HRCO15 Dec 2010 07:05
Chairman's Statement
The year ended 30 September 2010, can be best summarised as one of mixed results and unexpected challenges.
In my letter last year, I reported nascent signs of an improving economic outlook and a recovery in India's equity markets. This positive trend has continued throughout the reporting year and it looks increasingly likely that we are witnessing a return to a long-term upward trend.
GDP growth, having dipped last year to 5.8%, is now forecast by the Reserve Bank of India to reach 8.8% in FY2011. The Asian Development Bank is forecasting growth to remain high at 8.7% in FY2012. We have also seen the return of robust business confidence and positive consumer sentiment. There are signs of an ongoing recovery in the real estate sector that is both broad based and sustained.
However, the BSE Realty Index is down 17% over the reporting period and has significantly underperformed the broader market, with the BSE Sensex index rising 17% over the same period.
Indian wholesale price inflation, having increased steadily over the last 12 months to levels above 10%, is now easing, but continues to effect fuel and construction raw material prices.
We continued to make steady progress in the construction of phase 1 of our developments, with the first low-rise buildings in the Chennai township being completed and the high-rise buildings reaching their full height of 15 and 27 storeys. The sales office and show apartment building in Panvel is expected to be completed in early 2011. In addition, the Ministry of Environmental Affairs has approved the development of the Navi Mumbai International Airport, within close proximity to our site. We expect this announcement to further enhance the attractiveness of our Panvel township.
On 6 June 2010, Hirco celebrated a very significant landmark as the first residential apartments in Chennai were handed over to enthusiastic owners. This exciting event demonstrates that the projects in which Hirco PLC invested have now moved from the design, planning and construction stage to the delivery and execution phase. From now on, completed apartments will be released to owners on a regular basis, with the next block of apartments expected to be released in the first half of 2011.
The impact and duration of the global recession and the long time it has taken to obtain permits have caused a lengthening of the projects' overall development timeline. Some asset classes, such as commercial office space, have yet to see any significant recovery. This has delayed the commencement of commercial and retail asset construction at both townships.
As is explained in note 13, the latest Jones Lang LaSalle Meghraj feasibility study shows that the project timelines have been extended. The impact of this is that the preference dividend accrues and compounds over a longer period. This means the fair value gain on the group's investment, as at the 30th September 2010, is very uncertain and a fair val
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