For any company, an internal risk management framework is an important ingredient of its sustainable business model. It counters the impact of unfavorable internal and external events and attempts to ensure business continuity across different stages of the economic cycle. Peninsula Land has put in place a robust risk management framework that is periodically reviewed and updated. The framework facilitates risk assessment and mitigation procedure, lays down reporting procedure and enables timely reviews by the management. Company’s key risk areas are similar to other players in the business of real estate development. A few of the key risks and the mitigation measures are as follows:
1. Economic Risk
a. Risk: An unexpected development in any of the macroeconomic variables that may adversely impact the company’s profitability or viability. Real estate being a cyclical industry gets impacted more by the changes in macroeconomic variables like interest rate, GDP Growth, employment, purchasing power, inflation, et al than a non cyclical industry like FMCG.

b. Mitigation Plan: Peninsula Land strives to be conservative and has defined internal prudential norms. The company maintains a low debt equity ratio, high liquidity, strong brand premium and focus on select markets minimize the impact in adverse.
2. Execution Risk:
a. Risk: Execution delay may results in cost overruns and may also negatively impact company’s reputation. A real estate project generally is a long gestation project and generally spans across multiple years. Also being an asset heavy business, any execution delay can impact the project viability due to increase in interest burden and also increase in project cost especially in high inflationary environment like we have in India currently. A drop in project quality also negatively impacts company’s reputation.

b. Mitigation Plan: Peninsula Land has put in place processes that include milestone based time & quality checks that help to ensure adherence to quality, cost and delivery as per the plan. The company deploys a well-defined standard operating procedure – from project planning to delivery – and adheres to rigorous internal checks and balances with regard to every project.
3. Land Acquisition Risk
a. Risk: Risk to project earning and viability due to delay in acquisition of land due to title ambiguity, interference from local residents or any other reason may impact. For real estate companies, land is nearly irreplaceable raw material and also the largest contributor to the overall expenditure.

b. Mitigation Plan: Peninsula Land undertakes meticulous due diligence and multi layered verification of title ownership. It deploys its pool of competent counsels. It also undertakes physical verification of the land to be acquired for ascertaining the development.
4. Credit Risk:
a. Risk: Risk to earnings arising from vendor’s (borrower’s) failure to meet the terms as stated in the contract. A vendor may not be able or willing to meet the commitment as indicated in the contract.

b. Mitigation Plan: Given the strong history and lineage of Peninsula Land, the company has developed a list of preferred vendors and strong working relationship with them. The company due to its close association is also aware of their financial condition.
5. Input Price Risk
a. Risk: Risk to earnings arising from the volatility in the price of input. Many of the real estate projects are usually sold on “no price escalation” basis, leaving the adverse impact of rise in input cost to be borne by the Company. Also given that real estate projects generally are long gestation project, the likely hood of such event happening is high.

b. Mitigation Plan: Peninsula Land takes this risk into account at the time of launch, and usually sells the projects it offers, in a phased manner. The phases launched later cover the rise in cost of construction due to higher ticket size.
Management Discussion & Analysis
Economic Overview
Real Estate Sector
Business Overview
Risk Management
Internal Control Systems
Human Resource
Cautionary Statement
PDF Download