MANAGEMENT DISCUSSION AND ANALYSIS REPORT

"Paying for infrastructure is a vexing issue in both developed countries andemerging markets, and can be a tough political challenge. Yet the search for funding mustbe a top priority for the public and private sectors alike if infrastructure investment isto accelerate and economies are to continue to grow. The bank ability of infrastructureprojects enhanced by new revenue sources and supported by enforceable contracts designedto match local institutional capacity is what will accelerate their delivery".

- World Economic Forum Report: Accelerating Infrastructure Delivery

In the recent past the policy focus in India has been on infrastructure investment asthe growth of the economy in general and the manufacturing sector in particular is largelydependent on creation of suitable infrastructure. Such investment has increased manifoldover time with increased private-sector participation in the country. The Twelfth FiveYear Plan has also laid special emphasis on infrastructure development as qualityinfrastructure is important not only for sustaining high growth but also ensuring that thegrowth is inclusive. Large infrastructure investment during the last decade or so hashelped India emerge as one of the fastest growing economies in the world.

However, over the past few years, need has been felt to kick-start stalledinfrastructure projects by stepping up infrastructure investment, improving theproductivity and quality of infrastructure spending, removing procedural bottlenecks, andimproving governance. In the current perspective, the real challenge is not only toidentify a core set of projects that are crucial for accelerating overall economic growthbut also to ensure channelization of investment for such viable infrastructure projectsand expedite their implementation by addressing issues like delays in regulatoryapprovals, land acquisition and rehabilitation in fast-track mode.

ECONOMIC AND INDUSTRY OVERVIEW

After achieving unprecedented growth of over 9 per cent for three successive yearsbetween 2005-06 and 2007-08 and recovering swiftly from the global financial crisis of2008-09, the Indian economy has been going through challenging times that culminated inlower than 5 per cent growth of GDP at factor cost at constant prices for two consecutiveyears, i.e. 2012-13 and 2013- 14. Sub-5 per cent GDP growth for two years in successionwas last witnessed a quarter of a century ago in 1986-87 and 1987-88.

Persistent uncertainty in the global outlook, caused by the crisis in the Euro area andgeneral slowdown in the globaleconomy, compounded by domestic structural constraints andinflationary pressures, resulted in a protracted slowdown. The slowdown is broadly in syncwith trends in other emerging economies, but relatively deeper. India's growth declinedfrom an average of 8.3 per cent per annum during 2004-05 to 2011-12 to an average of 4.6per cent in 2012-13 and 2013-14. Average growth in the emerging markets and developingeconomies including China declined from 6.8 per cent to 4.9 per cent in this period(calendar-year basis).

Availability of quality infrastructure is key for the growth of industry and servicesFrom the infrastructure development perspective, while important issues like delays inregulatory approvals, problems in land acquisition and rehabilitation, and environmentalclearances need immediate attention, time overruns in the implementation of projectscontinue to be one of the main reasons for underachievement in many of the infrastructuresectors. According to the Ministry of Statistics and Programme Implementation (MOSPI)Flash Report for February 2014, of 239 central-sector infrastructure projects costing Rs.1000 crore and above, 99 are delayed with respect to the latest schedule and 11 havereported additional delays with respect to the date of completion reported in the previousmonth.

The total original cost of implementation of these 239 projects was about Rs. 7,39,882crore and their anticipated completion cost is likely to be Rs. 8,97,684 crore, implyingan overall cost overrun of Rs. 1,57,802 crore (21.3 per cent of the original cost). Theexpenditure incurred on these projects till February 2014 was Rs. 4,10,684 crore, which is45.7 per cent of the total anticipated cost.

Major sector-wise performance of core industries and infrastructure services during2013-14 shows a mixed trend. While the growth in production of power and fertilizers wascomparatively higher than in 2012-13, coal, steel, cement, and refinery production postedcomparatively lower growth. Crude oil and natural gas production declined during 2013-14.Among infrastructure services, growth in freight traffic by railways and cargo handled bymajor ports and the civil aviation sector (except import cargo) has been comparativelyhigher during 2013-14. In the road sector the National Highways Authority of India (NHAI)posted negative growth of 33 per cent during 2013-14 as compared to the 26.5 per centgrowth during 2012-13.

However, now with politically stable government at the Centre, it is widely believedthat the entire economy will turn around in the days to come.

OPPORTUNITIES

The Twelfth Five Year Plan lays special emphasis on development of the infrastructuresector as an imperative for sustaining high growth and also ensuring that the growth isinclusive. According to the Twelfth Plan projections, during the Plan period, i.e.2012-17, an investment of US$ 1 trillion is required in the infrastructure sector inIndia. About half of this is expected to come from the private sector. Sluggish growth& development of economy created in the Era of previous government is expected togarner pace with the arrival of pro-reform & developmental agenda of new government.Initiatives already taken by the government like, expediting projects under the NHDPthrough new mechanism, streamlining environmental clearances for projects, changes in FDIpolicy regime to attract high inflow of FDI into infra, give a positive impetus &opportunity for growth in our infrastructure segment.

Recent Initiatives for Development of the Infrastructure Sector in India:

(1) Harmonized Master List of Infrastructure Sub-sectors:

To resolve the issue of uniform definition of infrastructure, a Harmonized Master listof Infrastructure Sub-sectors has been drawn up and published in the Gazette of Indiadated 7 October 2013. An institutional mechanism has been set up under the chairmanship ofthe Secretary, Department of Economic Affairs, with representation from the PlanningCommission, Department of Revenue, Reserve Bank of India (RBI), Securities and ExchangeBoard of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Pension FundRegulatory and Development Authority (PFRDA), and concerned ministry for updating themaster list and revisiting the sub-sectors outside the master list on the basis ofwell-defined principles.

(2) Infrastructure Financing:

(i) The Cabinet Committee on Investment (CCI), cleared 303 projects with aggregateinvestment of Rs. 6,95,437 crore up to end February 2014.

(ii) Infrastructure Debt Fund: The government has conceptualized Infrastructure DebtFunds (IDF) for sourcing long-termdebt for infrastructure projects. Potential investorsunder IDFs may include off-shore institutional investors, off-shore High Net-worthIndividuals (HNIs), and other institutional investors (insurance funds, pension funds,sovereign wealthfunds, etc.). An IDF can be set up either as a trust or as a Non-BankingFinancial Company (NBFC). The income of IDFshas been exempted from income tax. So far, twoIDF-NBFCs and five IDF-Mutual Funds (MFs) have been operationalized.

(iii) Tax-free Bonds: The government has attempted to broaden the corporate bond marketby according tax-freestatus to infrastructure bonds for addressing the specific needs ofinfrastructure deficit, especially in sectors such asroads, ports, airports, and power,which are essential for economic growth in any country. During financial year2013-14, thegovernment has allowed issue of tax-free bonds amounting to Rs. 50,000 crore, to CentralPublic Sector Undertakings (CPSUs), for a period of 10, 15, and 20 years.

(iv) Municipal Borrowing: With a view to deepening the bond markets for infrastructurefinance, draft guidelines/framework has been prepared for issuance of municipal bonds inIndia.

(3) Public-Private Partnership Initiatives in India

The Government of India is promoting Public-Private Partnerships (PPP) as an effectivetool for bringing private-sector efficiencies in creation of economic and socialinfrastructure assets and for delivery of quality public services. By end March 2014 therewere over 1300 projects in the infrastructure sector with a Total Project Cost (TPC) ofRs. 6,94,040 crore. These projects are at different stages of implementation, i.e.bidding, construction, and operational.

SECTORIAL DEVELOPMENTS

Major sectors pertaining to infrastructure include roads, aviation, energy andrailways. Some of the recent developments relating to these sub-sectors are statedhereafter.

Roads

Roads account for 80 per cent of passenger traffic and 65% freight traffic in India.The annual growth of road network in India is projected at over 12%for passenger trafficand over 15% for cargo traffic. Indian Road Network is divided into National Highways,State Highways/ PWD roads and rural roads. The Indian Government estimates around Rs.1,62,000 Cr plus private investment is required over FY12-FY17 to improve the country'sroad infrastructure.

Of late, financing of road projects has also run into difficulty as leveraged companiesimplementing road projects are unable to raise more debt in the absence of fresh equity.In current market conditions these firms are unable to raise new equity. Exit conditions,therefore, need to be eased in such a manner that promoters can sell equity positionsafter construction, passing on all benefits and responsibilities to entities that step into take over the project. Promoters can then use the equity thus released for newprojects. Further, the toll should have correlation with users' capacity to pay as well asreasonable payback for the financing entities. From the lending institutions' perspective,keeping in view of the asset-liability mismatch issue, there is a need to design newfinancing products so as to avoid undue burden on the developer. Going by internationalpractice, concepts like 'traffic trigger' and're-equilibrium discount' could be examinedto see whether they can be applied to address some of the problems of the Indian roadsector. A 'traffic trigger' clause in the contract implies that if a certain volume ofidentified traffic is reached, the concessionaire is obligated to increase roadwayscapacity in order to maintain a minimum level of service to users. 'The re-equilibriumdiscount' is used to reduce tariff when performance parameters are not being met. A tableof discounts is pre-defined in the contract. The discounts represent the resources thatare not invested as a result of a failure to meet performance parameters.

The National Highways Development Project (NHDP) is planned to be implemented overseven phases. The program envisages an investment outlay of over Rs. 2,40,000 Cr.Currently 33,500 kms are alreadydeveloped or are under implementation with balance 21,000kms are yet to be awarded. Extensive contribution of the private sector is being utilizedfor implementation of NHDP through contracting andPublic Private Partnership (PPP) mode.The procurement process for highway developers/contractors is highly streamlined andconcession agreements and other agreements have been standardized by the government. Theprocesses are oriented towards players with good experience and sound financial strength.Additionally, a lot of states are also actively developing their highways with the hel pof private sector. While the average value of these projects is smaller than the NHDPprojects, they will be substantial and provide a good entry point for those looking todelve into the Indian market.

Sensing a change in the economic scenario of the country and taking into accountfeedback from various developers, the Government is pushing towards a stronger regulatoryregime by setting up of an Independent Regulator specifically for road sector projects inthe country. Revision to the bidding processand documents in view of changing economic andmarket landscape is also underway.

Railways

Indian Railways has the world's fourth largest rail network comprising 115,000 km oftrack over a routeof 65,000 km and 7,500 stations. Indian Railways carried 1,009 mntonnesof Freight Traffic and 8,501mn passengers (more than 23mn daily) in the FY 2012-13. Thereis an estimated annual traffic growth of 4% to 5%. Indian Railways is also the world'ssecond largest employer with a workforce of 1.5 mn. Indian Railways is one of the largestsystems of passenger carriers in the world. However, Passenger services tend to be crosssubsidized in India through freight earnings. Almost 70%of total earnings of IndianRailways come through freight services.

The Indian Railways network has an operating ratio of almost 90%. The Indian Governmenthas recognized existing infrastructure gaps and capacity constraints in the rail system,and as a consequence plans large scale investment over the next five years of around Rs.5,19,000 Cr. of which around 19% is expected to be contributed by the Private Sector.

One major programmes is the Dedicated Freight Corridor project. The project is intendedto decongestthe routes of Delhi-Mumbai and Delhi-Kolkata by building dedicated cargo linesat an estimated cost of Rs. 40,000 Cr. Other initiatives undertaken to attract investmentsinclude the development of rolling stock factories with long-term off take guarantees.Further, City metro systems have come up in India in a big way over the last 10 years.Indian Railways is also looking for private partners to help modernize railway stations toworldclass levels. Further, port connectivity projects are also a focus area of the IndianRailways.

Recently the Government of India has also allowed private sector to set up railconnected freight terminals. Further, the monopoly of Government operated rail system hasbeen loosened by allowing private sector to run their own rakes for containers, freight,automobile etc.

Urban Infrastructure:

Only 30% of Indian population lives in urban areas. As per Government of Indiaestimates, urbanization in Indiais expected to grow at an astonishing rate of 38%.

The Twelfth Five Year Plan document expects 48% of the Plan investment to come fromprivate sources,dependent on several national policy initiatives torestore investorconfidence. To boost urban infrastructure across the country, the Government of India hasinitiated numerous measures and has allocated almost Rs. 12000 Cr. under Jawaharlal NehruNational Urban Renewal Mission. The Government has also launched the Urban InfrastructureDevelopment Scheme for Small and Medium Towns with an outlay of Rs. 6000 Cr. to addressinfrastructure needs of small towns and cities. Additionally, there is are newed pushtowards PPPs in the sector. Delhi-Mumbai Industrial Corridor (DMIC) is anambitiousInfrastructure programme conceptualized with Government of India and aiming at developingnew industrial cities as "Smart Cities" and converging next generationtechnologies across infrastructure sectors. Projects worth investment of Rs. 12,00,000 Cr.have already been approved under DMIC. Success of DMIC has prompted many similar corridorsincluding Bangalore Chennai corridor etc. There are key investment opportunities forprivate firmsin this sector, particularly in the sphere of Solid Waste Management, UrbanTransport, Water management etc. Further, with tier II cities also opting formetrosystems, there is a space for large scale private participation through technologyand equipment supply.

Aviation/Airports

By 2020, passenger traffic at Indian airports is expected to touch US$ 450 million from159.3 million in 2012-13. The travel & tourism industry is predicted to grow 7.9 percent to US$ 270.5 billion in 2023 from US$ 119.4 billion in 2012.

India is the ninth largest civil aviation market in the world and fourth in terms ofdomestic passenger volumes (116.3). The country's civil aviation market is also set tobecome the world's third largest by 2020. Total freight traffic registered a compoundannual growth rate (CAGR) of 6.6 per cent over FY 06-13; it stood at 2.19 million tonnesin FY 13. Domestic freight traffic also increased at a CAGR of 7.1 per cent over FY 06-13while international freight traffic rose 6.2 per cent over the same period. In FY13,domestic freight traffic was 0.78 million tonnes, while international freight traffic wasat 1.41 million tonnes.

The government has done its bit to support the airport sector in the country. It hasfocused on infrastructure as well as liberalised policies. One such policy is, the OpenSky Policy - a concept that calls for the liberalisation of the rules and regulations ofthe international aviation industry (especially commercial aviation) so as to foster afree-market environment for the airline industry. Furthermore, it has constantly providedpolicy sops and encouraged foreign direct investment.

The Indian aviation sector is likely to see investments totaling US$ 12.1 billionduring the Twelfth Five Year Plan. It aims to boost MRO business in India, which iscurrently worth US$ 500 million and is estimated to grow over US$ 1.5 billion by 2020.

Power

In an emerging economy, like our's, experiencing rapid urbanization andindustrialization, is the world's fourth largest energy consumer. However, the country hasalways experienced power demand-supply gap. The peak power deficit for FY 2013 was 8.7%(Source: Central Electricity Authority). This power deficit, coupled with an increasingdemand, provides significant growth opportunities for India's power sector.

In the draft of 12th Five Year Plan, the Planning Commission had recommendeda capacity addition target of 88,537 MW, as compared to the 11th Five YearPlan's actual capacity addition of 54,964 MW. An additional 30,000 MW of renewable energycapacity addition is targeted during the 12th Five Year Plan. Hence, there is an immediateneed to create power transmission infrastructure to support this planned expansion ofgeneration capacity. The transmission line capacity addition plan at 1,07,440 circuit kmsis 54% higher than the 11th Five Year Plan's actual addition of 69,926 circuitkms. The Plan includes a multi-fold increase of 765 KV transmission lines addition, whichrequires a comparatively higher investment. During the 12th Five Year Plan, theCentral Transmission Utility namely Power Grid Corporation of India Limited (PGCIL) plansto invest Rs. 1,00,000 Cr in a phased manner for transmission line systems. These systemsare associated with central sector linked generation, Ultra Mega Power Projects (UMPP),Independent Power Producers (IPP) and grid strengthening.

Besides, Green Energy Corridors, viz.-transmission line system for power evacuationfrom renewable energy generation. PGCILs July 2012 report indicates a necessity of Rs.42,000 Cr. investments to create several transmission line corridors for 40,000 MWrenewable energy generation capacities.

Apart from PGCIL, the State Electricity Boards (SEBs) are also planning investments toexpand the intra-state transmission networks. In some cases, SEB's investments are backedby multilateral funding agencies, like the World Bank, Asian Development Bank (ADB) etc.Private sector participation in the transmission sector is increasing. Till FY 2013, ninetransmission projects had been awarded through competitive bidding processes. TheGovernment is encouraging more private participation, even at the state level. Thesubstation capacity addition projected in 12th Five Year Plan at 2,70,000 MVA is 80%higher, as compared to actual addition (latest estimate) of 1,50,362 MVA during the 11thFive Year Plan. of the total capacities planned, 55% is at 765 KV level.

SEGMENT WISE PERFORMANCE

The Company operates in major infrastructure segments. It regards Business Segments asprimary segments. The Business Segments are in line with AS-17. Segment Wise Performanceof the company is provided in detail under the head Notes to Account forming part ofBalance Sheet of the company.

CHALLENGES & OUTLOOK

While large infrastructure investment during the last decade or so has placed India inthe global league of fast growing economies, concerns have been raised over the past fewyears about stalled infrastructure projects. The ongoing global downturn and slowdown inIndia's Economic growth poses a cause of concern for all business entities operating inIndia. Industry specifically, the contracting and construction markets in our country arecompetitive and require substantial resources and capital investment in equipment,technology and skilled personnel. We are increasingly moving towards larger projects withstringent Pre-qualification requirements where intense competition is expected to continueand may even increase as a result of the entry of foreign construction companies into theIndian market. All this is likely to lead to significant challenges to our maintaininghistorical growth rates and acceptable profit and margins. Our contracts are awarded aftera competitive bidding processes and satisfaction of other prescribed pre-qualificationcriteria.

The need for infrastructure development for economic prosperity and global integrationcannot be overemphasized. Infrastructure sector has suffered from financing and time lagin physical capacity creation and time over-runs. These not only delay availability, butthrough cost overruns raise pricing and affordability issues. Infrastructure costs, asthese are often non-tradable may also affect the competitiveness of economy in long run.The key to global competitiveness of the Indian economy lies in building world classinfrastructure and service delivery at competitive rates. Lack of infrastructure not onlyresults in reduced economic output, it also translates into additional costs in terms oftime, effort, and money for accessing essential services such as health care andeducation. Rapid economic growth in recent years has put enormous pressure on existinginfrastructure, particularly in transport, energy, and communications. Unless it issignificantly improved, infrastructure will continue to be a bottleneck for growth and anobstacle to poverty reduction. In other words, the challenge is to ensure strong,sustainable, and balanced development through integration of economies withenvironmentally sustainable development of infrastructure.

Stepping up infrastructure investment, improving productivity and quality ofinfrastructure spending, removing procedural bottlenecks, improving governance, and aboveall maintaining consistency in government's infrastructure policies are some issues thatneed to be urgently addressed in this context. From a broader perspective, a high level ofinvestment in the infrastructure sector is essential for the overall revival of investmentclimate which may finally lead to sustainable growth in an economy. However, in thecurrent macroeconomic environment, to achieve this objective, there is need to addresssector-specific issues over the medium to long-term horizon in India.

RISK, CONCERNS AND THREATS

Infrastructure projects take a long time to plan and implement. Delays in the executionof projects not only lead to shortfalls in achieving targets but widen the availabilitygaps. Time overruns in the implementation of projects continue to be one of the mainreasons for underachievement in many infrastructure sectors. Delays in land acquisition,municipal permission, supply of materials, award of work, operational issues, etc.continued to drag down implementation of these projects. A large number of majorcentral-sector projects are delayed with respect to their latest scheduled dates ofcompletion.

Our exposure to BOT Projects, particularly in the area of Road and Transportationwherein revenues from toll-based projects are a function of actual traffic volume, hasincreasingly led to additional risks associated with such projects, including trafficvolume risks, availability risks and financial closure risks. Adverse deviations betweenactual traffic volumes from projected volumes, delays in completion of related projectscomponents or failure to achieve a financial closure could result in significant loss ofrevenue.

Of late, financing of road projects has also run into difficulty as leveraged companiesimplementing road projects are unable to raise more debt in the absence of fresh equity.In current market conditions, these firms are unable to raise new equity. Exit route needsto be eased so that promoters can sell equity positions after construction, passing on allbenefits and responsibilities to entities that step in. Promoters can then use the equitythus released for new projects. Steps are also needed to up-scale projects in PPP mode forachieving the targets envisaged for the development of roads in the Twelfth Plan.

INTERNAL CONTROL SYSTEMS

Company has a proper and adequate internal control procedures & systemscommensurate with the nature and size of its business. The Company's internal controlsystem primarily covers aspects such as:

1. Operating parameters and various factors relating to production.

2. Efficient use and protection of resources.

3. Accuracy and Promptness of financial reporting.

4. Compliance of laws and regulations.

5. An effective MIS & ERP system.

Company has a well-defined organizational structure, well documented policies,guidelines and clearly defined authority levels. RISK MANAGEMENT

The assets of your Company are adequately secured/ covered under appropriate policiesand your management reviews it from time to time.

FINANCIAL PERFORMANCE

(Operational Results 2013-14 vs 2012-13) (Rs. in Lacs)
Particulars 2013-14 2012-13
Total Income 268,964.30 470,181.37
Interest & Financial Charges 69,637.31 54,946.94
Expenses 236,860.11 378,061.85
Depreciation 13,073.95 11,041.39
Total Expenditure 319,571.37 444,050.18
Profit Before Tax & Extraordinary Items -50,607.07 26,131.19
Extraordinary Items 26,700.64 2,354.68
Profit Before Tax (PBT) -77,307.71 23,776.51
Provision for Tax -26,922.06 6,949.06
Profit After Tax (PAT) -50,385.65 16,827.45
Equity Capital 3,636.55 3,636.55
Reserve & Surplus 142,009.49 191,549.84
Earnings per Share (After extraordinary items):
Basic -27.71 9.25
Diluted -27.71 9.25

Your company had to face challenging environment in FY 13-14. The turnover of theCompany for the year ended 31st March, 2014, reported at Rs. 2,68,964.30 lacsfrom Rs. 4,70,181.37 lacs in the previous year.

Loss before depreciation and taxation was Rs. 37,533.12 lacs and after providing Rs.13,073.95 lacs towards depreciation, Extra-Ordinary Item on account of Foreign CurrencyTranslation Loss of Rs. 26,700.64 lacs and deferred tax of 26,922.06) lacs towards tax,the net loss amounts to Rs. 50,385.65 lacs.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

During the year, the company has focused at consolidating the work culture embodyingvalues and ways of doing things that may exert sharpening influence on the individual'sefforts towards excellence and fulfillment of Organization's vision. Efforts have alsobeen made to integrate the needs and aspirations of the employees into strategicobjectives and mission of the Organization; and to proactively deal with the issues asmovement to develop Organizational capabilities to manage change and Challenge. Theunderlying HR philosophy based on its belief in limitless potential of human beings, trustin their basic integrity and respect for their dignity led to creation of work climate inthe company where employees experience a sense of involvement and belongingness; whereemployees find fulfillment in work and seek newer horizons for self-development andorganizational growth.

There has been complete Industrial peace and harmony across the Organization during theyear.

In order to cope up with manpower requirement on account of diversification andexpansion of business activities, the company has further strengthened its Engineering,Marketing, Commercial and Operational cadres. Today we have a strong complement of about2000 quality manpower on the rolls of the company. Their matchless competencies andexpertise are the backbone of the company.

The process of human resource management which has moved from strength to strength overthe years has been further augmented, inter alia, through following initiatives:-

1. In order to keep the employees of the company abreast of latest knowledge in theirrespective field of specialization, the company had deputed a good number of employees,both to external and In house training programs; and professional Seminars.

2. Quality management systems (QMS) have been steered across the Organization in orderto strengthen initiative and commitment of the employees in continuous improvement. Numberof seminars and conferences have been organized to generate quality awareness andcommitment amongst every employee segment. In collaboration with prestigious clients likeDelhi Metro Rail Corporation (DMRC) a good number of client specific/ Job specific Qualityconformance programs have also been organized.

3. The induction of fresh graduate engineers in multi-disciplines under the schemenamed as 'UDAAN", launched in the year 2011 proved as an asset in meeting out thegrowing requirements of specialized manpower and also in providing for replacementsagainst normal attritions. Through UDAAN-3 in 2013 & UDAAN-4 in 2014, a large numberof fresh Engineering talents have been hired from the best Engineering Institutions of theCountry, thereby strengthening the pool of highly skilled, specialized and motivated manpower of the company.

4. In order to achieve and maintain lean and cost effective organization structure atall the levels of the company operations, system of periodical review adopted continues tobe applied in the organization under the direct supervision of the Chairman