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Prozone Realty Ltd

| Quarterly Financial Results Q3 FY 2025-26

NEUTRAL SENTIMENT

Report Source

⬤7th Feb 26

Summary : Prozone Realty reported unaudited Q3 FY26 results, navigating significant regulatory challenges regarding a Deputy MD re-appointment and a Nagpur project NOC, while management pursues legal recourse.

Quarterly Report Analysis & Insights

Financial Disclosures

  1. Consolidated Q3 FY26: Cost of Projects Rs. 1,127.71 lakhs, Change in inventories Rs. 912.63 lakhs, Employee benefits Rs. 198.62 lakhs, Finance costs Rs. 897.33 lakhs, Depreciation Rs. 588.26 lakhs, Other expenses Rs. 1,307.87 lakhs.
  2. Standalone Q3 FY26: Employee benefits Rs. 189.83 lakhs, Finance costs Rs. 38.67 lakhs, Depreciation Rs. 101.45 lakhs, Other expenses Rs. 193.46 lakhs.
  3. Consolidated Q3 FY26: Outright Sales Rs. 2,388.74 lakhs, Leasing Rs. 3,434.05 lakhs, Other income Rs. 272.12 lakhs.
  4. Standalone Q3 FY26: Revenue from operations (Sale of Services) Rs. 263.22 lakhs, Other income Rs. 274.69 lakhs.
  5. Potential liability of Rs. 682 lakhs for remuneration and salary advances paid to the former Deputy MD.
  6. Potential demolition/rehabilitation costs and interest payable to customers for the Nagpur project (inventory of Rs. 6,818.25 lakhs at risk).
  7. Consolidated Capital Employed (Segment Assets - Segment Liabilities) as of Dec 31, 2025: Leasing Rs. 14,935.13 lakhs, Outright Sales Rs. 20,033.34 lakhs, Unallocated Rs. 44,446.01 lakhs, Total Rs. 79,414.48 lakhs.
  8. Both standalone and consolidated unaudited financial results are presented.
  9. The company will publish only consolidated financial results in newspapers.

Corporate Overview

  1. Primarily India, with a subsidiary in Singapore (Prozone Liberty International Limited).
  2. Rejection of Deputy Managing Director's re-appointment by the Ministry of Corporate Affairs (MCA).
  3. Contesting cancellation of No Objection Certificate (NOC) for a residential project in Nagpur, impacting four out of five towers.
  4. Evaluating potential liability for remuneration and salary advances paid to the former Deputy MD (Rs. 682 lakhs).
  5. Inventory of Rs. 6,818.25 lakhs for the Nagpur project is at risk due to the NOC issue, with potential demolition/rehabilitation costs and interest payable to customers.
  6. Developing, owning, and operating shopping malls, commercial, and residential premises.
  7. Management is actively evaluating available recourse and determining plans of action for significant regulatory challenges.
  8. Expresses confidence in the high chances of revalidation for the Nagpur project NOC based on technical reports and legal opinion.
  9. Leasing
  10. Outright Sales

Risk Factors

  1. Unfavorable Nagpur NOC outcome.
  2. Liability from MD remuneration.
  3. Uncertainty from new labor codes.
  4. Reliance on other auditors' reports.

Key Drivers

  1. Nagpur NOC revalidation success.
  2. Favorable resolution of MD issue.
  3. Strong growth in leasing revenue.
  4. Successful outright sales execution.

Auditor’s Report

  1. Unmodified conclusion on both standalone and consolidated unaudited financial results.
  2. The auditor drew attention to Note 5 (standalone) and Note 7 (consolidated) regarding the MCA order on the Deputy MD's re-appointment, stating their conclusion is not modified.
  3. The auditor drew attention to Note 5 (consolidated) regarding the Nagpur project NOC cancellation and management's assessment, stating their conclusion is not modified.
  4. Attention drawn to the rejection of the Deputy Managing Director's re-appointment by MCA and management's evaluation of recourse.
  5. Attention drawn to the ongoing contestation of the No Objection Certificate for the Nagpur residential project and management's belief in revalidation.

Board Commentary

  1. Deputy Managing Director ceased to hold position and designation changed to Non-Executive Director due to MCA order.
  2. Potential liability of Rs. 682 lakhs for remuneration and salary advances paid to the former Deputy MD.
  3. Risk of demolition costs, rehabilitation costs, and interest payable to customers if Nagpur NOC is not revalidated.
  4. Rejection of Deputy Managing Director's re-appointment by MCA, leading to a change in designation to Non-Executive Director.
  5. Ongoing legal challenges regarding the cancellation of the No Objection Certificate for a Nagpur residential project.
  6. Implementation of four new Labour Codes (Code on Wages 2019, Code on Social Security 2020, Industrial Regulation Code 2020, and Occupational Safety, Health and Working Conditions Code 2020) with rules yet to be notified.
  7. Inventory in respect of 12th to 14th floor of four towers in Nagpur aggregating to Rs. 6,818.25 lakhs, currently at risk due to NOC issues.

Corporate Governance

  1. Deputy Managing Director's designation changed to Non-Executive Director following MCA order.
  2. Audit Committee reviewed the unaudited standalone and consolidated financial results.
  3. Rejection of Deputy Managing Director's re-appointment by the Ministry of Corporate Affairs (MCA).

Management Discussion & Analysis

Future Strategy

  1. Evaluating available legal and statutory recourse regarding the MCA order on Deputy MD re-appointment.
  2. Determining a plan of action for remuneration and salary advances paid to the former Deputy MD.
  3. Contesting the cancellation of the Nagpur project NOC through legal channels and seeking revalidation.
  4. Monitoring the finalization of Central/State Rules and clarifications for new Labour Codes and providing appropriate accounting effect.

Operational Focus Areas

  1. Resolving regulatory issues related to the Deputy MD's re-appointment.
  2. Securing revalidation of the No Objection Certificate for the Nagpur residential project.
  3. Obtaining part occupancy certificates for remaining flats in the Nagpur project.

Performance Drivers

  1. Revenue from operations (Leasing and Outright Sales).
  2. Other income.
  3. Fair value gains on financial assets measured at FVOCI, primarily from investments in subsidiaries and joint ventures due to property valuation changes.

Risk Control Measures

  1. Management is evaluating legal recourse for the Deputy MD re-appointment issue.
  2. For the Nagpur project, management believes chances of NOC revalidation are high based on technical reports, part OCs received, court orders, and legal opinion, thus no adjustments to inventory value or provisions have been made.
  3. The company has assessed the incremental impact of new Labour Codes as not material based on available information and actuarial valuation.

Critical Risks

  1. Unfavorable outcome regarding the Deputy MD's re-appointment, leading to significant financial liability.
  2. Failure to revalidate the Nagpur project NOC, potentially leading to demolition costs and customer liabilities.
  3. Uncertainty regarding the full impact and implementation of new Labour Codes.
  4. Reliance on management's assessment for inventory valuation despite ongoing regulatory challenges.