patel engineering ltd Management discussions

Global Economic Outlook

Uncertain growth, persistent in_ation and _nancial turmoil governs the World Outlook.

The July 2023 World Economic Outlook Update anticipates a moderation in global growth to 3.0 percent in both 2023 and 2024. However, this forecast indicates a notable rebound from the challenges faced during the pandemic.

Inflationary pressures are expected to ease gradually, with global headline inflation set to decline from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. This decline is primarily attributed to lower commodity prices. However, underlying (core) inflation is projected to decrease at a slower pace, delaying its return to target levels until around 2025 in most cases.

Chinas recent reopening has paved the way for a faster-than-anticipated recovery, but global inflation is still expected to remain above pre-pandemic levels, with a forecast of 6.6 percent in 2023 and 4.3 percent in 2024.

Initiatives such as the Connecting Europe Facility and the UKs National Infrastructure Strategy aim to boost growth through infrastructure investments. In North America, stimulus bills totalling $1.6 trillion will support the expansion of infrastructure.

Developed economies have strong labour markets, leading to robust household spending. Record-high employment rates and narrowing gender gaps are positive indicators.

Overall, the global economy shows uncertain recovery, persistent inflation, and intermittent financial turmoil.

(Source:https://www.imf.org/en/Publications/WEO/ Issues/2023/04/11/world-economic-outlook-april-2023)

Indian Economic Outlook

Infrastructure Development Driving Recovery of Growth

Indias economic growth in 2023 and beyond will be significantly influenced by strides made in key sectors, with infrastructure development playing a catalytic role in this progress.

S&P Global Ratings predicts that Indias GDP will grow by 8% over the next three fiscal years - the fastest-growing major economy of the world.

Infrastructure is a vital enabler in Indias journey towards becoming a $5 trillion economy. Investments in physical infrastructure, coupled with initiatives to improve the ease of doing business, are essential for enhancing efficiency and reducing costs. Prime Minister Mr. Narendra Modi has emphasized the importance of infrastructure as a fundamental pillar for ensuring sustainable growth across sectors.

The government has demonstrated a strong focus on building future-ready infrastructure through initiatives such as the $1.3 trillion national master plan for infrastructure, Gati Shakti. This plan has already made significant progress in implementing systemic and effective reforms in the sector.

To achieve the said goal by 2025, infrastructure development is critical. The National Infrastructure Pipeline (NIP), along with initiatives like "Make in India" and the production-linked incentives (PLI) scheme, are driving growth in the infrastructure sector. Historically, transportation, electricity, and water & irrigation sectors have received more than 80% of the countrys infrastructure spending.

Furthermore, Indias infrastructure development has attracted international attention for foreign investment. For instance, Saudi Arabia plans to invest up to $100 billion in sectors such as energy, petrochemicals, refinery, infrastructure, agriculture, minerals, and mining.

(Source: https://www.ibef.org/industry/infrastructure-sector-india )

Union Budget Highlights for Infrastructure Sector

The Budget 2023-24 sets forth a comprehensive vision for a prosperous and inclusive India, emphasizing the crucial role of the infrastructure sector in achieving sustainable growth during the Amrit Kaal era. Capital outlay for infrastructure is being increased by 33% to 10 trillion (US$ 122 billion), equivalent to 3.3% of GDP in FY24. If grants-in-aid to states for creation of capital assets are included, effective capital expenditures will be 13.7 trillion – a historic high so far.

(Source: Union Budget 2023-24)

The budget prioritizes last and first mile connectivity, with a significant allocation for railways, further development of regional airports, and transportation infrastructure projects. The proposal to provide viability gap funding for battery storage, renewable energy evacuation, and the green credit program reflects a strong commitment to support green growth initiatives.

The government continues to focus on the Public-Private Partnership (PPP) model to promote energy-efficient and cost-effective coastal shipping as a mode of transport. The introduction of the Urban Infrastructure Development Fund aims to facilitate the development of urban infrastructure, enhancing the quality of life in Tier 2 and Tier 3 cities.

Overall, the budget proposals aim to foster domestic consumption, employment, and skill development, particularly for the digital India initiative. While the power sector did not receive specific tax incentives or capital expenditure-linked deductions, policy announcements such as the green hydrogen mission, green credit program, and support for renewable energy evacuation and battery storage systems through viability gap funding are designed to drive the green industrial and economic transition.

The Budget 2023 signifies a continuation of growth and lays the foundation for a digitally driven economy, with a strong focus on sustainable infrastructure development and the transition towards a greener future.

(Source: https://www.ibef.org/industry/infrastructure-sector-india) (Source: https://www.ey.com/en_in/tax/union-budget-2023 )

Infrastructure Sector Outlook in India

Hydropower

Hydropower in India holds the position of being the third-largest source of electricity, accounting for 11% of the countrys total installed capacity, following coal (50%) and other renewable sources (30%). With 211 large hydro projects in operation and a cumulative installed capacity of 46.8 GW, India is actively pursuing 41 additional hydroelectric projects, totalling 17 GW, including 30 projects in the Himalayan region.

India recognizes hydropower as a renewable energy source and considers it instrumental in transitioning away from coal, as it helps manage the intermittency of solar and wind power.

In a bid to meet the rising power demand, India recently approved its largest-ever hydropower project in the northeastern region bordering China, aiming to boost renewable energy generation. The Ministry of New and Renewable Energy (MNRE) oversees the development of Small Hydro Power (SHP) projects, which serve remote areas in a decentralized manner, provide employment opportunities, and contribute to the renewable energy sector. Currently, 4,935.65 MW has been achieved through the implementation of 1,167 SHP projects, with an estimated potential of 21,133.61 MW across approximately 7,133 identified sites.

NHPC Ltd, a state-run hydropower company, will soon conduct trial runs for Subansiri Lower project, a crucial step in Indias energy transition. By the end of 2024, all eight units of the project are expected to be commissioned. The governments efforts to promote hydropower include granting clean energy status to large dams, making it mandatory for power distributors to prioritize purchasing hydropower over fossil fuel-generated electricity. Additionally, the government provides budgetary support for civil construction and flood moderation work to further incentivize hydropower development.

The National Hydrology Project (NHP), supported by the World Bank, aims to establish a comprehensive system for acquiring, storing, collating, and managing water resources data across India. With 48 implementing agencies involved, including central government bodies, river basin organizations, and state governments, the NHP facilitates informed decision-making for water resources assessment, planning, and management. The project, spanning from 2016-17 to 2023-24, has an approved outlay of 3,679.77 crore as a central sector scheme, providing 100% grant to state governments and central implementing agencies.

These initiatives showcase Indias commitment to harnessing hydropower and managing water resources effectively, contributing to its renewable energy targets and reducing dependence on conventional power generation.

As per the Reassessment Study carried out by the Central Electricity Authority (CEA) during 1978-1987, the assessed hydro power potential in the country is about 1,45,320 MW (for projects with capacity above 25 MW). Presently, 42,104.6 MW (29%) out of 1,45,320 MW has been developed and 15,023.5 MW (10.3%) is under construction.

Status of Top 5 Hydro Electric Power Potential and Development (above 25 MW, as on 28.02.23)

Region/ State	Identified Capacity (reassessment study)	Capacity in operation		Capacity under construction
	(MW)	(MW)	%	(MW)	(%)
Arunachal Pradesh	50,064	1,115	2	4,880	10
Himachal Pradesh	18,470	10,263	56	2,490	14
Uttarakhand	17,998	3,975	22	1,571	9
Jammu & Kashmir	11,567	3,360	29	3,099	27
Karnataka	6,459	3,689	57	0	0

The annual growth in renewable generation (Including Hydro) (%) during recent years is as under:

(Source: Ministry of New and Renewable Energy FY23 Annual Report)

(https://www.business-standard.com/economy/news/india-gears-up-to-start-mega-hydropower-project-near-china-border-123061300291_1.html)

Irrigation

The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), launched on 1st July 2015 with the motto "Har Khet Ko Paani," aims to expand cultivated areas with assured irrigation, improve water use efficiency, and reduce water wastage. It focuses on creating sources for irrigation and harnessing rainwater at the micro level through "Jal Sanchay" and "Jal Sinchan," promoting micro irrigation for increased crop productivity. Under the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) for 2021-26 there has been an outlay allocation of 93,068 Crore which would benefit about 22 lakh farmers.

The objectives of PMKSY include achieving convergence of investments in irrigation, enhancing access to water on farms, improving water use efficiency, promoting precision irrigation technologies, and ensuring integrated development of rainfed areas. An outlay of 23,918 crore has been approved for PMKSY-AIBP and CAD&WM projects, with the aim of completing ongoing projects and providing financial assistance for new major and medium irrigation projects.

The Jal Jeevan Mission focuses on providing safe and adequate drinking water through tap connections to all rural households by 2024. It emphasizes source sustainability, water conservation, and community participation. States/Union Territories have presented their focus areas, such as grey water management, capacity building of Panchayats, water service delivery, and multi-village schemes, to address water-related challenges and ensure "Har Ghar Jal" for all households.

The Jal Jeevan Mission and PMKSY are integral parts of Indias efforts to enhance water resource management, improve irrigation, and provide access to clean drinking water, thereby supporting sustainable agricultural practices and rural development.

(Source: https://jaljeevanmission.gov.in/)

Department of Water Resources FY23 Annual Report

Tunnel

In recent years, tunnelling activity in India has witnessed significant acceleration driven by various growth factors. Government support, adoption of advanced technologies, and initiatives to enhance rural connectivity have played a crucial role. The Gati Shakti Master Plan, a government initiative aimed at fast-tracking Indias development, is set to boost the Countrys infrastructure capabilities, including the tunnelling sector.

The development of tunnels in India primarily stems from investments in sectors like metro rail, railways, roads and highways, hydropower, underground crude oil storage, and water and sewerage. India Infrastructure Research estimates that there is a promising pipeline of over 800 tunnels, spanning approximately 2,700 km across various sectors. The construction of these tunnels is anticipated to require an investment of over 5 trillion in the coming years.

Indian and foreign joint ventures are expected to remain interested in bidding for tunnel construction projects, with new players likely to enter the market. However, addressing critical issues such as delays in land acquisition, contractual challenges, and the shortage of skilled manpower is essential to ensure timely and efficient project implementation.

Source:https://indianinfrastructure.com/2022/09/06/growth-passage/

Road

Indias highways sector has witnessed remarkable growth and innovation, contributing significantly to the countrys transportation infrastructure. Despite the challenges posed by the pandemic, the construction of highways remained resilient, with an impressive 10,457 km added in FY22 alone. National highways, constituting a mere 2% of the road network, bear the burden of over 40% of the total traffic.

The market outlook for the highways sector is highly favourable, with a projected compound annual growth rate (CAGR) of 36.16% between 2016 and 2025. This growth trajectory has been facilitated by the governments effective implementation of the Hybrid Annuity Model (HAM), which has attracted private investment and fostered robust public-private partnerships (PPPs) in the sector.

Driven by attractive opportunities, strong demand, policy support, and increased investment, the government has set an ambitious target of constructing 65,000 km of national highways at a cost of

60,75,64,20,000 million. (US$ 741.51 billion). This commitment is evident in the significant allocation of funds, such as 27,00,000 million (US$ 33 billion) in the Union Budget 2023-24, underscoring the governments unwavering focus on road development.

Indias highways sector continues to thrive through various ongoing projects and initiatives, showcasing sustained growth and unlocking immense potential for future progress.

(Source: https://www.ibef.org/industry/roads-india)

Urban Infrastructure

India currently has the fifth-largest metro network in the world and will soon overtake advanced economies such as Japan and South Korea to become the third-largest network. Metro rail network reached 810 kms and is operational in 20 cities as of September 2022. At almost 20 kms, Mumbai monorail is the third largest route in the world after China with 98 kms and Japan with 28 kms.

As a result of digitalization and opportunities that tier II and III cities present for economic growth, the divide between metro and non-metros is blurring, moving to a new era of infrastructure growth. Commercial real estate properties have witnessed exponential growth in demand across Tier II & III cities as Information technology and Information technology enabled services and banking financial services and insurance focused organizations are increasingly decentralizing their operations to adapt to the new normal.

220 destinations (airports/heliports/water aerodromes) under UDAN are targeted to be completed by 2026 with 1000 routes to provide air connectivity to unconnected destinations in India.

Indias real estate market is undergoing significant growth, with projections indicating its market size will reach 6,50,000 million (US$ 9.30 billion) by 2040, compared to 1,20,000 million (US$ 1.72 billion) in 2019. By 2030, the sector is expected to reach a market size of US$ 1 trillion, contributing 13% to Indias GDP by 2025. This growth extends beyond residential real estate to sectors like retail, hospitality, and commercial real estate. Foreign investments have been substantial, totaling US$ 10.3 billion in the commercial real estate sector from 2017-2021. The industrys positive outlook and evolving dynamics make it an attractive investment opportunity for both domestic and international investors.

(Source: https://www.ibef.org/industry/real-estate-india)

Patel Engineering (PEL) Development

Financial Performance:

Revenues from operations of the Company for FY23 increased by almost 25.98% to 38,171.26 million as compared to 30,298.46 million in FY22 on a standalone basis. On a consolidated basis, revenue increased by 24.31% to 42,019.71 million from

33,803.05 million during the same period.

For FY23, standalone operating EBITDA stood at 5,404.78 million against 4,575.35 million - growth of 18.13% and on a consolidated basis operating EBITDA stood at 6,248.76 million against 5,277.32 million - growth of 18.41%.

For FY23, standalone Net Profit increased by 176.38% to 1,558.53 million as compared to 563.91 million and on a consolidated basis Net Profit increased by 181.43% to 1,548.06 million as compared to 550.06 million in FY22.

Hydro Power business contributed 53% amounting to 20,103.87 million.

Tunnel business contributed 20% amounting to 7,506.10 million.

Irrigation business contributed 15% amounting to 5,814.92 million.

Road business contributed 7% amounting to 2,666.60 million. The balance contribution of 5% amounting to 2,079.77 million came from other segments which include urban infrastructure, real estate, etc.

In FY23, the company successfully completed its Rights Issue of 3,250 million which was fully subscribed.

In FY23, the Company has managed to sell a few land parcels located in Telangana and has generated cashflows of around 670 million. The amount received has been utilized towards prepayment of term loan and NCDs. The Company has also realized 1,570 million during Q4 FY23 from arbitration awards against BGs which again has been utilized for reduction of debt.

The Company has reduced its debt by 5,094.85 million in FY23 from 22,616.13 million as on March 31, 2022 to 17,521.28 million on a consolidated basis as on March 31, 2023 through monetization of non-core assets, surplus from projects and partly from Rights Issue proceeds.

The Company is focused and committed to reducing and improving the debt position and would continue the plan to monetize non-core assets through sale of Land, non-core investments and realization of arbitration claims/awards in the future as well and continue to reduce the debt and improve the profitability further and unlock shareholder value.

Based on the improvements in the financial performance along with the promising executional outlook of the Company, the rating of the Company has improved to BBB+.

Risks and concerns.

Internal Risk Factors:

Our business heavily relies on government contracts, making us vulnerable to potential policy changes. This introduces uncertainty and challenges that need careful management. Additionally, delays, modifications, or cancellations of projects can have a significant impact on our business, affecting our order book and future projects. These factors have the potential to materially and adversely affect our results of operations and financial condition.

External Risk Factors:

Prevailing economic, political, and market conditions can lead to a slowdown in the Indian economy, negatively impacting our business, financial performance, and operations. Communicable diseases like COVID-19 and natural calamities pose a significant risk to the Indian economy, which in turn can have adverse effects on our business. Moreover, a potential downgrade in Indias debt rating by rating agencies can have adverse implications for our business operations and financial performance.

Operations Review

The Company expects to continue to focus on enhancing execution capabilities and optimizing resources and to leverage our experience in the hydro-power projects, irrigation, tunnelling and urban infrastructure segments and to bid for projects in which the Government is investing funds.

Business Development

The Order Book position improved to 2,08,067 million (including orders declared lowest bidder – L1) as on March 31, 2023 from 1,50,110 million as on March 31, 2022.

Order Book

Hydropower:

The Indian government has granted approval for the Dibang multi-purpose project, which stands as the countrys largest-ever hydropower undertaking. Set amidst the scenic mountains of the Northeastern region, specifically in Arunachal Pradesh, this project boasts a capacity of 2,880 MW and will be developed by NHPC Limited. Our organization has recently secured the L1 position for a portion of this project, which will be implemented in a phased manner. The hydropower and tunneling sectors hold immense potential, with a staggering value of over 8,00,000 million in upcoming projects within the next few years.

Our Order Book comprises of 18 Hydropower projects valued at

1,25,119 million including following orders received in FY 2022-23.

• Dibang Multipurpose Project. Project Location: Arunachal Pradesh. Client: NHPC Limited. Contract Value: 36,371 million. Our share – 18,185 million. (50% share in JV). Remarks: LOA awaited

• Kwar Hydroelectric Project. Project Location: District Kishtwar,

Jammu & Kashmir. Client: CVPP [Chenab Valley Power Projects (P) Ltd], a Joint Venture of NHPC (51%) & JKSPDC (49%) Contract Value: 24,610 million.

• Sunkoshi Marin Diversion Multipurpose Project. Project Location: District Sindhuli, Nepal. Client: Department of Water Resources and Irrigation, Ministry of Energy, Government of Nepal. Contract Value: 8,797 million. Our share – 3,079 million. (35% share in JV).

Irrigation:

The Company has successfully improved its presence in the micro irrigation sector and secured multiple orders in Q4 FY23. This sector plays a crucial role in the last leg of irrigation projects, delivering water to villages through pipelines and canals. There is tremendous potential in this segment, especially for villages located far from rivers. Our expansion in micro irrigation allows us to contribute to rural development and meet the essential water needs of these communities.

Under Pradhan Mantri Krishi Sinchayee Yojana for 2021 to 2026, there has been an outlay allocation of 9,30,000 million, which would benefit about 22 lakh farmers. Hence, there is a huge potential of works expected in this segment also.

Our Orderbook comprises of 15 Irrigation projects valued at 44,231 million which includes following orders received in FY 2022-23.

• Rihand Micro Irrigation Project. Project Location: Madhya Pradesh. Client: Department of Water Resources, Madhya Pradesh. Contract Value: 6,400 million. Our share – 5,120 million (80% share in JV)

• Tumkur Branch Canal – Package III. Project Location: Karnataka Client: Visvesvaraya Jala Nigama Limited. Contract Value:

3,111 million., Our share – 1,586 million. (51% share in JV).

• Tumkur Branch Canal – Package V. Project Location: Karnataka. Client: Visvesvaraya Jala Nigama Limited (VJNL). Contract Value: 5,511 million. Our share – 2,810 million. (51% share in JV).

• Sher Irrigation Project. Project Location: Madhya Pradesh. Client: Department of Water Resources, Madhya Pradesh. Contract Value: 9,987 million., Our share – 3,495 million. (35% share in JV) Remarks: Converted to LOA in Q1 FY24.

• Krishna Marathwada Irrigation Project - Scheme 1. Project Location: Maharashtra. Client: Water Resources Department, Government of Maharashtra. Contract Value: 5,920 million. Our share – 3,021 million (51% share in JV) Remarks: Converted to LOA in Q1 FY24.

• Krishna Marathwada Irrigation Project - Scheme 2. Project Location: Maharashtra. Client: Water Resources Department, Government of Maharashtra. Contract Value: 2,484 million., Our share – 1,490 million. (60% share in JV) Remarks: Converted to LOA in Q1 FY24.

Tunnel:

The growth of the tunnel construction in the country has been driven by a robust pipeline of projects and investments in setting up hydropower projects, developing urban mass rapid transit systems, improving road and rail connectivity, constructing underground crude oil storage, and upgrading water supply and sewerage systems.

Going forward, the overall outlook for tunnel development in the country remains promising. According to India Infrastructure Research, the tunneling sector offers a strong pipeline of over 500 tunnels, spanning a length of around 1,000 km across sectors like roads, railways and metro rail. The sector holds immense promise for contractors, consultants, and technology and equipment providers.

Our Orderbook comprises of 6 Tunnel projects valued at 26,084 which includes following orders received in FY 2022-23:

• PGRW Tunnel Project. Project Location: Mumbai, Maharashtra. Client: MCGM. Contract Value: 4,200 million.

• Kohima Tunnel Project. Project Location: Nagaland. Client: NF Railway Construction, Guwahati. Contract Value: 8,230 million., Our share – 4,200 million. (51% share in JV).

• CIDCO – Water Tunnel Project. Project Location: Maharashtra Client: City and Industrial Development Corporation ("CIDCO"). Contract Value: 5,558 million. Remarks: Converted to LOA in Q1 FY24.

Road:

Under the Union Budget 2023-24, the Government of India has allocated 27,00,000 million (US$ 33 billion) to the Ministry of Road Transport and Highways. As a company operating in the road infrastructure development sector, it has played a significant role in this domain by successfully constructing over 12,000 kilometers of roads.

Our Orderbook comprises of 5 Road projects valued at 8,698 million

Others:

As per a recent report release by the World Bank, by 2036, 600 million people will be living in urban cities in India, representing 40% of the population. India will need to invest USD 840 billion over the next 15 years into urban infrastructure if it is to effectively meet the needs of its fast-growing urban population.

Currently, the central and state governments finance over 75% of city infrastructure, while Urban Local Bodies (ULB) finance 15% through their own surplus revenues.

Only 5% of the infrastructure needs of Indian cities are currently being financed through private sources.

Our Orderbook comprises of 5 projects in this segment valued at 3,935 million

Projects Update

Following are some key projects under execution by the Company, apart from the new projects received as detailed above.

Hydro Power & Tunneling

• Subansiri HEP (2,000 MW)

• Kiru HEP (624 MW)

• Luhri HE Project (210 MW)

• Arun-III HE Project (900 MW)

• Teesta HEP (500 MW)

• Kwar HEP (540 MW)

• IRCON T15 (Railway Tunnel)

Irrigation

• Sleemanabad Carrier Canal

• Morand & Ganjal Dam

• Khalwa Micro Lift Irrigation

• Jigaon Lift Irrigation

• Parbati Irrigation Project

Roads

• Shivane to Mhatre bridge

• Selapass Road and Tunnel

• Katraj Kondwa Road

• Up-gradation - Pimpla junction.

• Construction of New BG Line – Yevatmal for RVNL

Urban Infrastructure

• Amarmahal to Trombay Tunnel

• Hindoli - Nainwa Water Supply Project

• RVNL Project

• PGRW Tunnel

In FY23, the Company successfully completed Tunnel T-2 project in Indias Udhampur-Srinagar-Baramula Rail Link. Tunnel T-2 project is a double tube tunnel project comprising of 5.1 km Main Tunnel and an Escape Tunnel, both interconnected by Cross Passages at every 375m. The project is crucial in connecting the Kashmir valley with the rest of India, providing all-weather connectivity and facilitating seamless transportation. The total project value on completion was

8,698 Million.

At our Kiru Hydroelectric project, we have made some technological advancements by installing the tower belt system which is a conveyor belt concreting system. The conveyor belt which works on electric power helps transport aggregate from the crushing plant to the batching plant which is generally transported via dumpers covering a distance of around 1.5 - 2 kms and further transporting concrete on the conveyor belt from the batching plant to the dam which is generally done via transit mixers or dumpers. This helps us in reducing diesel consumption and well as saving cost and time.

We remain committed to our core E&C business with hydropower continuing to have a major focus for the next few years, given our expertise and experience in this sector and the Government boost to development the Infrastructure of the Country thus contributing our bit in the best possible way to the betterment of the society and Nation.

Details of Significant Changes in Key Financial Ratios along with explanation:

In compliance with the requirement of listing regulations, the key financial ratios on Consolidated basis have been provided here under:

Ratio	FY23	FY22	Change In %
Debtor Turnover	7.91	6.02	31.40
Inventory Turnover	0.26	0.24	8.33
Interest Coverage Ratio	1.78	1.53	16.34
Current Ratio	1.44	1.41	2.13
Debt to Equity Ratio	0.61	0.95	-35.79
Operating Profit Margin	14.87	15.61	-74 BPS
Net Profit Margin	3.68	1.63	205 BPS
ROE	5.36	2.31	132.29

Note: The explanation for signi_cant change along with reasons has been captured in the notes to _nancial statements.

Asset Ownership:

Hydro Power Projects & Thermal Power Projects - The Company has kept all its plans for development of Asset Ownership Projects on hold and is focusing on E&C Business and is looking to hive off these assets which includes project land of approximately 1,500 acres.

Road BOT – The two annuity road BOT projects, i.e., KNT – 1 & AP – 7 are in operation and maintenance stage. The Company is focusing on realization of arbitration awards against NHAI for the road BOT projects and then may look at hiving off the said assets as well. For the other BOT Project i.e., four-lane highway project on Varanasi-Shaktinagar Road, the toll collection period is presently on. Transmission Asset – Raichur Sholapur Transmission Company Private Limited (RSTCPL), a SPV with Simplex Infrastructures Ltd and

BS Transcomm Ltd. commissioned 765 kV single circuit transmission line between Raichur and Sholapur in July 2014. As a part of Companys strategy to sell non-core assets, the stake in RSTCPL has been sold during the year under review to India Grid Trust by all the shareholders/partners of the SPV and the Company along with the partners of RSTCPL got released the corporate guarantees of approximately 2,400 million given for the loan availed by RSTCPL.

Real Estate:

Large amounts of land that belong to the company are mostly located in or close to the major cities of Mumbai, Hyderabad, Bangalore, and Chennai. These sites are mostly intended for residential construction.

The Company intends to sell these land parcels outright or use Joint Development Agreements (JDA) to monetize them. The Company is nearing completion of its residential project – Smondo Gachibowli located in Hyderabad where all construction activities have been completed and the Company has commenced handing over the possession of the units to the Owners.

CSR Initiatives

Corporate Social Responsibility (CSR) plays a significant role in the development of the Country and the Company recognizes how important CSR initiatives can help improve the lives of individuals and communities. Mahatma Gandhi said that "Wealth created by the society has to be ploughed back into the society". The Company is a staunch advocator of sustainable development and over the years has been working on projects which are aimed towards improvement of infrastructure landscape of the Country. The Company has its CSR policy and frame-work in place and has taken various initiatives to reduce our carbon footprint.

The corpus to be spent by the Company on CSR shall include at least 2% of the average net profits of its India Operations for the preceding three financial years. CSR Policy implementation is periodically reviewed and monitored by a two-tiered Governance Structure consisting of Board and CSR Committee of the Board, and CSR Team consisting of Corporate Office, Project Sites.

In FY 2022-23, Companys Project sites viz USBRL- T2, USBRL – T 15, Luhri Hydro Electric Project, Kiru Hydro Project are the major contributors towards various CSR activities conducted around its respective sites in FY 2022-23. The CSR initiatives of the Company are provided in detail under the Report of CSR forming part of the Boards report.

Internal Control System

The Companys internal control system is sufficient for preventing loss, unlawful use, and disposal of its assets. The management is informed of and given proper authorization for all transactions. The Company maintains its books of accounts and reports financial statements in accordance with all applicable accounting standards. The Company has hired internal auditors to examine several aspects of the Companys operations. Management and the Boards Audit Committee periodically evaluate the audit reports.

Consequent to implementation of Companies Act, 2013 (Act), the Company has complied with the specific requirements in terms of Section 134(5)(e) of the Act calling for establishment and implementation of an Internal Financial Control framework that supports compliance with requirements of the Act in relation to the Directors responsibility statement.

Management Systems

The Companys main emphasis is on performance enhancement in relation to important aspects including resource utilization, quality management, safety measures, environmental protection, human resource development, and design engineering. Customer satisfaction, work effectiveness, and time management are the fundamental tenets.

Integrated Management System (IMS) based on three standards stipulated by ISO 9001:2015 for Quality, ISO 14001:2015 for Environment and OHS 45001:2018 for Health and Safety is judiciously managed and maintained by the Company covering all corners of activities. Execution of projects generates vast number of documents, including contracts, plans, permits, and specifications. We have a document controlling system that helps in organizing, storing, retrieving, and sharing these documents securely. It ensures that the right stakeholders have access to the necessary information at the right time. Quality is of utmost importance in PEL. Our quality management system establishes processes and procedures to ensure that construction of projects meet the required standards and specifications. It includes quality control inspections, documentation of non-conformities, and corrective actions. Our Project sites can be hazardous, so safety management is crucial. A safety management system ensures compliance with safety regulations and promotes a safe working environment. It includes safety policies, hazard identification, risk assessments, safety training, incident reporting, and emergency response procedures.

We conduct safety & environment training programs periodically on all work fronts. Adaptation to protocols relevant to COVID-19 has been of the utmost importance at our operational sites. We have implemented methods of Risk-Based thinking for hazard identification and environment protection at our project sites. This has helped minimize the incident ratio and made the operational ground safe to work on.

We use communication and collaboration systems to facilitate communication among project teams, subcontractors, suppliers, and clients. This includes email systems, project management software, and other collaboration tools. We require efficient management of labour, equipment, and materials. Our resource management system helps in tracking and allocating resources, scheduling equipment usage, managing inventory, and optimizing resource utilization. It ensures that resources are effectively utilized and projects are adequately staffed.

In our management review sessions, we regularly inspect our operations, identify flaws, and provide solutions. This builds a strong system in and around the periphery of the organization.

Information Technology Services

"If you change the way you look at things, the things you look at change." - Wayne Dyer Data has become the most valuable resource. The insights we derive from Data is the fuel for change. PELs Digital Transformation plan to establish digital-first, data-driven talent and culture is a deliberate strategy that is aimed to set a new performance edge for our Company. This strong digital core backed by our design thinking and human-centric approach, to deliver tangible business benefits will enhance our ability to connect the dots and define solutions for key business problems and help in accelerating growth and optimize operations by transforming every part of the business through technology, data, and new ways of working.

In the beginning of the last year we decided to upgrade our existing ERP system with SAP ERP system by the end of financial year. Our goal and focus were to eliminate manual, inefficient processes, reduce unnecessary administrative costs, mitigate risks related to separation of duties (SoD), deploying analytics, mobility and improve project profitability. We accomplished this mammoth task on our set target go-live date of April 17, 2023 in record time and with zero disruption to our business - PEL is now live on the latest offering by SAP namely, ‘RISE with SAP S/4Hana Cloud. PEL is the first hydro power company in India that has gone live on this product, this has been the biggest milestone in our digital transformation journey.

We applaud the massive effort by our PEL engagement team who did a magnificent job. They had the requisite skills and experience to work closely with a range of service providers across multiple areas of the organization — a critical requirement for an enterprise-level project of this size and complexity. A cloud-based network enables collaboration with all project stakeholders including owner, contractor, subcontractors, engineers and architects, facility management, and authorities. Different disciplines are brought together, such as engineering, logistics, project control and service as well as structural, architectural, electrical, into a central system. A collaborative platform is now available to connect business partners across the value chain and establish a single source of truth for the project by providing visibility of contractual clauses and project progress. Enhancing business value with this intelligent enterprise transformation will allow our employees and stakeholders to interact at the construction sites with accurate insights and information in real time, on any device for better visibility into each supplier, vendor, and sub-contractor to track project progress, cost, and margin with greater accuracy.

Today, PEL operates like a Digital Native enterprise because simply investing in digital technologies isnt enough; we believe that digital transformation does not only change individual elements within a business, but connects whats happening at the company with the world outside and fosters new skills enabling a Total Reinvention to keep up to these dynamic times. In the last decade PEL has strived and succeeded in implementing an innovative digital mindset and culture through upskilling and retraining current employees on a constant basis.

Our next challenge is scaling our E-Learning, IoT efforts and a Deep Dive into AI.

Human Resources Department

"Great teamwork is the cornerstone of our breakthrough achievements, defining our strength." Our company, comprising a large and diverse workforce of approximately 4,400 permanent employees, takes pride in attracting, engaging, and retaining top talent within a robust and competitive culture. Our primary objective is to cultivate a positive work environment that fosters employee.

We continuously work towards nurturing talent through comprehensive ‘on the job training and development programs, ensuring that our employees have the skills and support they need to succeed personally and contribute to the organizations goals. Incorporating the principles of transformational leadership, we foster a culture of mentorship and collective growth, empowering us to inspire positive transformations in those around us. This approach is particularly valuable in our dynamic and competitive industry, where we strive for continuous growth and success.

We are committed to creating an inclusive workplace where employees from diverse backgrounds can be their authentic selves, develop their skills, and advance their careers. By promoting diversity and fostering a sense of belonging, we aim to enhance work performance and create a culture of inclusion.

The HR department plays a pivotal role in our overall success, focusing on talent acquisition and nurturing, employee well-being, and process optimization. We actively connect with employees at remote project sites, recognizing the importance of their well-being and engaging in activities that promote their health and happiness. With more than 95% of our workforce located remotely, our HR departments efforts contribute significantly to enhancing employee satisfaction and engagement, ultimately leading to improved performance and productivity.

Furthermore, we continually strive to enhance HR processes and systems, streamlining recruitment, on boarding, performance management, and employee development. By optimizing these processes, we enhance organizational effectiveness and drive positive outcomes for our company.

In summary, our HR department is dedicated to acquiring and nurturing talent, promoting employee well-being, and optimizing processes. Through our collective efforts, we establish a supportive and thriving work environment where employees can excel and contribute to our shared success.

Cautionary Statement

In this Annual Report, the management has disclosed forward-looking information like objectives, estimates and expectations to enable investors to comprehend our prospects and take investment decisions, which may be ‘forward-looking statements within the meaning of applicable laws and regulations. This report and other statements - written and oral that we periodically make, contain forward-looking statements that set out anticipated results based on the managements plans and assumptions. The management has tried wherever possible to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expects, ‘projects, ‘intends, ‘plans, ‘believes, and words of similar substance in connection with any discussion of future performance. The management cannot guarantee that these forward-looking statements will be realized, although we believe we have been prudent in assumptions. The operations of the Company may be affected due to various reasons like changes in political and economic front of the country; fluctuations in exchange rate, tax laws, litigations, labour relations, interest costs and overall scenario of the infrastructure sector. Hence, the achievements of results are subject to risks, uncertainties, and even inaccurate assumptions. Should know or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.