ABSTRACT

Should UNITECH BUILDERS adopt promotional techniques in order to maximise their

revenue?
The background of the company had given me the throughout information of the firms
working process and their description about the different projects which are being running or
on the bank of its completion in the various parts of the country. As a real estate developer
the firm has almost achieved the flying colours in the sky of real estate development. During
last few months the firm is suffering from the low collection of revenue due to the decline in
sales in the products manufactured by the firm. The firm is generating various techniques to
increase the sales revenue by providing various payment options and they are also making
customer attractive techniques of sales like buy one get one free.
On gathering the information about the company and the working of the firm I analyze that
the firms revenue is declined to a significant low level which is the prime concern for the
firm I analyze this issue in the light of following business tools which focus on the remedy to
the firm.
a) INVESTMENT ANALYSIS
b) STATISTICAL TABLES/CHARTS/DIAGRAMS
c) EQUITY RESEARCH
d) COST BENEFIT ANALYSIS
e) PORTERS FIVE FORCES ANALYSIS
I concluded that firm is unable to fight with the second largest economic slowdown so in
order to remain stay* in the market the firm has to provide various gifts* benefits and other
promotional activities to the customer.

Word Count: 241

ACKNOWLEDGEMENTS

I would like to pay my heartily regards to the following person from the core of my heart for
the support that they have provided throughout the progress of my project and for the
successful completion of my project:

Mrs. Asha Yadav for her support and assistance in completing the report.

Mr. Sanjay Chandra for sharing his future plans and upcoming projects.

Mr. Ashwini Jain for the data required to complete my report.

CONTENTS PAGE
Title Page....................1
Letter of Authentication.............................................................................................................2
Abstract..........3
Acknowledgements............4
Table of contents........5
Research Question......6
Theory............7
Introduction.......8
Analysis....10

INVESTMENT ANALYSIS10

STATISTICAL TABLES/CHARTS/DIAGRAMS..12

EQUITY RESEARCH..16

COST BENEFIT ANALYSIS18

PORTERS FIVE FORCES ANALYSIS19

Conclusion ....20
Recommendation

.22

Bibliography and References ....23

Appendices .24

RESEARCH QUESTION

Should UNITECH BUILDERS adopt promotional techniques in order to

maximise their revenue?

THEORY
Change in the investment expenditure: The decline in expenditure had caused the decline in
demand of real estate sectors. The demand of investment expenditure is decreasing regularly.
The demand of houses were dipping and since the spending of the previous year. Many firms
had lost their market as the prices of home due to inflation and excess demand rise sharply in
the last few years. But due to the fear of loss of job, the demand for the homes were kept on
declining due to the heavy crush in the credit market of USA, the constant fear of less of the
job declined the demand of the homes. In the beginning of the year 2008, India had felt the
heat of inflation which gives rise to the price of property but the high interest rate and the
constant fear of loss of job had lead Indians to stay back foot on the context of investment in
the real estate sector. The trend of purchasing and investing the property kept on declining on
a constant bars and revenue earned by the real estate developers also started declining
sharply. The main purpose of any essay is to generate the ways through which the real estate
firms can able to generate the demand in the dead market. After the second quarter august
07, it has been discovered by the researchers that the market of property had seen a revenue
downfall. The area of my investigation change surrounding towards the research of the issue
that how during this crisis time of depression, new firms are able to generate the demand for
the housing sector in the business.

The area of investigation flows through the two aspects

1. Why the firm faces the problem of earning less revenue in this period?
2. How and by which ways firm can come out of this crisis of low demand?

INTRODUCTION
1

UNITECH had started working civil engineering sector in the year 1974. UNITECH is
always looking for the ways to improve all the lives. UNITECH builders are doing well in all
the sectors of the construction from power to power transmission lines and highways to
theme parks, from steel plants to residential development, from indoor stadium and other
construction areas also. The above fact shows how the firm had achieved growth during the
last few years, now they are on the top of the real estate industry. The firm has also faced the
crisis period during this economic meltdown and their share prices had shed drastically. I am
investing on the segment on the same analyze its impact on UNITECH builders.
The world economic meltdown was started in the end of previous year i.e. December 2007
the economic meltdown was started due to the deepening credit crisis in the states, many
firms of Indian origin has faced the crisis due to the failure of credit creation in the US banks.
Many Indian firms were affected by the mortgage crisis and the US financial institutions had
reported the losses and meltdown of over 500 billion dollars2. Moreover the job cuts in Indian
firm also start rising, when the Satyam computers services announced the firing of 400 jobs
and they had also put 4500 jobs 3under scanning. The effect of recession can be seen in the
Indian market as the job crisis is rising sharply in every sector of the economy which is an
alarming situation.
1

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http://www.business-standard.com/pdf/tu769%20unitech%20limited%20081203.pdf

Indian firms are facing the crisis of investment and the stock market had reach to its lowest
below 8000 points4, which is lowest in the past few years. The decline in investment
expenditure led to the decrease in income in every sector of the economy. My curiosity
surrounded towards the effect of economic meltdown on real estate sector. I had chosen the
analysis of UNITECH builders because they were the worst affected firm in real estate
industry due to economic meltdown. My area of investigation passes through the effect of
economic meltdown on real estate industries so I had chosen to analyze the effect of
economic meltdown on UNITECH builders and I researched the issue: How UNITECH
builders can increase its revenue during the period of economic slowdown.

http://www.india-newsbehindnews.com/stock-news.html

ANALYSIS
INVESTMENT ANALYSIS
As per my investigation the investment depends upon the three main factors which are as
follows:
1. COST OF INVESTMENT The cost of investment in the real estate industry was kept
on rising since last 1 decade n the return from this investment was declining year after
year due to the factor that the new investors are flooding in the market so the profit
share is keeps on reducing year after year. Earlier in the beginning of 2000 5 the
investment in the real estate was speculated profitable investment but with the passage
of time the speculated investment is now considered to be slow growth investment
because there is no future prospect is clear and the rate of interest of the bank on
which they provide loans also keeps on increasing. Earlier in the year 2004-05, the
home loan interest rate varies in between 6-8% which has now risen up to around
12% which puts the consumer on back foot and now consumer is not demanding any
additional demand in the housing sector which results in reduction of profits of the
real estate investors.
2. RETURN OF INVESTMENT The return of investment keeps on declining year after
year because the number of investors in the real estate industry is rising sharply which
is reducing the quantum of profit. Moreover the prices of the property also declining
due to the high rate of recession, this recession is reducing the tendency to invest in
the market, the disposable money is also reducing as the people are having the fear of
loss of job, due to this the general people are getting away from investments. The
change in investment had declined the investment rate in the economy. People are
now not interested in investing money in real estate sector which affected the sales of
UNITECH BUILDERS.

3. FUTURE EXPECTATION The future expectation of a investment depends upon the

share market and the inducement to investment, the expectation of people is declining
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over investment as the recessionary period is predicted to be longer and the amount of
investment is also declining regularly. A lot of stock is available in the market which
is still unable to generate customers so it is been predicted that the amount of
investment will keep on declining in future. The investment is of two kinds-

a) Autonomous Investment This is the kind of investment which is free from the
speculation in the future. It is unaffected by the rate of interest. Rate of interest do
not increases or decreases the investment.
b) Induced Investment This kind of investment depends upon the rate of interest
and it also depends upon the speculative nature of the investor. As the rate of
interest increases, the inducement to invest in the different sectors of the economy
also increases.

 STATISTICAL TABLES/CHARTS/DIAGRAMS
According to the recent studies the UNITECH had suffered heavy losses due to the effect of
recession in U.S.A. The pre tax profits of the firm had been declined up to 29%. According to
the top officials of

the UNITECH it has been revealed that UNITECH had suffered huge

losses due to the slowdown of economic environment and the gulf war led them to reduce
their sale revenue. UNITECH reported a moderate financial performance in quarter 2 09,
due to the liquidity crisis and the in the economic sector. The profit margin of UNITECH
had also fell up to 60% due to the fall in of property prices and a shift in focus towards low
magnified middle income group. UNITECH is also suffering from the short term liquidity
problems and the debt obligation of RS. 27 billion 6is due by the end of financial year 09. The
UNITECHs stock is currency trading of 43.4 which is tough situation for any stakeholder
company.
It is revealing the fact that the firm is sustaining losses their expected quarterly earnings is
also predicted to fall in the coming future. Their consolidated are also fell by 3% and
revenue, it is declined by 64%, and UNITECHs second quarter net profit is declined by
12.5% YOY to RS. 3.6 billion (RS. 2.2 per share) in q2 09 from 4.1 billion (RS. 2.5 per
share) in q2 08
The recent studies reveal that the net profit margin will drop further because of the high
interest rate and the shift towards low magnified middle income housing.
The basic main problems of the failure to secure private equity deals in projects may results
in a lack of the funding costs.
The major cause of decline in revenue of the infrastructure firms are slowdown in residential
construction homes and rising interest rate which causes damages to the profits of the real
estate industry.
In the time of crisis and recession the inducement to invest by the investor keeps on
decreasing which reduces the demand of residential houses in this period. The effect of
recession can be seen in the various sectors of the economy as the service sector and the
information technology industry is also facing the job crisis which indicates that number of

www.indianpropertynewsite.com

jobs is declining sharply. It is the impact of high cost of production, high cost of production
and decrease in quantum of investment.

The recent fall of UNITECH Infrastructure Ltd is the result of fall in expectations by the
investor. UNITECH infrastructure was considered to be one of the most speculative and
profitable industry but the recession period lead to the decline in prices of shares of
UNITECH. UNITECHS share dripping down constantly So, it can be said that the word
economic turmoil had not left the big companies also from the effect of recession people
didnt want to invest money in the shares of UNITECH because negative approach is being
developing among the investors that market is going to fell to its lowest.

http://www.qbtpl.net/images/Unitech's%20Consolidated%20Result.jpg

The Indian economy more or less depends upon the MNCs which are causing a flow of
money in the Indian market. Due to credit crisis the US economy was started falling the US
firms started with drawing money from the Indian market. This led to the fall in the prices of
shares and the stock exchange had reached its lowest point. The hit also affected the real
estate firms. The real estate market of India is almost an unorganized and fragmented and was
commanded by the small business man of local areas. The industry had seen its boom in the
early era of 2000. The tremendous growth of the real estate sector is attributed to various
fundamental sectors such as growing economy, growing business needs. The supply of
money to the real estate industries is declining due the recession in the US economy. The
INDIAN economy as well as the real estate industry is also facing the heat of the recession.

Appendix 2

The two major financial firms of the us had invested their money blindly in the real estate
industry (Merrill Lynch and Lehman brothers), later on they became bankrupt and failed to
collect their money from the market. The impact of the recession is same on the UNITECH
builders also. The prices of shares of various real estate companies like DLF, UNITECH,
GMR group, RELIANCE group, WIPRO and SATYAM had fall to its lowest. The
SATYAM group an information technology company because almost bankrupt.9
UNITECH was founded in 1996, fore-runner in manufacturer of residential, official and
commercial interiors. Racking system for supermarkets and hypermarkets, with the
combination of wooden furnishings. The firm is a leading firm in the infrastructure industry.

http://www.merinews.com

 EQUITY RESEARCH10
The success of UNITECH is its research and development department which remains always
busy in the research and innovation of different designs. The firm is seriously committed to
design, manufacture, install and maintain infrastructure and interior solutions using good
skills, quality raw materials, effective people and overall prompt delivery. The UNITECH
provides custom and complete solution for infrastructural needs.
The current economy slowdown had affected the liquidity of the UNITECH builders up to
much greater extent. The main problem came in light due to the main economic slowdown
are the following: 1) Slowdown in liquidity: - The UNITECH is facing the liquidity crisis due to fall of the
American economy.
2) Decrease in investment: - The investment had decreased in the economy and the
people started saving in the economy.
3) Fall in operating margin: - UNITECHs operating margin is also about to fall that is
creating decline in operating margin from current 89.9%, due to the expected fall in
property prices.
4) Decrease in stock valuation: - the stock value of UNITECH is declining regularly. It
has reached to its lowest and shown a discount of 43.4%.

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UNITECHs consolidated revenue was also declined up to 3%. The construction revenue had
also fallen up to a greater level, the fall had seen 64%, and the net profit margin had also
fallen 40.5% to 36.09%. The earning capacity of the firm is declining constantly and its
expected fall per share is predicted to from 2.5 to 2.2. The construction cost of the industry is
regularly dropping which is a positive point for the industry. UNITECHs second quarters
profit was also declined the profit margin of the firm.

The analysis of the statistics provided me the conclusion that the firm have following
problems: -

a) The firm is fail to secure its private equity deals in projects may result in a lack of
funding.
b) Delaying in project completion and a slowdown in residential demand due to high
interest rate would affect companys growth prospects.

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Appendix 2

 COST BENEFIT ANALYSIS

This model examines the financial cost and benefit of a decision. It is simple but affective
process whereby if the financial benefits outweigh the financial cost then the proposal can go
ahead.
A. The real estate industrys boom comes to an end in 2008, following an acute liquidity
crunch, falling sales and rising interest rates slowdown the growth of reality market in
real estate sector.
B. According to managing director of South Asia operations for reality consultancy
Cushman and Wakefield, the slowdown and higher interest rate started spilling over
on the realty sector and the immediate impact was visible in realty shocks were the
worst performer and slumped 80%, out spacing the 58% drop in the Stock market.
C. The valuation at the realty stocks of UNITECH was greatly eroded. The stake value
has down sharply as compared to last year investment.
D. UNITECH real estate firm is going to face severe cash crunch and the firm is now
unable to grow to maintain its market share and they are now deciding to offload their
26-40% stake to raise Rs. 400 crores to cover up their loss in the revenue.
E. According to the UNITECH BUILDERS SOURCES, the company is likely to finalize
the deal of sale of stake within the week to generate cash liquidity.
F. The cost of firm is also rising high because UNITECH has an outstanding debt to
clean by the end of March 2009.
G. In addition to cost revenue analysis the UNITECH BUILDERS is also planning to
move up Rs. 5000 crore from United Estate International fund.
The cost benefit ignores the next financial aspects of the decision making. So, the
UNITECH BUILDERS prime motive is to analysis the benefit of the cost incurred by
implementing various process of the cost benefit analysis. This analysis finds and adds
the all positive factors. It identifies quantifies and subtracts all the negatives the costs.
The prime tricks to destroy a cost benefit analysis. UNITECH BUILDERS prime concern
is to analyze the cost that incurred in the production of revenue from the market. The
UNITECH BUILDERS are nowadays running on the lowest points. The firms prime
concern of obtaining cost benefit analysis is to check whether the firm able to generate
enough funds for their future operations in the upcoming future.

 PORTERS FIVE FORCES ANALYSIS

Porters five forces analysis assess the nature of competition that the firm faces in the market.
It analysis the market of the firm from the five areas which are as follows:a) Threat of new entrants.
b) Threat of the substitutes.
c) Bargaining power of suppliers.
d) Bargaining power of buyers.
e) Intensity of rivalry.
The above mentioned factors affect the decision of the UNITECH BUILDERS up to a larger
extent.
1) At this period of recession, UNITECH is not likely to get any threat of new entrants.
2) If recession continues for longer period, then it is possible that consumer may build or
find new substitute for its product in long run. Thus, in this period, the firm has to
maintain their economies of scale and they should keep researching over processing
of new projects despite the lack of funds. The firm may lack funds for its future
expansion but to maintain the status in the industry they have to make initiative in the
new projects.
3) The firm also has to find new customers and maintain the revenue generating
capacity. The firm should check that if buyer has higher bargaining powers then they
can influence the decision of the firm up to a much greater extent. So during this
recessionary period, the firm should maintain the cost effective technique to stay in
the industry for longer period.
4) UNITECH can create its strong bargaining power even at this time of recession by
applying capacity utilization technique, cost cutting or by analyzing the need of the
customer. UNITECH should apply research techniques to reduce cost by cheaper
substitute input.
5) Intensity of rivalry has created a room for pressure on UNITECH. Since, it is known
to the top companies within its industry. It is expected from UNITECH to gear up its
own growth rate which will further contribute towards the industry growth rate.

Although the firms profit share is expected to decline in the near future, in
this situation porters five forces analysis will help the firm to maintain its power in
the industry.

CONCLUSION
Should UNITECH BUILDERS adopt promotional techniques in order to maximise their
revenue?

1) The slowdown in the real estate industry had compelled the real estate builders to
think over the revenue and business strategy. The firms are making various sources of
non-sales revenue, which includes: a) Subvention
b) Grants
c) Donations
d) Fundraising
2) The real estate industries are making policies which are not only consumer friendly
but also suits to the pocket of the consumer. The government banks have also reduced
the lending rates of the home loans and the other private banks are also following the
same policy. Gradually, the interest is coming down and the consumer also prefers
this scheme of the real estate industries.
REVENUE AND BUSINESS STRATEGY: 3) Cost control is crucial if a business is to maintain its profitability. A large number of
American firms use the acronym force (focus on reducing costs everywhere). This is
the right time for UNITECH developers to use this policy. The recent downfalls of
employment opportunity in real estate sector are the part of the policy cost control of
the real estate firms.
4) In order to survive in the industry during these harms, UNITECH has reduced their
costs. In order to control costs, managers must realize or allocate cost to different
products portfolio. Cost control theory vitally depends upon the different
classifications of costs and also how they may arise.
5) A good management system suggests that 80% of the energies of the business focus
on the ways how they can raise the revenue. Only 20% resources of the business focus
on the cost of cutting policies. Taking these factors in mind, the firms of real estate
industry are planning to launch various discounts and the different payment schemes
for the customers. Thus, UNITECH should adopt the same policies.

6) The UNITECH being crippled, skill trying to grow up with the government and the
banks policy to reduce the rate as well as they are themselves also reducing their
profit margin in order to increase the revenue in the market.

COMPARED PERFORMANCE OF UNITECH:7) UNITECH is the worst performing nifty stock of 2008 to get over of this; they are
providing various schemes for the houses. The stock values of UNITECH has fallen
up to 72% whereas the stock values of other real estate firms also fallen as DLF has
fallen by 80% whereas PARSVNATH too have lost 90%. According to a report by
India info line, UNITECH has more than 30% vacancy on its portfolio held jointly
with UNITECH corporate packs and has to manage pre-lease only 18% of the
anticipated completions. In order to keep the flow of revenue, UNITECH is planning
to diversify its entire state in six properties comprising 1000 rooms. It has scaled
down its planned investment in the hotel business from 15 hotels with 2500 rooms to
a mere six hotels with 2500 rooms to a mere six hotels consisting of one thousand
rooms. The other sources of obtaining revenue that the firm is using is the other two
hotels in which UNITECH has the tie ups with Marriot and Carlson chain will be
ready within one and half year. The company is planning to raise money through
private equity route.
8) According to a real estate developer, it should be slashed to 6% for loans up to 5
lakhs and 7-7.5 % for loans up to 30 lakhs, what the public sector bank have done is
grossly inadequate. Moreover, on fifteen December 2008 public sector bank have
announced that the home loans up to five lakhs will be given at a maximum interest
rate 8.5%, while those between five to twenty lakhs would be offered at a lucrative
interest rate of 9.25%. OMAXEs CMD Rohtash Goel said, We were expecting more
soaps from banks for the housing sector for loans up to 50 lakhs, interest rates should
have been 9% for rs. Five lakhs, in the words of UNITECHS Managing Director Mr.
Sanjay Chandra however weighted the package as an excellent thing that would boost
up the sales in the reality sectors.12
Unanswered Questions:
This essay fails to answer the effectiveness of the change in promotional strategy.

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