelines.pdf (Accessed: 22 September 2015)

Report Page 30

14. Grant Thornton 2015, Indian Real Estate Hand book 2015. Available from: http://www.grantthornton.in/industrysectors/indian-real-estate-sector-handbook-3/ [Accessed: 22 September 2015]

15. Kharakhanis, N 2013, Technology Innovations in Real Estates. 3 September 2013. Luxury Home Expo: Expert View. Available from: http://economictimes.indiatimes.com/technology-innovations-in-real-estate-narendra-kharkhanis-pashmina-builders/exposhow/22260155.cms. (Accessed: 22 September 2015)

16. HYDERABAD 2015, ‘Housing Ministry to promote green buildings, The Hindu 7 September. Available From: http://economictimes.indiatimes.com/news/economy/indicators/india-to-grow-at-7-4-this-year-outpacing-china/articleshow/46179512.cms(Accessed:23September 2015)

17. BS Reporter 2015, ‘IGBC targets 10 billion sft green building base, The Business Standard 4 September. Available From: http://www.business-standard.com/article/current-affairs/igbc-targets-10-billion-sft-green-building-base-by-2022-114090401367_1.html (Accessed: 23 September 2015)

18. Corporate Catalyst India (PVT) Ltd, A Brief Report on Real Estate Sector in India, Available from: http://www.cci.in/pdfs/surveys-reports/Real-Estate-Sector-in-India.pdf (Accessed: 23 September 2015)

19. KARVY, Obiroy Reality, 22 July 2014, pp-6 Available from: http://bsmedia.business-standard.com/_media/bs/data/market-reports/equity-brokertips/2014-07/14060227950.27165500.pdf (Accessed: 23 September 2015)

20. Press Release for immediate issue, Oberoi Realty a Master Brand 2012 Status Awarded by CMO Council & CMO Asia & Asian Confederation of Business Available from: http://www.oberoirealty.com/system/pdfs/37/original/Oberoi_Realty_wins_Master_Brand_2012_status_by_CMO_Council___CMO_Asia___Asian_Confederation_of_Business.pdf (Accessed: 23 September 2015)

21. Press Release for immediate issue, Oberoi Realty a Master Brand 2012 Status Awarded by CMO Council & CMO Asia & Asian Confederation of Business Available from: http://www.oberoirealty.com/system/pdfs/37/original/Oberoi_Realty_wins_Master_Brand_2012_status_by_CMO_Council___CMO_Asia___Asian_Confederation_of_Business.pdf (Accessed: 23 September 2015)

Report Page 31

22. KARVY, Obiroy Reality, 22 July 2014, pp-5 Available from: http://bsmedia.business-standard.com/_media/bs/data/market-reports/equity-brokertips/2014-07/14060227950.27165500.pdf (Accessed: 23 September 2015)

23. Business 2012, India's economic growth better than forecast, BBC News 31 august 2012, Available from: http://www.bbc.com/news/business-19432961, (Accessed: 23 September 2015)

24. Brief Rational, Care Ratings, Available from: http://www.careratings.com/upload/CompanyFiles/PR/INCLINE%20REALTY%20PRIVATE%20LIMITED-07-20-2015.pdf (Accessed: 23 September 2015)

APPENDIX

Report Page 32

Appendix-1 Extracts from Annual Reports of Oberoi Reality Ltd (Income Statements)Oberoi Reality Ltd

Profit and Loss AccountFinancial Year Ending : March 2015 2014 2013

Revenue 7,610,555,000 7,058,558,000.00 7,424,950,000.00

Less : Cost Of Sales/Services (2,178,537,000)

(2,055,564,000.00)

(2,193,069,000.00)

Opening Balance of works in progress (8,665,675,000)

-4793354000.00 -3880848000.00

Gross Profit 5,432,018,000 5,002,994,000 5,231,881,000GP Margin 71.37% 70.88% 70.46%

Less : Operating Cost (1,164,540,000)

(892,882,000.00) (791,609,000.00)

Profit/(Loss) From Operations 4,267,478,000 4,110,112,000 4,440,272,000Net Finance Costs (1,747,000.00) (2,617,000.00) (3,365,000.00)Profit/(Loss) Before Tax 4,265,731,000 4,107,495,000.00 4,436,907,000.00Tax Expense And Zakat/ provision for taxation

(1,218,032,000)

(1,156,254,000) (1,162,184,000)

Profit/(Loss) After Tax 3,047,699,000 2,951,241,000 3,274,723,000Profit/(Loss) After Tax And Before Extraordinary Item Attributable To Shareholders

3,047,699,000 2,951,241,000 3,274,723,000

Net Profit/(Loss) For The Year Attributable To Shareholders

3,047,699,000 2,951,241,000 3,274,723,000

Retained Profit/(Loss) Brought Forward 6,225,964,000 3,274,723,000 0Prior Year AdjustmentsRestated Retained Profit/(Loss) Brought Forward

6,225,964,000 3,274,723,000 0

Profit/(Loss) Available For Appropriation 9,273,663,000 6,225,964,000 3,274,723,000Unappropriated Profit/(Loss) Carried Forward

9,273,663,000 6,225,964,000 3,274,723,000

Report Page 33

Appendix-2 Extracts from Annual Reports of Oberoi Reality Ltd (Balance Sheet)Oberoi Reality Ltd

Balance SheetFinancial Year Ending :

March 2015 2014 2013

NON-CURRENT ASSETSFixed And Operating

Assets 14,973,213,000 15,598,697,000 15,343,832,000

14,973,213,000 15,598,697,000 15,343,832,000CURRENT ASSETS

Inventories 10,327,855,000 8,754,076,000 5,881,993,000Trade Receivables 276,123,000 591,947,000 352,260,000Other Receivables 698,950,000 663,600,000 637,500,000

Cash And Bank Balances 874,813,000 3,444,634,000 9,216,545,000Other Current Assets 14,787,405,000 6,783,085,000 3,040,501,000

26,965,146,000 20,237,342,000 19,128,799,000CURRENT LIABILITIES

Trade Payables 263,942,000 170,049,000 187,696,000Other Payables 10,444,757,000 6,800,570,000 7,966,828,000

Provisions For Liabilities 825,003,000 777,195,000 777,714,00011,533,702,000 7,747,814,000 8,932,238,000

NET CURRENT ASSETS/(LIABILITIES)

15,431,444,000 12,489,528,000 10,196,561,000

30,404,657,000 28,088,225,000 25,540,393,000FINANCED BY :

SHAREHOLDERS' EQUITYShare Capital 3,282,380,000 3,282,333,000 3,282,333,000

Reserves 26,410,369,000 24,058,915,000 21,781,477,000Retained Profits/(Losses)

29,692,749,000 27,341,248,000 25,063,810,000

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Minority Interests29,692,749,000 27,341,248,000 25,063,810,000

NON-CURRENT LIABILITIESBorrowings 466,996,000 429,866,000 270,492,000

Provisions For Liabilities 11,244,000 9,636,000 10,887,000Other Non-Current

Liabilities 233,668,000 307,475,000 195,204,000

711,908,000 746,977,000 476,583,00030,404,657,000 28,088,225,000 25,540,393,000

Appendix-3- Extracts from Annual Reports of Godrej Ltd (Income Statements)Godrej Ltd

Profit and Loss AccountFinancial Year Ending : March 2015 2014 2013

Revenue 7,187,000,000.00 7,665,569,778.00 4,894,951,683.00

Less : Cost Of Sales/Services (3,162,200,000)(4,915,116,194.00

)(2,287,491,765.00

)Gross Profit 4,024,800,000 2,750,453,584 2,607,459,918GP Margin 56% 35.88% 53.27%Less : Operating Cost (1,012,200,000) (602,914,930.00) (613,214,812.00)Profit/(Loss) From Operations 3,012,600,000 2,147,538,654 1,994,245,106

Net Finance Costs (1,575,400,000)(1,185,402,140.00

)(598,193,373.00)

Non-Operating Income 0 0 0Profit/(Loss) Before Tax 1,437,200,000 962,136,514.00 1,396,051,733.00Tax Expense And Zakat/ provision for taxation

(158,000,000) 14,380,837 (169,374,255)

Profit/(Loss) After Tax 1,279,200,000 976,517,351 1,226,677,478Profit/(Loss) After Tax And Before Extraordinary Item Attributable To Shareholders

1,279,200,000 976,517,351 1,226,677,478

Extraordinary ItemNet Profit/(Loss) For The Year Attributable To Shareholders

1,279,200,000 976,517,351 1,226,677,478

Retained Profit/(Loss) Brought Forward

2,203,194,829 1,226,677,478 0

Prior Year Adjustments

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Restated Retained Profit/(Loss) Brought Forward

2,203,194,829 1,226,677,478 0

Profit/(Loss) Available For Appropriation

3,482,394,829 2,203,194,829 1,226,677,478

Un-appropriate Profit/(Loss) Carried Forward

3,482,394,829 2,203,194,829 1,226,677,478

Appendix-4- Extracts from Annual Reports of Godrej Ltd (Balance Sheet)Godrej Ltd

Balance Sheet

Financial Year Ending : March

2015 2014 2013

NON-CURRENT ASSETSFixed And Operating Assets

1,220,400,000 1,111,770,828 580,873,799

Other Non-Current Assets

7,426,300,000 4,457,741,217 2,612,127,224

8,646,700,000 5,569,512,045 3,193,001,023

CURRENT ASSETS

Inventories 10,389,400,000 9,283,312,564 6,506,111,576

Trade Receivables 900,900,000 1,162,342,259 631,584,122

Cash And Bank Balances

3,565,000,000 6,525,191,207 474,535,569

Cash in hand& at banks

3,565,000,000 6,525,191,207 474,535,569

Other Current Assets 22,291,100,000 19,206,526,758 16,867,126,964

37,146,400,000 36,177,372,788 24,479,358,231

CURRENT LIABILITIES

Borrowings 18,859,800,000 13,166,907,326 4,256,146,862

Trade Payables 624,800,000 1,105,204,334 1,088,099,338

Other Current Liabilities

6,508,000,000 7,019,343,512 4,773,535,976

26,496,100,000 21,768,878,413 10,537,911,203

NET CURRENT 10,650,300,000 14,408,494,375 13,941,447,028

Report Page 36

ASSETS/(LIABILITIES)

19,297,000,000 19,978,006,420 17,134,448,051

FINANCED BY :

SHAREHOLDERS' EQUITYShare Capital 996,800,000 991,232,600 780,461,030

Reserves 18,185,700,000 16,910,311,447 12,862,476,771

Retained Profits/(Losses)

19,182,500,000 17,901,544,047 13,642,937,801

Minority Interests

19,182,500,000 17,901,544,047 13,642,937,801

NON-CURRENT LIABILITIESBorrowings 54,800,000 2,037,033,000 3,460,925,000

Provisions For Liabilities

45,500,000 28,579,179 27,817,241

Other Non-Current Liabilities

14,200,000 10,850,194 2,768,009

114,500,000 2,076,462,373 3,491,510,250

19,297,000,000 19,978,006,420 17,134,448,051

APPENDIX 5Formulas used in ratio calculation

Profitability ratios:1. Gross profit margin = Gross profit / Sales * 1002. Net profit margin = Operating profit / Sales * 1003. Return on Capital employed

= profit before interest and tax / average capital employed *100 Liquidity ratios:

1. Quick ratio = (Current assets – inventory) / Current liability2. Current Ratio = current asset / current liability

Efficiency ratios:1 Inventory days = Inventory / cost of sales * 3652. Receivables days = Receivable / Sales * 3653. Payable days = payables / Cost of Sales * 365

Gearing ratios:1. Gearing ratio = long term debt / debt + equity

Investor ratios:1. Earnings per share = Profit after tax and preference dividend / weighted average

number of shares

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