RealBuild is a Promoter owned and managed, and privately funded mid-sized real estate company headquartered in Mumbai. RealBuild had developed approximately 10L sqft of residential and commercial space in and around Mumbai immediately before MyCFO’s involvement with the Company and developed around 5Lsqft of commercial real estate during the time of our involvement. Senior Management was and continues to be exclusively run by close friends and relatives of Promoter. Initial work has been done to induct a professional CEO at RealBuild
Challenges for MyCFO
MyCFO was involved with RealBuild in two phases. In the first phase, the mandate was to study the business processes of the company, make recommendations for improvement and to recommend a suitable ERP package for implementation. This phase also required us to study the financing structure of RealBuild and recommend strategies to move away from a personal relationship drive approach to fund raising to a more professional basis to raise funds from formal, institutional sources. In Phase II, MyCFO was required to establish financial and operational controls, streamline MIS delivery, help develop models for pricing decisions and study fund raising alternatives, including private equity and lease rent discounting.
In Phase I, MyCFO’s role was one of change management, working closely with department heads, who had never before been exposed to working with professionals. Our deliverables included a comprehensive SOP document that covered land acquisition, broker appointment, project evaluation, contracting and sub-contracting, financing and accounting and reporting controls and processes. MyCFO’s approach was to ‘first seek to understand’, evaluate the technical and execution capability of HOD’s and come up with a set of practical solutions that provided some easy wins, but yet were a step up from what the company was already doing. The SOPs formed the basis for the ERP implementation partner to configure Microsoft Dynamix at RealBuild. On the fund raising side, MyCFO introduced banking partners to RealBuild and was actively involved in the negotiations for fund and non-fund based limits, which helped RealBuild reduce dependence on private and expensive sources of lending. In Phase II, MyCFO’s work was focussed on helping RealBuild take decisions on hold/ sell decisions relating to ready stock and timing and pricing decisions of the sale. Rent discounting options were evaluated and implemented with banking partners, helping RealBuild reduce the overall cost of funding. Timely generation of MIS relating to size and quality of sales inquiry pipeline, competitor pricing and inquiry to sales conversion, helped management take timely decisions on the sales side. Financial MIS was focussed on Budgetary controls to ensure that costs were within approved limits at all times and that time and cost overruns were flagged in advance.
How the Client Benefited?
In Phase I, MyCFO’s involvement helped RealBuild reduce dependence on private funding from 100% to 63%, on a larger funded base. We estimated reduction in ERP implementation time, by a minimum of 8 weeks on a conservative basis, with a smooth M+8 days first month closing on ERP, apart from ‘Go live’ at about 65% of features available in the system.
MyCFO’s involvement helped improve margins by about 2% through better controls over procurement processes. Our involvement also helped reducing time taken to finalize commercial evaluation of new land bank acquisition process from about 42 days to 23 days.
In Phase II, MyCFO’s lease rent discounting solution reduced weighted cost of funding from about 17.5% to about 13.8%. Sales Pipeline reports were moved from Week end + 5 days to daily basis. MyCFO estimates improvement of sales realization by about 1.5% on account of improved quality and benchmarking of sales pipeline reports. Flagging of cost and time over runs enabled project completion within 104% of Budget; of the 4% overrun, 85% was passed on to end customers.