Page 57 - Arvind 2024

Risk management
Corporate Overview
Statutory Reports Financial Statements
Mitigation: ASL mitigates this risk by diversifying
its operations across Ahmedabad, Bangalore, Pune, Surat and is further looking to expand to the Mumbai Metropolitan Region. The Company employs effective cost management and maintains sufficient liquidity to weather economic downturns.
Economic risk
The real estate sector is prone to fluctuations in cash flow due to economic volatility. A downturn
can significantly reduce demand.
Mitigation: The Company manages these risks through a structured approach that outlines necessary controls and accountability. Price adjustments are made cautiously to preserve margins. ASL has invested in an Enterprise Resource Planning (ERP) system, further enhanced by the implementation of SAP, to monitor the progress of its projects and manage exceptions. The Company’s commitment to corporate governance ensures operational transparency and regulatory compliance.
Operational risk
ASL faces operational challenges such as
delays in land acquisition, obtaining approvals, project completion, and increased construction costs, which can lead to decreased customer satisfaction.
Project risk
Risks include cost overruns and sluggish sales, leading to reduced collections.
Mitigation: As of March 31, 2024, ASL secured
Rs. 1,152 Cr in receivables from booked units, covering the remaining construction costs for ongoing projects, excluding land costs for joint ventures.
Interest rate risk
Fluctuating interest rates can increase/decrease borrowing costs and impact real estate demand.
Mitigation: ASL mitigates this risk by maintaining cash reserves, diversifying funding sources, and keeping a close watch on cash flow and liquidity. The Company managed to keep borrowing costs low, at 10.8% as of March 31, 2024.
Mitigation: With a net debt-to-equity ratio of (0.10) and an operating surplus cash flow of approximately Rs. 458 Cr in FY23-24, ASL possesses ample capacity to secure additional financing at a comfortable debt- to-equity ratio. The Company’s positive cash flow outlook ensures sufficient funds for near to medium- term needs.
Liquidity risk
This risk affects the Company’s ability to meet short-term obligations and complete projects, potentially leading to increased financing costs and negative reputational impact.
Concentration risk
Reliance on a limited number of projects or markets can create revenue stream vulnerabilities.
Mitigation: ASL diversifies risk by offering a mix
of product types across its operational regions, including plotting, villas, luxury, and middle-income group (MIG) housing.
Raw material risk
Significant price fluctuations in raw materials can impact property prices and, by extension, demand, if passed on to consumers.
Mitigation: ASL has established a stable supply chain and negotiates fixed prices for essential materials over set periods, with price increases passed on to consumers judiciously.
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