bharat road network ltd Management discussions

I. ECONOMY & INDUSTRY

The global economy is currently vexed with an unprecedented global crisis due to COVID-19 pandemicwhich threatens to put the world economy into the deepest recession since the Second World War. It has caused a devastating blow to the lives and livelihood of billionsofpeople world wide and jeopardized the decades of socio-economic progress made by both advanced as well as emerging economies.

The Global Economic Prospects, by World Bank group predicts an alarming rate of 5.2 percent contraction in global GDP in 2020. While advanced economies are expected to witness a contraction of 7.0 percent in real GDP, the emerging market and developing economies would be faring little better with an estimated contraction of 2.5 percent.¹ The report estimates that global GDP in real terms could register a growth of 4.2 percent next year but the recovery largely hinges on the prospect of an early control over the pandemic.

Amid a fragile global economy which has been affected with rising trade protectionism and political uncertainties at various geographies, the Indian economy has showed remarkable resilience during Financial Year 2019-20. However, the pandemic stuck a devastating blow to the ambitious growth plan of the nation. According to the estimates from World Bank Group, the real GDP in India is estimated to be contracted by 3 percent against earlier estimates of 6 percent growth in GDP.

Since private consumption, investment and external trade gets severely affected; the economic growth is most likely to remain muted in during next fewquarters. Barring a few sectors, almost all the major contributors to GDP are likely to witness existential crisis. Amid this emerging crisis, the enhanced allocation on

1 Global Economic Outlook, June 2020, World BankGroup, https://www.worldbank.org /en/news/feature/2020/06/08/the-global-economic-outlook-during-the-covid-19-pandemic-a-changed-world infrastructure would be only glimmering hope for bringing in the required momentum in demand supply mechanism in our economy.

Over the past few years, Government of lndia has been consistently displaying unwavering thrust on infrastructure sector. At a time of muted economic growth and sluggish pace in infrastructure creation, the announcement of National Infrastructure Pipeline last year provided much needed push to the economy. With a vision to spend INR 100 lakh crore on infra over FY20-25, the announcement was aimed at improving Indias global competitiveness by creating new & upgrading existing infrastructure.

Among the core infrastructure verticals, the Roads and Highways continues to be the driving force as the highway construction in India recorded CAGR of 21.44 percent between FY16-FY19. In FY19, 10,855 km of highways were constructed. The government is now aiming toconstructal most 65,000 km of national highways ata cost of Rs 5.35 lakh crore by 2022 under Bharatmala Pariyojana.

Renewed thrust on revival of economic growth in post COVID scenario, preference of road in freight traffic, spurt in private participation and constant surge in passenger traffic and vehicle density continues to be the key growth drivers for increased investments in the Roads and Highways sector. The production of commercial vehicles in India has increased to 717,688 units in FY20 from 614,948 units in FY15. The passenger vehicle sales in India increased from 2,601,236 units in FY15 to 2,773,575 units in FY20. The sharp increase in domestic vehicle sales indicate the need for a stronger road network in India.

Government of India has therefore undertaken major initiatives to upgrade and strengthen highways and expressways in the country including enabling policy measures to facilitate private investments in this sector. Some of the key initiatives include Bharatmala and National Highway Development Program. In addition to Highway Development, focus remains on efficient operations & network management for improving logistics efficiency, which shall give rise to new investment opportunities.

The key drivers for growth in Roads and Highways sector are highlighted below:

• Potential Focus on Infrastructure for Economic Revival:

The economic revival in post COVID-19 scenario hinges primarily on pace of recovery and control over the pandemic. Simultaneously Government also needs to focus on infrastructure development not just for asset creation for the future but also to generate employment in the construction sector. Considering the multiplier effect of infrastructure sector on the economic revival, the crisis has offered an opportunity to revisit infrastructure development mechanism right from project conceptualization to operation and maintenance of physical infrastructure.

• National Infrastructure Pipeline (NIP): The Government has recentlyannounced National Infrastructure Pipeline ofaround Rs 100 lakh crores out of which Rs.20 lakh crore has been earmarked for development of Roads and Highways. Although an annual outlay Rs.3-4 lakh crores have been envisaged during next three years, it is also expected that Government may reprioritize and redistribute the annual outlays by frontloading the investments to provide momentum to economic activities and generate employment during post COVID scenario.

• Increased Budgetary Allocation: Under Union Budget 2020-21, the government of India has allocated Rs.91,823 crore for the Ministry of Road Transport and Highways. The transfer to National Investment Fund (NIF) for 2019-20 has also been estimated to be Rs. 6,070 crore.

• Focus on Growing Private Sector Participation:

The cumulative BOT/HAM contracts awarded (% of total km awarded) over the past few years have been on the ebb and have been 15% in FY19 owing the liquidity crunch in the market, rising interestcostand stressed balancesheetof thedevelopers. With renewed thrust on revamping BOT Model Concession Agreement and implementation of Hybrid Annuity Model (HAM), the private investment is set to increase substantially. As on December 2019, 824 projects were recommended for development by Public Private Partnership (PPP) Appraisal Committee and an Investment of INR 2.320 lakh crore for national highways is expected in PPP by 2020.

• Fiscal Incentives: 100% Foreign Direct Investment (FDI) through automatic route allowed subject to applicable laws and regulation. Right of Way (ROW) for project land made available to concessionaires free from all encumbrances, 100% tax exemption for 5 years and 30% relief for next 5 years, which may be availed of in 20 years.

• Increasing participation of Private Equity funds:

There has been a steady inflow of Private Equity players and global pension funds in Roads and Highways sector in India. Going ahead, Private Equity investment can further pick up, following the recent announcements of 100% exit policy for debt- stressed operators for toll roads. The vibrancy in the secondary market due to demand for operational assets with healthy cash flow, the capricious success of Asset Monetisation through Toll OperateTransfer model and potential realization through InviT model, indicates incessant involvement ofglobal private equity players and pension funds looking for long term investment opportunity with a steady return on capital.

• Technology and Automation in Highway Operations:

The decision of the Ministry of Roads Transport and Highways to roll out ElectronicToll Collection (ETC) programme in the country under the brand nameFASTag has resulted in greater user convenience through automation. ElectronicToll Collection is being encouraged to minimize toll collection time and reduce pilferage in toll collection on NHs. Enabling facilities for ETC is being put proactivelyto enableseamless movementofvehicles on the National Highways to promote digital transformation and cash less economy.

COVID-19 has also put the onus back on digital transformation of highway operation and maintenance. With NHAI recently announcing its complete digital transformation with the launch of unique cloud-based and artificial intelligence powered big data analytics platform, it has now become first such construction sector organization in India to go full-digital.The digital transformation is likely to expedite decision making as advance analytics adopted by them is expected to forecast delays, predict disputes and help in streamlining the system and processes.

II. OPPORTUNITIES

The World Economic Forum Global Competitiveness Report 2019 has ranked India on 72nd position in terms of Road Connectivity. India ranks 48th in terms of Quality of Road Infrastructure. The infrastructure deficit ofsuch humongous proportion could not be aligned with the aspirational goal of the nation to be self-sufficient without minimizing the reliance on external factors.

With such an objective, Government has taken up a massive infrastructuredevelopment programe under National Infrastructure Pipeline which envisaged investment of about Rs 100 lakh crores which offers massive investment opportunities across various infrastructure verticals.

The Roads and Highways sector also offers a plethora of opportunities for the companies engaged in Highway construction and development. The NIP has earmarked almost 20 lakh crores for development of Roads and Highways where as the focused Highway development programme under Bharatmala Pariyojana envisages to build 83,677 km ofroad by 2022 with a total estimated investment at INR 6.92 lakh crores. Total 246 road projects with an aggregate length of about 10,100 km have been awarded till February, 2020 under Bharatmala Pariyojana with Total Cost ofRs. 2,38,413 crores approximately, which also include projects on Greenfield Corridors.

The government of India has set a target for construction of 12,000 km national highway in FY20. During April-September 2019, a total of length of 4,622 km of national highways was constructed.

Over the next 5 years, the investment in National Highways awards will majorly be under EPC and HAM, a breakaway from past trends. BOT (toll) has also started seeing some interest from Authority and is likely to gain traction in FY20-22.

NHAI is also focused towards monetizing National Highway (NH) projects which are operational and are generating toll revenues for at least two years after the Commercial Operations Date (COD) through the Toll Operate Transfer (TOT) Model. Around 75 operational NH projects completed under public funding have been preliminarily identified for potential monetization using the TOT Model.

NHAI also plans to offer 19 projects worth Rs. 35,000 crores underthe InvIT model. Most of these projects are likely to be the ones constructed on government-funded or in engineering-procurement- construction mode.

Monetization of public funded NH roads is expected to create a framework for attracting long term institutional investment on the strength of future toll receivables. Market feedback indicates that certain institutional investors from outside the country have a long term investment appetite and are keen to participate in operational highway projects with stable toll revenue outlook. These investors generally hesitate in taking construction risk but are willing to look at de-risked Brownfield road assets.

III. BUSINESS & OPERATIONS

Our Company is a road BOT company in India, focused on development, implementation, operation and maintenance of National and State Highways with existing projects in states ofUttar Pradesh, Kerala, Haryana, Madhya Pradesh, Maharashtra and Odisha. At present, all ofour Companys projects are implemented through Special Purpose Vehicles (SPVs), either directly or in partnership with other infrastructure players.

The main business operations ofour company can be divided into three categories, i.e.

(i) Project development and implementation;

(ii) Tolling Operations and Highway Management; and

(iii) Advisory Services and Project Management Services including Construction Supervision/Debt Syndication for your Companys projects.

During the year under review, our Company has focused onall these areas to augment resources. Our Company has a project portfolio consisting of six (6) BOT Projects covering over 2000 Lane km of Roads and Highways across 6 states in India. All the six projects in our portfolio, are in Tolling & Operational phase covering approximately 2100 Lane kms. The Operational projectsare located in the states of Kerala, Madhya Pradesh, Haryana, Uttar Pradesh, Odisha, and Maharashtra.

• Operational Projects:

1. Guruvayoor Infrastructure Private Limited ("GIPL"): Four laning of theexisting two lane portion of theThrissur- Angamali section of NH-47 from km 270.00 to km 316.70 and improvement, operation and maintenance of the Angamali- Edapalli section from km 316.70 to km 342.0 of NH-47 in the state of Kerala on BOTToll basis.

2. Mahakaleshwar Tollways Private Limited ("MTPL"): Four laning of the Indore-Ujjain portion from Ch. 5/2 to Ch. 53 on State Highway 27 on BOT Toll basis in the state of Madhya Pradesh.

3. Ghaziabad Aligarh Expressway Private Limited ("GAEPL"):

Four laning of the Ghaziabad-Aligarh section of NH-91 connecting km 23.60 to km 140.20 of NH-91 and subsequent six laning of the project highway (excluding Aligarh bypass from km 129.60 to km 149.90) before the 12th anniversary of the appointed date on BOT (Toll) basis.

4. Kurukshetra Expressway Private Limited ("KEPL"): Four laning of the Rohtak-Bawal section of NH-71 from km 363.30 to km 450.80 in the state of Haryana on DBFOTToll basis.

5. ShreeJagannath Expressways Private Limited ("SJEPL"):

Six laning of the existing road from km 413.00 to km 418.00 and km 0.00 to km 62.00 on Chandikhole- Jagatpur-Bhubaneswar section of NH-5 in the state of Odisha on DBFOTToll basis.

6. Solapur Tollways Private Limited ("STPL"): Four laning of the Solapur-Maharashtra/ Karnataka border section ofNH-9 from km 249.00 to km 348.80 in the state of Maharashtra on DBFOT Toll basis.

• Project Foreclosed:

1. Orissa Steel Expressway Private Limited ("OSEPL"):

The OSEPL Project for augmenting the existing road on the Rimuli- Roxy-Rajamunda section of NH-215 from km 163.00 to km 269.00 on DBFOT basis was signed on July 6, 2010 with the NHAI. Due to non-unavailability of Land and Forest clearance issues, NHAI agreed to mutuallyforeclose the said Agreement without any penalty, however, with a condition that the performance bank guarantees must be kept alive and agreed to address the claims/losses ofOSEPL through ISAAC (NHAIs dispute redressal mechanism) failing which OSEPL may refer to Arbitration.

Based on the same,ajoint inspection of the Project sitewas carried on and thereafter the project was handed over to NHAI on 02-032017 on "as is where is basis". As NHAI despite requests did not constitute the ISAAC, OSEPL invoked arbitration and submitted a claim of around Rs.945 crores against NHAI towards total losses incurred finance and capital costs, overheads and loss ofprofit- up etc. to March 31,2018. The Arbitration process duly commenced during the Financial year 2018-19 and the company successfully won the Award ofapproximately Rs.322.78 Crores (including interest) on 31st March 2019. It is one of the highest value awards won by any company against N HAI in their history on a single Arbitration on a single project. However, NHAI has filed application for setting aside the award under section 34 of the Arbitration and Conciliation Act, 1996 and its amendments before the Delhi High Court. NHAI has deposited thetotal award amountwith the High Court Registry. Currently, the matter is pending before the Delhi High Court for adjudication.

IV. BUSINESS PERFORMANCE

During the year under review, your Company continued its focus on improving operational efficiencythrough increased automation of services and adopted prudent project delivery mechanism to expedite execution of the existing asset under construction. With thecommencementoftolling on 82.95 km ofSolapur-Maharashtra/ Karnataka border section ofNH-9, all the projects under the portfolio of your Company are now revenue generating projects.

• COVID-19 Impact

With the nationwide lockdown announced to curb the spread of COVID19 pandemic, the inter-stateand intra state traffic came to a grinding halt. Following the promulgation of lockdown since 25th March 2020, the National Highways Authority ofIndia announced suspension of tolling till 19th April 2020 on all National Highways across the nation. Some states extended the prohibitory orders on traffic movement and hence tolling on Thrissur- Angamali section of NH-47 under GIPL and Indore-Ujjain section on State Highway 27 remained suspended till 3rd May 2020 whereas on others, the suspension of tolling was applicable as per NHAI directives.

The suspension of tolling and dip in passenger and freight traffic during thesubsequent phases oflockdown hasso far resulted in an estimated lossofX92.53 crorein toll revenue across all the operational projects till 30th June, 2020. NHAI has announced a compensation for the revenue loss by way of extension of concession period for the period oftoll suspension as well as for days where toll revenue is less than 90% ofdailytoll collection of FY19-20.

• Traffic and Revenue Growth

During the year under review, the Traffic across our various road projects witnessed a degrowth of 1.2% from last year due to several factors such as COVID 19,economicslowdown, LokSabha elections, adjacent competing road (Kundli Manesar Palwal Expressway) operational at KEPL& several force majeure incidents such as political protests, natural calamities like cyclones and floods. Although these events adversely affected the traffic growth across our project stretches, the Average Daily Revenue (ADR) across all the operational projects increased by 12% to X185.68 Lakhs in Financial Year 201920 from X165.84 Lakhs in Financial Year 2018-19. The toll revenue

is expected to recover from initial slump during COVID-19 impact period and improve further with increased economic activity across the high growth industrial corridors along the project stretches. All of our Companys projects have implemented new updated most modern Tolling system (ETC operations) which reflected in higher Toll collection & decrease in operational cost.

o Ghaziabad Aligarh Expressway Private Limited: Due to overall economic slowdown, general elections restricting traffic movement & COVID 19 during the fag end of the financial year, the project has been able to register a modest toll revenue growth of 0.6% as Average Daily Revenue increased from Rs.57.79 Lakhs in FY 2018-19 to Rs.58.13 lacs in FY 2019-20. Major increase in Revenue was on account of growth of freight traffic on this corridor. Thetoll revenueis expected to improve further as soon as the 4 laning of Aligarh Kanpur section is completed.

o Mahakaleshwar Tollways Private Limited: Post installation of new upgraded Toll Management System (TMS), the project has been able to register toll revenue growth of 1% as the Average Daily Revenue increased from Rs.8.61 Lakhs in FY 2018-19 to Rs.8.69 lacs in FY 2019-20 inspite of economic slowdown & COVID 19 impact. The company is also pursuing claims on Madhya Pradesh Road Development Corporation (MPRDC) for the Toll loss due to forced exemptions and loss of actual Toll during demonetization and Simhasta Parva periods.

o Shree Jagannath Expressways Private Limited: The project has been provisionally completed and the balance work is being expeditiously implemented on the stretches which were handed over late to the Company due to Right of Way (ROW) issues. The Average Daily Revenue (ADR) sharply improved to 48.47 Lakhs in FY 2019-20 as compared to Rs.42.79 Lakhs in FY 201819. The reason for this spurt in revenue is due to increase in freight traffic because ofspurt in the economic activity in the region. In the coming years, it is expected that revenue shall increase further on account of major boost in economy resulting from expected growth ofmining industry in the hinterland.The Company has won the Arbitration Award of over X150 Crore towards loss of Toll that was not allowed to be collected by NHAI afterthe completion ofconstruction ofMahanadi Bridge.

o Kurukshetra Expressway Private Limited: Operation of parallel competing road corridor Kundli Manesar Palwal Expressway opened by the Haryana Government resulted in stagnation of Toll collections.The Average Daily Revenue slightly increased to Rs.20.81 lakhs in FY 2019-20 from Rs.19.62 Lakhs in FY-201819. The company alsowonan Arbitration Award of X47 Crores and an extension of 58 days in the concession period which has been challenged by NHAI at the Delhi High Court.

o Guruvayoor Infrastructure Private Limited: During the year under review, the Company has shown a modest growth of 5.08% in Average Daily Revenueto Rs.33.27 lakhs in FY 2019-20 as against Rs.31.66 Lakhs in FY 2018-19. The Company has also been suffering lose in revenue due to non-payment of toll by KSRTC buses and for the free passes issued as per the Govt of Kerala. Hence the company has invoked arbitration against NHAI for all the claims which are pending for adjudication.

o Solapur Tollways Private Limited: During the year under review, the company achieved substantial work progress by completing almost82% of the project.At certain locations,the Projectsuffered due to delay in acquisition ofland and shifting of utilities. The extension of project completion date has been recommended by NHAI till 31st March, 21. The company has achieved provisional commercial operation for 82.95 Km length and commenced Toll operations with effect from 3rd February 2020. During the 2 months ofoperations, the project has been able to achieve an ADR of f16.31 lacs during the FY 2019-20.

• Technology Up-Gradation:

Your Company maintained its focus on strengthening IT system and capabilities to create digital, scalable and sustainable business eco system. The company has successfully implemented Hybrid ETC system in all its operational projects. The company is committed towards driving efficiency through more advanced and fully proven technologies to minimize human errors resulting from manual intervention and also moving towards more robust system. During theyear under review,your Company has continued itsjourney on a Digital Transformation initiative for automating operations across Toll Plaza and construction projects keeping an eye on further improvement in toll revenue, better operational efficiency and proactive business planning. The company has also initiated Centralized Control Room in Registered office Kolkata to monitor all Toll Management System at individual SPV which will be unique in nature.

• Effective Project Management and Delivery:

Your Company intends to focus on improving project monitoring and management capabilities to faster execution of project. The company also intends to implement robust systems through IT platforms for developing user friendly tools for Project Management.

V. FUTURE BUSINESS PLANS

Your Company is a pure play BOT Company focused on development, implementation, operation and maintenance of roads/highways projects. As an infrastructure developer operating on the asset aggregation platform, your Companys business growth strategy is strongly focused on value accretion and strengthening operational efficiency.

o ShareholdersValue Enhancement:

Your Company follows a policy of systematic review of the incremental value-creation potential of assets under its management and takesastrategicdecision to maximizevalueoffuturecash flows by judicious churning of the portfolio either through asset restructuring or divestiture. As an infrastructure developer working on transportation asset ownership model, your company is committed to abide by a robust asset management policy aimed at strengthening its value creation capabilities through constant monitoring asset performance.

o Optimizing Financial Structure:

Your Company is exploring options for refinancing in various SPVs to lower borrowing costs and improve cash flows. The priority for your Company is to continue its effort towards repricing and retenure its debt in all its assets. Though your Company sources funding for existing projects primarily through long term loans from banks and other financial institutions, the Company intends to continuetoevaluatevarious funding mechanisms which will enable

it to enhance credit rating and in turn reduce borrowing cost and improve liquidity.

o Claim and Contract Management

Claims and Contract Management are an integral part of highway concession business. Our Company is committed towards adopting a mature Claims Management process across the value chain to create efficiency, effectiveness, and ultimately competitive differentiation in claims settlement and dispute resolution. With a constant focus on enhancing capabilities to better assess, manage, and mitigate claims and risk; the Company is correspondingly focused towards expeditious handling ofclaim through negotiation, mediation and arbitration.

o Continue to focus on technology and operational efficiency:

With gaining prominence of IT system and other internal processes in every aspect of business and operations, your Company is constantly strengthening the IT system and capabilities to create an environment friendly sustainable business eco system. Your Company is committed towards driving efficiency through more advanced and fully proven technologies to minimize human error resulting from manual intervention and also moving towards more environment friendly transportation solutions that are sustainable both from energy consumption and an environment perspective.

YourCompany isconstantly in theprocess ofupgrading theexisting IT systems and implementing a fully automated operation management system integrating technology primarily to monitor the flow of vehicular traffic, real time revenue and collection monitoring and improved road safety.

As part of thedigital drive,your Companyaims to createone single consolidated platform across all organizations for all stakeholders -Operations, Finance and Management to help them in enhancing their efficiencies in services like Revenue Reporting, Traffic Growth Analysis, Incidence Management and Administration through mobile and web channels. The emerging technology interventions such Sensor driven/RFID driven auto capture or Internet of Things (IoT), Artificial Intelligence/Machine Learning driven smart projectionsor analytics, automated traffic volume reporting on real time basis, Cloud based Data Management System and Workflow Management are explored for better and informed decision making planning.

o Enhancing in-house integration with an aim to improve performance and enhance returns:

Your Company seeks to continue its focus on enhancing in- house competencies by expanding into various functional aspects of projects, thereby reducing dependency on third parties. Your Company intends to focus on strengthening project designing and engineering capabilities, Project Monitoring and Management capabilities. It is believed that developing specialized in-house capabilities would reduce dependency on third parties, thereby avoiding risks and minimizing costs associated with outsourcing.

VI. FUTURE OUTLOOK

India has a massive infrastructure investment requirement to the tune off 340 lakh crores by 2040 and infrastructure creation ofsuch a gigantic scale does require a wide range of resources, expertise and skills together with funding either from public and private sources. Considering the limited scope to maneuver public spending ofsuch a massivescaleand size,the Public-Private Partnership (PPP) assumes significance, both for attracting investment in infrastructure and leverageon theasset managementskill setof the privatesector.

As PPP model is aimed at leveraging on the private capital for infrastructure development and making the best use of the asset management skill set of the infrastructure companies, Your Company sees itself as a strong enabler for PPP projects while acting as a bridge between the Public Asset and Project Authority. Your Company leverage on its strong asset management skill set, access to capital and rich pool ofcontractors and its expertise in financial engineering to implement projects.

Over the past few years, there has been a lot of proactive measures being taken up for reviving the infrastructure sector and thankfully Roads and Highways sector has so far been the biggest beneficiary of Governments thrust on infrastructure. Economic growth, preference of road in freight traffic, spurt in private participation and surge in passenger traffic and vehicle density are key growth drivers for infrastructure investments. Greater connectivity between different cities, towns and villages has led to increased road traffic over the years.

The opportunities under Bharatmala Pariyojana and National Infrastructure Pipelineopen a plethora ofopportunities for growth in the primary market. Simultaneously, the asset monetization initiatives taken up by National Highways Authority of India and Ministry of Road Transport and Highways have evinced considerable interest among the global private equity players and pension funds to leverage on the investment opportunities in Indian Roads and Higwayssector. It has helped in bringing buoyancy in thesecondary market in the sector.

NHAI has started the tendering process for projects worth -Rs 1 lakh crore. Out ofthis, HAM accounts for -60% of thetendervalue with EPC accounting for the rest. Currently BOT projects are not being actively tendered by NHAI.

TheGovernmentofIndia is quite empathetictothe concernsof the industry and has shown intent to resolve the crisis through a series of reform measures, the actual action on the ground needs to be effectiveenough totacklethecoreissues related to land acquisition, time bound resolution ofdisputes, faster settlement ofclaims and local administrative support to streamline on-ground execution mechanism.

VII. RISK MANAGEMENT

Risk management forms an integral part ofyour Companys future growth strategy. The risk management strategy of your Company hinges on a clear understanding ofvarious risks and adherence to well-laid out risk policies and procedures that are benchmarked with industry best practices. Your Company has developed robust systems and embraced sturdy practices for identifying, measuring and mitigating various risks and ensuring that they are maintained within pre-defined riskappetitelevels.

Riskand Concern • Growth Risk

Growth risk is the inability to effectively manage growth or to successfully implement business plans which depends heavily on theabilityto plan and executethegrowth strategy.Growth Riskcan impact organic as well as inorganic growth vision of the Company in the form of inability to successfully bid for new projects at attractive IRR or acquisition ofexisting stressed projects at attractivevaluation.

Your Companys growth risk mitigation strategy is guided by constant review and analysis of market opportunities and trends in both organic and inorganic space for selective bidding for new projects and acquisition for projects falling within our stringent investment criteria.

• Business Risk

Business Risk includes risks with respect to competition, capital intensiveness, input cost, traffic growth for BOT projects and labour.

Your Company faces risk of competition as the sector is growing and more players get qualified to bid for new projects, also as the business which your company operates is capital intensive by nature, availability of sufficient funds is critical for bidding of projects, particularly in case of fund-based projects such as BOT- toll, HAM and TOT model. Further,availabilityof therightqualityand quantity of resources is critical for the timely completion of infrastructure projects, any unexpected increase in the input costs will have direct impact on overall margins. Moreover undue attrition of manpower could lead to loss of competitive edge as it may lead to project delays.

Your Company has a well-designed mitigation plan to address these business risks.Companyadapts its policiesand procedurestoensure a sustained business model. Your Company strives to execute maximum number of projects before their scheduled completion and within the budgeted cost. Your Companyoperates its working capital cycle in a highly optimized manner, your company enters into contracts with EPC Partners which has the relevant cost escalation provisions that protectyourCompanys margins. Further, your companys focus is to build an organisation of highly motivated employees, having the ability to execute ambitious business goals with passion and commitment, thereby exceeding customer aspirations. The working environment of the Company is cordial and employee-friendly.The remuneration is at parwith the industry standards.

• Regulatory Risk

The business of the company is significantly dependent on various Government entities and could be adversely affected if there are adverse changes in the policies adopted by such Government entities.

Your Company regularly reviews and monitors government policies and likelydevelopmentsalong with an impact assessment ofthose policies so that necessary actions can be planned and implemented from time to time.

VIII. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Your Company has shown commitment in embracing an integrated approach towards the overall development of Human Resources and adopted best human resource practices over the past few years. In terms of its manpower strength, the overall headcount of the group (including the SPVs) till 31st March 2020 is 1442 which includes 11 employees of Bharat Road Network Limited & 1431 at project SPVs, consisting of on-roll employees & off-roll resources of 748 & 694 respectively.

The Human Resources department acts as a catalyst to enable employees under BRNLand itsSPV to contributeat optimum levels towards the success of the business, with a focused approach on the development of the workforce in terms of capability, values, attitude and behavior. Your Company aims to promote and recruit the best qualified people, recognizing and encouraging the value of diversity in the workplace. The Company strives to optimize manpower strength by leveraging its access to rich talent pool across various projects through effective cross-utilization of the workforce. Moving forward, your Company iscommitted to nurturetheexisting talent through Training and Development and implementation of the best Talent Management Practices like Succession Planning which aims to identifying organization preparedness for the critical roles of the organization. This adds value by enabling the organization to execute its strategy in an efficient and effective manner.

Your Company maintains and diligently adheres to the policies, rules and practices that treat employees with dignity and equality while maintaining company compliance with employment and labour laws, corporate directives and labour agreements. It also thrives to build a positive work culture wherein employees engage across all levels within the organization for improved productivity and personal growth, which has a direct positive impact on customers and innovation. Such initiatives helpin attracting the right talent across industry and retain a community of high performers.

There has also been adequate focus on employee engagement activities and employee welfare programs to promote a healthy work environment and boost productivity. Your Company is also committed towards giving backto the society by working towards the welfare of the community by various CSR activities. The overall aim isto providea work at mosphere that issafe, healthy, secureand conscious of long-term family and community goals. The constant endeavor ofyour Company towards promoting employee welfare and Human Capital augmentation has resulted in one of your subsidiaries namely Guruvayo or Infrastructure Private Limited (GIPL) being rewarded as a "Great Place to Work" in the Mid-Size Organization Category and secure the impressive ranking within top 50 Mid-Size Organization in India.

Great Place to Work is the global authority on building, sustaining, and recognizing high-trust, and high-performing workplace cultures. Every year, more than 10,000 organizations from over 60 countries partnerGreat Placeto Work Instituteforassessment, benchmarking and planning actions to strengthen their workplace culture. Great Place to Work Institutes methodology is recognized as rigorous and objective and is considered as the gold standard for defining great workplaces across business, academia and government organizations.

For your Company, this recognition underscores the organizations in India that are focused on creating and sustaining high-trust cultures amongst their employees. Guruvayoor Infrastructure Private Limited (GIPL), was highlighted for its dedication to five trust building dimensions including credibility, respect, fairness, pride, and camaraderie.Theaward underscoresGIPL practiceofputting people first and depicts a culture of caring, innovation, trust, and transparency, which not only empowers employees, but also nurtures an entrepreneurial culture that helps in emerging as a top employer. GIPL thrives to build a positive work culture wherein employees engage across all levels within the organization for improved productivity and personal growth, which has a direct positive impact on customers and innovation. Such initiatives help in attracting the right talent across industry and retain a community of high performers.

IX. INTERNAL CONTROL AND AUDIT

Your Board places utmost importance in setting up and regularly enhancing InternalControl Frameworkinviewofcomplexbusiness environment and increasing regulatory oversight for sustainable growth. Your Company adopts a calibrated and smart framework spanning on pillars of administrative and financial controls. On the administrative control side, your Company has a proper reporting structure, several oversight committees, defined roles and responsibilities at all levels to ensure appropriate checks and balances. On the financial controls side, management with the knowledge and understanding of the business, its organization, operations, and processes has put in place appropriate controls including segregation ofduties and reporting mechanism to deter and detect misstatements in financial reporting.

Your Company has an Internal Financial Control (IFC) System, commensurate with the nature of its business and the size and complexity of its operations. The Companys system of internal control has been designed to provide a reasonable assurance with regard to controls over critical business activities and operations, policies and procedures for ensuring the orderly and efficient conduct of business, critical procurements, prevention and detection of frauds and errors, compliance with regulations and for ensuring timelinessand reliabilityoffinancial reporting. Your Companys IFC have been reviewed and actions have been taken wherever needed, to strengthen control and overall risk management procedure.

The Audit Committee of the Board evaluates and reviews the adequacy and effectiveness of the Internal Control Systems and suggests improvements to strengthen them. Based on the report of Internal Auditor and the response thereto, necessary corrective actions are undertaken to strengthen the controls. Overall, the Board and the Audit Committee maintains a proactive approach in ensuring that the control and governance framework is regularly reviewed and timely corrective actions are taken to minimize risk of disruption.

During theyear under review, Your Company appointed M/s. G.P. Agrawal &Co, a Chartered Accountant Firm (Firm Registration No.302082E), having requisite academic and professional qualifications, work experience, skill and other suitable capabilities, as the Internal Auditor of the Company.