Role and Importance of Real Estate Industry

Transcription

1 FINANCIAL ANALYSIS OF SELECTED REAL ESTATE COMPANIES The present thesis entitled Financial Analysis of Selected Real Estate Companies is an attempt to analyze the financial statements of real estate companies. Now-adays the real estate industry in India has become one of the major investment sectors. This industry is playing an important role in the formation of the country s economy. In the coming years if the value of real estate really increases, then this will make an effective absorber of inflation. Therefore, it is ideal for long-term investment as it not only reduces risk but also helps in achieving the stable returns.. Real estate in India is one of the major revenue generating sectors with the growth and the depreciation that influences the economy of our country. Real estate is a property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing. Real estate sector covers residential housing, commercial offices, and retail outlets, trading spaces such as theatres, hotels and restaurants, industrial buildings such as factories and government buildings. It involves the purchase, sale, and development of land as well as residential and non-residential buildings. The activities of the real estate sector encompass the housing and construction sectors also. Role and Importance of Real Estate Industry The real estate firms in India are the bungalow developers, villa builders, Apartment developers, township developers who are playing a major role in building country s infrastructure. Under the sincere efforts of these real estate developers, cities in India have witnessed a rapid growth in the construction of residential and commercial projects. It is due to the innovative efforts and elegant constructions of these real estate builders, Major cities in India have witnessed commendable facelift. Whether it is a residential property or commercial property the Indian real estate firms are always up with new innovative ideas and designs,

2 which can catch the attention of investors across the globe. The relaxation of FDI policies by the Indian government has given a boost to the real estate firms. People from all parts of the globe are now keen to buy the Indian property. Providing world-class infrastructure in their constructions with stylish features and extremely luxurious facilities these builders are able to capture the attention of these foreign investors who are now investing huge amounts in property in India. These foreign investments in real estate will ultimately lead to the development of Indian economy. Thus it would not be wrong to say that the real estate firms are the important sources of development in Indian economy. This fast progress of real estate sector can be attributed to the efforts of the real estate companies. Through the years these real estate firms in India have been cooperatively working with architects and engineers and have been successful to bring about a revolutionary change in the country s real estate. The following factors have led to the increase in demand for residential and commercial properties in our country. They are: The easy availability of real estate finance, Rising income Better job prospects in country Increase of nuclear families in India The other important factors contributing to this growing number of real estate firms in India can be: The emerging hospitality or hotel industry, Development of the special economic zones, Growth of retail market in India, and Increasing number of IT and ITES industry. Owning a property in India is one of the greatest assets and is one of the most profitable investments in India. There are very less chances of a loss as the real estate growth graph is increasing day by day. Needless to say Real estate is one of the rapidly growing sectors in India. Few important facts relating to the chapter are:

3 It is second only to agriculture in terms of employment generation and substantially contributes to the gross domestic product of the country. Almost 5 per cent of GDP is contributed by the housing sector, and in the next few years it is expected to rise to 6 per cent. Moreover, the construction sector has also been responsible for the development of over 250 ancillary industries such as cement, steel, paints, brick, timber, building materials, etc. A study by a credit rating agency ICRA shows that the construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the Indian economy. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. According to a study One Rupee invested in real estate sector results in 78 paisa being added to the GDP of the country. Today, the real estate industry in India has become one of the major investment sectors. This industry is playing an important role in the formation of the country s economy in the present situation. Real Estate and property is the most popular topic in India these days because price of property increasing day by day. It is the safest way to earn money these days because everybody knows that the future of this industry is very bright in India. In fact property industry is the more effective source after agriculture in India and also the Indian Real Estate helps to increase the country s gross income. Developments in the Indian real estate sector symbolize the changing face of nation and it is a reflection of the growth in the Indian economy brought about by high rates of GDP and also by India's integration with the global economy, "With the economy on an upswing, the emphasis and requirement today is on creating international standard infrastructure and residential real estate to sustain the growth rate projected in the 11th Five Year Plan. All the factors which contributed to the growth of real estate sector- High disposable incomes, Sharp increase in global liquidity

4 Selective capital account Liberalization Looser credit policies A greater availability of leverage due to financial liberalization and A consequent increase in mortgage lending and price increases. The Real Estate industry has significant linkages with several other sectors of the economy and over 250 associated industries. One Rupee invested in this sector results in 78 paisa being added to the GDP of the State. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. The relaxed FDI rules implemented by India in last few years has invited more foreign investors and real estate sector in India is seemingly the most lucrative ground at present. Private equity players are considering big investments, banks are giving loans to builders, and financial institutions are floating real estate funds. Indian property market is immensely promising and most sought after for a wide variety of reasons. The real estate sector has taken a major hit, fundamentally things have only improved. Based on our top down approach and of the Indian economy we believe the Indian real estate sector is in a multiyear, stable growth phase. Following are a few of the key points that make us confident on the sector: 1. Working age population 2. Exploding Middle Class 3. Changing trend towards nuclear families 4. Huge Surpluses-High savings 5. Perennial investment destination 6. Growing Income Increasing Employment 7. Inclusive growth 8. Urbanization 9. Low Mortgage to GDP ratio 10. Expansion of IT sector 11. Adoption of FDI policy 12. Easy access to bank loan

5 CONSTITUANTS OF INDIAN REAL ESTATE SECTOR 1. Real Estate Investment Banking 2. Real Estate Consultants 3. Developers and Construction Companies 4. FDIs/FIIs 5. Financial Institutions Real Estate Mutual Funds 6. Private Equity/Venture Capital Funds Financial Statement Analysis Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, fund analysis, trend analysis, and ratios analysis. Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial analysis refers to an assessment of the viability, stability and profitability of a business. It is performed by professionals who prepare report using ratios that make use of information taken from financial statements and other reports. Financial Analysis is an aspect of the overall business finance function that involves examining historical data to gain information about the current and future financial health of a company. Financial analysis can be applied in a wide variety of situations to give business managers the information they need to make critical decisions.

6 Financial analysis is only one part of the overall function of finance, but a very important one. The mathematical tools produce data, not explanation; information, not interpretation; measurement, not meaning; according to James E. Kristy and Susan Z. Diamond, in there book Finance without fear to these tools you must add judgment, which develops slowly mostly out of experience. The present thesis entitled Financial Analysis of Selected Real Estate Companies is based on the following objectives: 1. To evaluate profitability of selected companies during research period. 2. To evaluate the liquidity position of selected companies during research period. 3. To evaluate position of fund flow of selected companies during research period. 4. To evaluate cash position. 5. To enable external parties, such as investors or lenders, to assess the creditworthiness and profitability of the firm. 6. To highlight areas that need to be improved, or areas that offer the most promising future potential and to give valuable suggestions to solve the problems. 7. To set benchmarks and standards for performance. The study is empirical and descriptive in nature and secondary data is used to complete the study. Sample companies include companies listed in BSE of India. There are total 32 companies listed in BSE under the head Construction And Contracting - Real Estate. The sample data includes capital structures, Balance Sheet, Profit and loss A/c and Income Statements of sample real estate companies of India. Sample size consists of top 5 real estate Companies on the basis of market capitalization, for the time period of five year (that is from to ). In the absence of financial data of two real estate companies (DB Realty & Godrej Property) out of top 5, the next two companies in sequence are considered in the list.

7 The sample companies consist of DLF, HDIL, India bulls Real, Sunteck realty and Anant Raj Industries. Secondary data of sample companies from the year to is taken from official website of BSE and from the website moneycontrol.com. The list of Companies is also taken from the official website of BSE and the website moneycontrol.com. Following tools that is Ratio analysis, Percentage and Index numbers are used to analyze the financial data. The study is based on the following Hypothesis: 1. Profitability of selected companies is decreasing during research period. 2. Liquidity position of selected companies is not sound during research period. 3. Working capital of selected companies is decreasing during research period. 4. Selected companies are not making proper use of their funds. The first chapter of the study is related with Concept of Financial Analysis. Meaning of financial analysis its elements and users of financial analysis have been described in this chapter. This chapter also tells about the objectives of the study. The types of financial analysis have been discussed differentiating it in Horizontal and Vertical Analysis. Under this the formats of financial statements ( Profit and Loss A/C and Balance Sheet) are also given explaining all its components. Ratio Analysis as a part of financial analysis is also explained in detail. This chapter also describes the importance of financial analysis, its problems and the limitations of financial analysis. Second chapter of the study is related with the Research Methodology. In this chapter researcher has explained the meaning of research, its objectives and research process. The hypothesis for the study has been explained in this chapter. The research Methodology which consist of study design, tools for data collection and data analysis, presentation of data has been explained.

8 Towards the end of the chapter, the limitations of the study have been discussed with chapter scheme of the study. Third chapter is Introduction. In this chapter Real Estate sector is discussed. Chapter begins with the meaning of real estate and its role and importance. The chapter also focused on the growth of real estate sector and its factors. Present Scenario of real estate sector is also discussed. The characteristics of the real estate sector are discussed in detail with constituents of real estate. Chapter four is The profitability Analysis of Sample Real Estate Company. The researcher has explained the meaning of profit and profitability in the chapter with its importance and limitations. Various profitability ratios have been discussed in detail. Profitability analysis of selected real estate companies has been done with the help of many profitability ratios. The Geometric Mean is calculated to analyze the data of the companies. Different tables and graphs have been made to present the data. The findings have been generated through the analysis. Chapter fiver is The liquidity Analysis of Sample Real Estate Company. The researcher has explained the meaning of liquidity in the chapter with its importance and limitations. Various liquidity ratios have been discussed in detail. Liquidity analysis of selected real estate companies has been done with the help of many liquidity ratios. The Geometric Mean is calculated to analyze the data of the companies. Different tables and graphs have been made to present the data. The findings have been generated through the analysis. Chapter six is The Fund Flow Analysis of Sample Real Estate Company. The researcher has explained the meaning of fund in the chapter with its importance and limitations. Various ratios relating to the flow of fund have been discussed in detail. Fund flow analysis of selected real estate companies has been done with the help of many ratios. The Geometric Mean is calculated to analyze the data of the companies. Different tables and graphs have been made to present the data. The findings have been generated through the analysis.

9 Chapter seven is The Cash Flow Analysis of Sample Real Estate Company. The researcher has explained the meaning of Cash and Cash Flow in the chapter with its importance and limitations. Various Cash Flow ratios have been discussed in detail. Cash Flow analysis of selected real estate companies has been done with the help of many Cash Flow ratios. The Geometric Mean is calculated to analyze the data of the companies. Different tables and graphs have been made to present the data. The findings have been generated through the analysis. Chapter eight is Conclusions and Suggestions. Finding of the different ratios have been discussed in this chapter. General findings of the study also have been discussed. Valuable suggestions are given on the basis of the findings of the study. SIGNIFICANCE OF THE STUDY The purpose of this study is to analyze the financial data of selected real estate companies. The major benefit is that the investors will get enough idea to decide about the investments of their funds in the specific company. Secondly, regulatory authorities like International Accounting Standards Board can ensure whether the company is following accounting standards or not. Thirdly, financial statements analysis can help the government agencies to analyze the taxation due to the company. Moreover, company can analyze its own performance over the period of time through financial statements analysis. The findings of the study are as follows: Findings from the Profitability Analysis of Selected Real Estate Companies are as follows: Profitability analysis of sample Real Estate Companies has been done in this chapter. Various ratios have been calculated such as Gross Profit Ratio, Net Profit Ratio, Operating Profit Ratio, Net Profit Ratio etc. and conclusions are drawn on

10 the basis of these ratios. On the basis of the findings from ratio analysis, suggestions are given. The findings of few ratios are as follows: 1. Gross Profit Ratio Percentage changes in Gross Profit Margin Company Name/Years Anant Raj 42% 330% 54% -13% DLF 5% -32% 42% 0% Sun Tek Realty -64% 310% -12% 21% HDIL 7% 1% -26% 63% India bulls real 50% -366% 234% -30% The growth (the increase/decrease over the period) rate of the companies for Gross Profit Margin can be observed through the above table. The Anant Raj Company has shown an increase of 42% from 2008 to 2009 and again a big increase of 330% from 2009 to 2010 in Gross Profit Margin. It then showed an increase of 54% between 2010 and 2011 but a decrease of 13% in between The DLF has shown fluctuating growth trends in the selected years. It has shown 5% increase in then a decrease of 32% between the years It again shown a growth of 42% in but then there is no growth in , which is showing the stability in Gross Profit Margin Ratio. The Sun Tek Realty Company has shown a decrease of 64% from 2008 to 2009 but a drastic growth of 310% from 2009 to 2010 in Gross Profit Margin. It then showed a decrease of 12% between 2010 and 2011 and again an increase of 21% in between In all these years the company has shown fluctuating trends towards its growth. The HDIL has shown an increase of 7% in and 1% in It has shown a minimum growth rate that is -26% during the period and then an

11 increase of 63% between the years In the beginning it is showing the stability than a decline and again a good increase in growth rate. The India Bulls Real has shown a 50% increase in and then a decline thereafter. It has shown a decrease of 366% between the years and then an increase of 234% in and again a decline of 30% in It is showing the fluctuating trend of Gross Profit Margin Ratio throughout the assessment years. It is observed from the calculation of Geometric Mean that Sun Tek Realty is showing the maximum Geometric Mean i.e followed by HDIL 6.852, DLF 0.345, Anant Raj and India Bulls Real Net Profit Margin Company Name/Years Change in Net Profit Margin Anant Raj -28% -43% -82% -18% DLF -5% -41% 31% -28% Sun Tek Realty 82% -53% -2% 14% HDIL -21% -18% 24% -22% India bulls real -96% 26% 64% -75% The growth (the increase/decrease over the period) rate of the companies for Net Profit Margin can be seen through the above table. The Anant Raj Company has shown a decline of 28% from 2008 to 2009 and 43% from 2009 to 2010 in Net Profit Margin. It again showed a decline of 82% from and again a decline of 18% in between The DLF has shown fluctuating growth trends in the selected years. It has shown a decline of 5% from 2008 to 2009 and 41% from 2009 to 2010 in Net Profit Margin. It then showed a growth of 31% in and again a decrease of 28% in

12 The Sun Tek Realty Company has shown growth of 82% from 2008 to 2009 but a drastic decline of 53% from 2009 to 2010 in Net Profit. It then showed a decrease of 2% between 2010 and 2011 and again the growth of 14% in between In all these years the company has shown fluctuating trends towards its growth. The HDIL has shown fluctuating growth trends in the selected years. It has shown a decrease of 21% from 2008 to 2009 and 18% from 2009 to 2010 in Net Profit Margin. It then showed a growth of 24% in and again a decline of 22% in The India Bulls Real has shown fluctuating growth trends in the selected years. It has shown a decrease of 96% from 2008 to 2009 and an increase of 26% from 2009 to 2010 in Net Profit Margin. It again showed a growth of 64% in and again a decline of 75% in It is observed from the calculation of Geometric Mean that all the values of Geometric Mean of Net Profit Margin of all the companies are negative. According to the values Sun Tek Realty is showing the maximum Geometric Mean i.e followed by HDIL , DLF , Anant Raj and India Bulls Real Findings of the Liquidity Analysis of Selected Real Estate Companies are as follows: The Liquidity of selected companies is calculated in this chapter. It is calculated on the basis of few ratios, they are Current Ratio, Quick Ratio and Cash Ratio. The findings of the Ratios are as follows: Quick Ratio Change in Quick Ratio Company Name/Years Anant Raj 43% 13% 6% -58% DLF 17% -7% -30% -30% Sun tek Realty -85% -34% -6% -32% HDIL -4% 43% 30% -53% India bulls real 2150% -16% 40% -93%

13 The Anant Raj Company has shown a growth rate of 43% from 2008 to 2009, 13% from 2009 to 2010, 6% from and -58% from The DLF Company has shown a growth rate of 17% from 2008 to 2009, -7% from 2009 to 2010, -30% from and -30 from The Sun Tek Realty Company has shown a growth rate of -85% from 2008 to 2009, -34% from 2009 to 2010, -6% from and -32% from The HDIL Company has shown a growth rate of -4% from 2008 to 2009, 43% from 2009 to 2010, 30% from and -53% from The India Bulls Real Company has shown a growth rate of 2150% from 2008 to 2009, -16% from 2009 to 2010, 40% between the years and -93% from It is observed that India Bulls Real is showing the maximum Geometric Mean i.e followed by Anant Raj , Sun Tek Realty , HDIL and DLF On the basis of the data the liquidity of India bull real is maximum followed by Anant Raj, SunTek Realty, HDIL and DLF. Cash Ratio Change in Cash Ratio Company Name/Years Anant Raj 3633% -5% -50% -80% DLF -92% -39% 34% 64% Sun tek Realty -100% 1154% -97% 177% HDIL -7% 908% -96% 301% India bulls real -52% -98% 12291% -95%

14 The Anant Raj Company has shown a growth rate of 3633% from 2008 to 2009, -5% from 2009 to 2010, -50% from and -80% from The DLF Company has shown a growth rate of -92% from 2008 to 2009, -39% from 2009 to 2010, 34% from and 64% from The Sun Tek Realty Company has shown a growth rate of -100% from 2008 to 2009, 1154% from 2009 to 2010, -97% from and 177% from The HDIL Company has shown a growth rate of -7% from 2008 to 2009, 908% from 2009 to 2010, -96% from and 301% from The India Bulls Real Company has shown a growth rate of -52% from 2008 to 2009, -98% from 2009 to 2010, 12291% between the years and -95% from It is observed that Anant Raj is showing the maximum Geometric Mean i.e followed by HDIL , DLF , India Bulls Real and Sun Tek Realty Findings of the Fund Flow Analysis of Selected Real Estate Companies are as follows: Movement of funds from different sources has been observed to analyze the financial position of the selected companies. The Fund Flow of selected companies is calculated in this chapter. It is calculated on the basis of few ratios. The findings of few of them are as follows: Change in Fund From Loan Capital Company Name/Years Anant Raj 93% -15% 876% 9% DLF 15% 31% 19% -20% HDIL 33% -2% 4% -43% India Bulls Real 61025% -92% 1327% -48% Suntek Realty -32% 59% -98% 10609%

15 The Anant Raj Company has shown the maximum growth in Loan Capital in which is 876% and minimum between the years that is -15%.The Anant Raj Company has shown a growth rate of 93% from 2008 to 2009, -15% from 2009 to 2010, 876% between and 9% between The DLF Company has shown the maximum growth in Loan Capital which is 31% and minimum between the years that is - 20%.The DLF Company has shown a growth rate of 15% from 2008 to 2009, 31% from 2009 to 2010, 19% between and -20% between The HDIL Company has shown the maximum growth in Loan Capital in which is 33% and minimum between the years that is 43%.The HDIL Company has shown a growth rate of 33% from 2008 to 2009, -2% from 2009 to 2010, 4% between and -43% between The India Bulls Real Company has shown the maximum growth in Loan Capital in which is 61025% and minimum between the years that is -92%.The India Bulls Real Company has shown a growth rate of 61025% from 2008 to 2009, -92% from 2009 to 2010, 1327% between and -48% between The Sun Tek Realty Company has shown the maximum growth in Loan Capital in which is % and minimum between the years that is -98%.The Sun Tek Realty Company has shown a growth rate of -32% from 2008 to 2009, 59% from 2009 to 2010, 98% between and 10609% between According to the values India Bulls Real is showing the maximum Geometric Mean i.e followed by Anant Raj , Sun Tek Realty , DLF and HDIL

16 Uses of Fund for Investment Change in Fund for Investment Company Name/Years Anant Raj 31% -15% 2% 1% DLF 61% 122% 7% 0% HDIL 43% 97% 32% 66% India Bulls Real 115% 37% -23% 50% Suntek Realty 70% 73% -59% 85% The Anant Raj Company has shown the maximum growth in Fund for Investment in which is 31% and minimum between the years that is -15%.The Anant Raj Company has shown a growth rate of 31% from 2008 to 2009, -15% from 2009 to 2010, 2% between and 1% between The DLF Company has shown the maximum growth in Fund for Investment in which is 121% and minimum between the years that is 0%.The DLF Company has shown a growth rate of 61% from 2008 to 2009, 122% from 2009 to 2010, 7% from and 0% between The HDIL Company has shown the maximum growth in Fund for Investment in which is 97% and minimum between the years that is 32%.The HDIL Company has shown a growth rate of 43% from 2008 to 2009, 97% from 2009 to 2010, 32% from and 66% between The India Bulls Real Company has shown the maximum growth in Fund for Investment in which is 115% and minimum between the years that is -23.The India Bulls Real Company has shown a growth rate of 115% from 2008 to 2009, 37% from 2009 to 2010, -23% between and 50% between The Sun Tek Realty Company has shown the maximum growth in Fund for Investment in which is 85% and minimum between the years that is -59%.The Sun Tek Realty Company has shown a growth rate of 70% from 2008

17 to 2009, 73% from 2009 to 2010, -59% between and 85% between It is found that HDIL is showing the maximum Geometric Mean i.e followed by DLF ,India Bulls Real , Sun Tek Realty , and Anant Raj Findings of the Cash Flow Analysis of Selected Real Estate Companies are as follows: Movement of cash from Operation Activities, Investing Activities and Financing Activities has been observed to analyze the cash position of the selected companies. The findings of few of them are as follows: Net Cash from Investing Activities Change in Net Cash from Investing Activities Company Name / year ANANT RAJ DLF HDIL Indiabulls Real Suntek Realty % 82% -12% 48% 71% % -110% -416% 81% -386% % 19% 17% -1069% 66% % 159% -43% 108% -104% The Anant Raj Company has shown the maximum growth in Cash from Investing Activities in which is 44% and minimum between the years that is -72%.The Anant Raj Company has shown a growth rate of 6% from 2008 to 2009, -72% from 2009 to 2010, 44% between and -26% between The DLF Company has shown the maximum growth in Cash from Investing Activities which is 110% and minimum between the years that is -159%.The DLF Company has shown a growth rate of -82% from 2008 to 2009, 110% from 2009 to 2010, -19% between and -159% between The HDIL Company has shown the maximum growth in Cash from Investing Activities in which is 416% and minimum between the years that

18 is -17%.The HDIL Company has shown a growth rate of 12% from 2008 to 2009, 416% from 2009 to 2010, -17% between and 43% between The India Bulls Real Company has shown the maximum growth in Cash from Investing Activities in which is 1069% and minimum between the years that is -108%.The India Bulls Real Company has shown a growth rate of - 48% from 2008 to 2009, -81% from 2009 to 2010, 1069% between and - 108% between The Sun Tek Realty Company has shown the maximum growth in Cash from Investing Activities in which is 386% and minimum between the years that is -71%.The Sun Tek Realty Company has shown a growth rate of - 71% from 2008 to 2009, 386% from 2009 to 2010, -66% between and 104% between It is found that India Bulls Real is showing the maximum Geometric Mean for selected study period i.e followed by HDIL , Sun Tek Realty 73.43, Anant Raj and DLF It means India Bulls Real is showing maximum growth in Cash from Investing Activities. Net Cash from Financing Activities Company Name / year Change in Net Cash from Financing Activities ANANT RAJ DLF HDIL Indiabulls Real Suntek Realty % 105% -79% -55% -124% % 428% 110% 33% 448% % -71% -11% 36% -126% % -423% -161% -120% 322% The Anant Raj Company has shown the maximum growth in Cash from Financing Activities in which is 3587% and minimum between the years that is -95%.The Anant Raj Company has shown a growth rate of -95% from 2008 to 2009, -59% from 2009 to 2010, 3587% between and -75% between The DLF Company has shown the maximum growth in Cash from Financing Activities which is -71% and minimum between the years that is

19 -428%.The DLF Company has shown a growth rate of -105% from 2008 to 2009, -428% from 2009 to 2010, -71% between and -423% between The HDIL Company has shown the maximum growth in Cash from Financing Activities in which is 110% and minimum between the years that is -161%.The HDIL Company has shown a growth rate of -79% from 2008 to 2009, 110% from 2009 to 2010, -11% between and -161% between The India Bulls Real Company has shown the maximum growth in Cash from Financing Activities in which is 36% and minimum between the years that is -120%.The India Bulls Real Company has shown a growth rate of - 55% from 2008 to 2009, 33% from 2009 to 2010, 36% between and - 120% between The Sun Tek Realty Company has shown the maximum growth in Cash from Financing Activities in which is -124% and minimum between the years that is -448%.The Sun Tek Realty Company has shown a growth rate of - 124% from 2008 to 2009, -448% from 2009 to 2010, -126% between and -323% between It is found that Anant Raj is showing the maximum Geometric Mean for selected study period i.e followed by India Bulls Real , HDIL , Sun Tek Realty and DLF It means Anant Raj is showing maximum growth in Cash from Financing Activities. Findings and Suggestions of the study Findings: 1. In sample Real Estate companies during study period Current Ratio is very high, Quick ratio is high while Cash Ratio is very low. It means overall liquidity position of the sample companies is very sound. 2. It is found that the Difference between current ratio and Quick Ratio is marginal. It means companies are not having much stock at a time.

20 3. In comparison to current and Quick Ratio Cash Ratio is very low which shows the Cash liquidity is comparatively very low and dues to customers (debtors) are very huge in amount. 4. Except India Bulls Real Gross Profit Margin of all the companies is increasing continuously but Net Profit is decreasing it means profitability of companies is declining continuously due to huge indirect expenses. 5. In few financial years of a few companies Net Profit is higher than Gross Profit Margin due to high volume of non operating incomes. It means companies have used their additional funds to invest outside business to earn additional income. It seems this policy has been implemented to maintain the soundness of Balance Sheet to raise funds from financial Institutions. 6. Earning Per share is declining continuously of all the companies as Profit after Interest and Tax is reducing continuously while there is no further issue of Equity share Capital during the study period. 7. Return on Equity Capital is declining continuously of all the companies as Profit after Interest and Tax is reducing while there is no further issue of Equity share Capital during the study period. 8. It is found that the main cause of decreasing Net Profit is that maximum companies are working on high debt Equity Ratio. 9. It is found that Dividend Payout Ratio of maximum companies is very low. It shows companies have retained their earnings for the growth of business during study period. It is a healthy sign for the further growth of the companies. 10. Cash Flow Statement analysis shows very fluctuating net cash inflow from operating activities. The reason is that in the years of launching project companies are receiving huge cash from customers and in subsequent years which are the project completing years using huge amount of cash to complete the projects. 11. Net Cash Inflows from investing activities of all companies in all the years are found negative. It shows all companies have used a huge amount of cash in purchasing fixed assets. Two companies DLF and India Bulls Real are on top in investing huge cash in purchasing fixed assets.

21 12. Net Cash Inflow from financing Activities is positive in general. It shows maximum companies has raised borrowing more than payment made by them during study period. It results more dependency of companies on debt. In year 2009 and 2012 DLF, 2012 HDIL, 2012 India Bulls Real and 2009 and 2011 Sun Tek realty are showing negative cash inflow from financing activities which indicates the above companies paid borrowings in concerning years, resulting less dependency on debt capital. Suggestions: The objective of the study is to analyze every financial aspect of sample real estate company during study period. To achieve this objective financial statements, reports, Cash Flow Statements and other reports has been observed keenly and analyzed thoroly. On the basis of thorow analysis to improve the profitability, Liquidity and Cash position of sample real estate companies. The following suggestions may be given as follows: 1. During analysis it is found that maximum companies are using a part of fund in investing outside business. If it is invested by them in their main business it would improve the profitability of the company. 2. It is found during analysis Net Profit is declining year by year while Gross Profit Margin is increasing. It is due to excess in indirect expenses. So indirect expenses should be checked through strict finance control. An important part of indirect expenses is commission to sales agent and office establishment in different cities. It may be reduced by online process of business. 3. An important cause of decreasing profitability is high interest burden. To reduce interest burden equity base should be increased. 4. It is found that amount of debtors in maximum companies is very high. It shows that companies are selling products on credit which is creating the problem of cash liquidity and low profitability. To solve these problem products should be sold in cash or 100% financing. 5. For decreasing dependency on borrowing it is necessary to increase equity share capital. To attract the investors for investing in shares of the company dividend payout should be increased.

22 6. High value of the products is a problem of this sector as per average purchasing capacity of the customers; they are not capable to purchase the products. It creates a big gap between demand and supply. Resulting as recession in the sector and companies face this problem time to time. So according to the purchasing capacities of the various class of the society low cost products should launched, Which may be helpful in increasing the turnover and profitability of the sector. 7. At present real estate companies are facing financial crises due to high loan burden. It is affecting overall performance and creditability of the companies. To solve this problem restructuring loan scheme should be adopted. High burden loan may be converted in convertible debentures, preference shares and equity shares. 8. According to recent Land Acquisition Bill the terms and conditions of Land Acquisition for real estate projects have become very strict and expensive and resulting difficulties in land acquisition and increasing cost of products which will affect negatively on overall performance of this sector. Government should take quick decision to liberalize this act in favor of this sector. 9. Normally companies are working only in Metros and big cities not in small cities and towns. In small cities and towns individual builders and small private companies are working in this sector. Their creditability is not satisfactory. If these companies diverts a part of Cpital to small cities and towns they can take advantage of their creditability and grow their business. It will also be helpful to generate local employment. 10. A major problem of this sector is delay in completion of project which increases the cost of product and decline creditability of the company. So real estate companies must complete the project within stipulated period anyhow. which will be helpful in creating creditability of the sector. Testing of the Hypothesis of the study: 1. Profitability of selected companies is decreasing during research period.

23 It is proved from the study that profitability of the selected companies is decreasing continuously. 2. Liquidity position of selected companies is not sound during research period. This hypothesis is proved wrong as it is observed from the study that the liquidity position of the selected companies is sound. 3. Working Capital of selected companies is decreasing during research period. It is observed from the study that Working Capital of the selected companies is going down during study period hence proved this hypothesis. 4. Selected companies are not making proper use of their funds. It is observed from the study that the selected companies have used their funds outside the business during study period hence proved this hypothesis. Limitations of the study: 1. Financial analysis is based on financial statements that reflect the past and not the future. Unless the ratios are stable, it may be difficult to make reasonable projections about future trends. Also, financial statements like Balance Sheet indicate the picture at one point in time, and thus may not be representative of longer periods. 2. Financial statements provide an assessment of the cost and not value. For ex. financial assets are usually shown on the Balance Sheet as the cost of the assets less their accumulated depreciation, which may not reflect the actual current market value. 3. Proposed study will be based on mainly secondary data, so results of study may be affected by the standard of accuracy of used secondary data.

24 4. Considering the time factor and resources, only five companies and five years have been taken for the study. This may also affect the results of the study to a markable extent. 5. The data has been extracted from the official website and annual reports of the selected companies. Hence, the study incorporates all the limitations that were inherent in the financial statement. 6. Sample size consists of top 5 real estate Companies on the basis of market capitalization, for the time period of five year (that is from to ). In the absence of financial data of two real estate companies (DB Realty & Godrej Property) out of top 5, the next two companies in sequence are considered in the list. Bibliography 1. Agarwal,Harish Kumar,; Profit Management of Public Enterprises of M.P.; An analytical Study, Jiwaji University Gwalior, Kulshreshtha.N.K.Analysis of Financial Statementsin Paper Industries of India Chaurasiya, V.M., Profit Trends in Public Enterprise, Agra University Agra Thakur, K.S.Financial Management in Public Enterprises, Jiwaji University Gwalior Grewal s T.S. Analysis of Financial Statements 6. Vol. XLII (1) December 2011, Indian Journal of Accounting 7. Vol. XLV (1) December 2013, Indian Journal of Accounting

25 8. Bangs, David H., Jr. Managing by the Numbers: Financial Essentials for the Growing Business. Upstart Publishing, Casteuble, Tracy. "Using Financial Ratios to Assess Performance." Association Management. July Donnahoe, Alan S. What Every Manager Should Know about Financial Analysis. Simon and Schuster, "Financial Analysis: 17 Areas to Review." Business Owner. January- February Gill, James O. Financial Basics of Small Business Success. Crisp Publications, Helfert, Erich A. Techniques of Financial Analysis. Irwin, Jones, Allen N. "Financial Statements: When Properly Read, They Share a Wealth of Information." Memphis Business Journal. February 5, Larkin, Howard. "How to Read a Financial Statement." American Medical News. March 11, Hey-Cunningham, David. Financial Statements Demystified. Allen & Unwin, Larkin, Howard. "How to Read a Financial Statement." American Medical News. 11 March Bangs, David H., Jr. Managing by the Numbers: Financial Essentials for the Growing Business. Upstart Publishing, Casteuble, Tracy. "Using Financial Ratios to Assess Performance." Association Management. July Donnahoe, Alan S. What Every Manager Should Know about Financial Analysis. Simon and Schuster, "Financial Analysis: 17 Areas to Review." Business Owner. January- February Gill, James O. Financial Basics of Small Business Success. Crisp Publications, Helfert, Erich A. Techniques of Financial Analysis. Irwin, Higgins, Robert C. Analysis for Financial Management. McGraw-Hill, Kristy, James E., and Susan Z. Diamond. Finance without Fear. American Management Association, Management Accounting Chapter 2. Analysis and Interpretation of Financial Statements 2.5 Concept of Financi.htm

26 31. of real estate.pdf Agenda. Meeting the Challenge.pdg in Indian Economy Impacting Real Estate Sector ESTATE IN INDIAN CONTEXT-OPPORTUNITIES AND CHALLENGES Mar Cost Study 08.pdf estate definition\real estate Real Estate Sector An Overview - The Latest Legal Features, Research and Legal Profiles - Who's Who Legal.mht note on real estate IIMA.pdf src/symposuims/%d8%a8%d8%b1%d9%86%d8%a7%d9%85%d8% AC%20%D9%85%D9%87%D8%A7%D8%B1%D8%A7%D8%AA%20% D8%A7%D9%84%D8%A8%D8%AD%D8%AB%20%D8%A7%D9%84 %D8%B9%D9%84%D9%85%D9%8A/dr.sooad1.pdf formulation%20of%20a%20research%20problem.pdfs _6654a_122.pdf isid.ac.in/~pu/conference/dec_10_conf/papers/sumitkmajumdar.pdf to invest in real estate.pdf

27 51. and formulation of a research problem.pdf Profitability Dynamics of Indian Firms.pdf Study Of Profitability Analysis Of Selected FMCG Companies In India Case Study on Profitability Analysis of Selected Sugar Industry in India Real Estate Agency Practice and Profitability: An Analysis of House Sales and Agency Profitability in Sydney AN EMPIRICAL STUDY OF PROFITABILITY ANALYSIS OF SELECTED STEEL COMPANIES IN INDIA file:///c:/users/j/downloads/financial_statement_analysis_ch13-libre.pdf C:\PHD\PHD work\profitability ratios\return on Assets Ratio ND.htm _Listed_Companies_of_ICT_Sector

28 case study on Profitability Analysis of selected sugar Industry in India EMPIRICAL STUDY OF PROFITABILITY ANALYSIS OF SELECTED STEEL COMPANIES IN INDIA Profitability Dynamics of Indian Firms Study Of Profitability Analysis Of Selected FMCG Companies In India Real Estate Agency Practice and Profitability: An Analysis of House Sales and Agency Profitability in Sydney Flow-Statement.pdf flow%20statement%20New.pdf Flow Statement Schedule of Changes in Working Capital - Illustration.html 90. Accountingexplained.com/financial/statements/cash-flow-statement Cash+Flow+Statements Policy/SEN-01-Cash-Flow-Statements.pdf flows/anant Raj Cash Flow 9-13.htm flows/anant Raj Cash Flow.htm flows/cash flow - Wikipedia, the free encyclopedia.htm flows\cash-flow-statement_screenshot.gif