Global economic review
The global economy reported a de-growth of 3.3% in 2020 compared to
2.9% in 2019, the worst contraction since World War II. This sharp decline in global
economic growth was largely due to the outbreak of the novel coronavirus and the
consequent suspension of economic activities due to the pandemic-induced lockdown. This
led to supply chain disruptions across the globe, resulting in the de-growth of some of
the largest global economies.
Global FDI reported a significant decline from USD1.5 trillion in 2019
to USD859 billion in 2020, the lowest since the 1990s and was more than 30% below the
investment trough that followed the 2008-09 global financial meltdown. The collapse of the
global economy had an adverse effect on the informally employed and the contract-intensive
sector. China was the first economy to rebound from the pandemic with a growth of ~3.2% in
the second quarter of 2020. Most European countries including UK, France and Italy
recorded four consecutive quarters of GDP degrowth.
|
2019 |
2020 |
| World output |
(3.3) |
2.9 |
| Advanced economies |
(4.9) |
1.7 |
| Emerging and developing economies |
(2.4) |
3.7 |
(Source: IMF)
Global economic growth over five years
| Year |
2016 |
2017 |
2018 |
2019 |
2020 |
| Real GDP growth (%) |
3.1 |
3.8 |
3.6 |
2.9 |
(3.3) |
(Source: IMF)
Outlook
The global economy is projected to grow by 5.5% in 2021 largely due to
the successful roll-out of vaccines across the globe, coupled with additional policy
support in the large economies. (Source: IMF)
Indian economic overview
The Indian economy passed through one of the volatile periods in living
memory in 2020-21.
At the start of 2020, India was among the five largest global
economies; its economic growth rate was the fastest among major economies (save China);
its population at 1.38 billion was the second largest in the world; its rural population
of the under-consumed was the largest in the world.
The Indian government announced a complete lockdown in public movement
and economic activity from the fourth week of March 2020. As economic activity came to a
grinding halt, the lockdown had a devastating impact on an already-slowing economy as 1.38
billion Indians were required to stay indoors - one of the most stringent lockdowns
enforced in the world.
The outbreak of the novel coronavirus and the consequent suspension of
economic activities due to the pandemic-induced lockdown, coupled with muted consumer
sentiment and investments, had a severe impact on the Indian economy during the first
quarter of the year under review. The Indian economy de-grew 23.9 % in the first quarter
of 2020-21, the sharpest de-growth experienced by the country since the index was
prepared.
The Indian Government announced a bold economic stimulus to combat the
sharp slowdown caused by the lockdown, its various measures aimed at easing liquidity and
credit unavailability faced by the MSME sector to reinvigorate economic activity.
Similarly, various measures targeted at incentivising investments in economic segments and
labour reforms, helped improve sentiment and attract global investments, strengthening
Indias self-reliance for critical needs.
The Indian and state governments selectively lifted controls on
movement, public gatherings and events from June 2020 onwards with each stage of lockdown
relaxation linked to the corresponding economic recovery. Interestingly, as controls
relaxed, what the country observed was a new normal: individuals were encouraged to work
from home; inter-city business travel was replaced by virtual engagement; a greater
premium was placed on the ownership of personal mobility modes (cars and two-wheelers);
there was a sharp increase in home purchase following the need to accommodate an
additional room for home working.
The result is that Indias relief consumption, following the
lifting of social distancing controls, translated into a full-blown economic recovery. A
number of sectors in India – real estate, steel, cement, home building products and
consumer durables, among others - reported unprecedented growth. The Indian economy
de-grew at a relatively improved 7.5 % in the July-September quarter and reported a 0.4 %
growth in the October-December quarter and a 1.6% growth in the last quarter of the year
under review.
The result is that Indias GDP contracted 7.3% during 2020-21,
largely on account of the sharp depreciation of the first two quarters. This sharp Indian
recovery – one of the most decisive among major economies – validated
Indias robust long-term consumption potential.
During FY 2020-21, while the Agricultural sector posted a growth of 3%,
the Industrial sector contracted by (-) 7.4% and the Services sector was hit the hardest
with a decline of (-) 8.4%. As a result, consumption expenditure declined (-) 7.1% while
Gross Fixed Capital Formation contracted (-) 12.4%. A decline in global commodity prices
helped contain inflation, with Consumer Price Index inflation rising 6.2% and Wholesale
Price Index inflation rising 1.2% during the year.
Indian economic reforms and recovery
There were a number of positive features of the Indian economy during
the year under review.
India reported improving Goods and Services Tax (GST) collections
month-on-month in the second half of 2020-21 following the relaxation of the lockdown,
validating the consumption-driven improvement in the economy.
The per capita income was estimated to have declined by 5% from H1.35
Lakh in 2019-20 to H1.27 Lakh in 2020-21, which was considered moderate in view of the
extensive demand destruction in the first two quarters of 2020-21.
The Indian currency strengthened from a level of H76.11 on April 1st,
2020 to a USD to H73.20 as on March 31st, 2021 after peaking at H76.97/ USD on April 21st,
2020 (Source: Poundsterlinglive, exchangerates. org.uk)
Indias foreign exchange reserves continue to be in record setting
mode – FY21 saw USD101.5 billion dollars accretion in reserves, the steepest rise in
foreign exchange reserves in any financial year; Indias forex reserves are ranked
third after Japan and China and can cover more than a years import payments.
India jumped 14 places to 63 in the 2020 World Banks Ease of
Doing Business ranking and was the only country in the emerging market basket that
received positive FPIs of USD23.6 billion in 2020; the country ranked eighth among the
worlds top stock markets with a market capitalisation of USD2.5 trillion in 2020.
The Indian government initiated structural reforms in agriculture,
labour laws and medium-small enterprise segments. The labour reforms were intended to
empower MSMEs to increase employment and enhance labour productivity and wages.
India extended the Partial Credit
Guarantee Scheme by relaxing the criteria and allowing state-owned
lenders more time to purchase liabilities of shadow banks. Under the H45,000-crore partial
credit guarantee scheme, announced as a part of the Atmanirbhar Bharat package, three
additional months were given to banks to purchase the portfolio of non-banking financial
companies.
The government approved amendments to the Essential Commodities Act and
brought an ordinance to allow farmers to sell their crop to anyone; the changes to the
Essential Commodities Act, 1955, were intended to ‘deregulate agricultural
commodities (cereals, pulses, oilseeds, edible oils, onions and potatoes from stock
limits). The government approved the Farming Produce Trade and Commerce (Promotion and
Facilitation) Ordinance, 2020 to ensure barrier-free trade in agriculture produce.
The Government relaxed foreign direct investment (FDI) norms for
sectors like defence, coal mining, contract manufacturing and single-brand retail trading.
The Union Cabinet approved the production-linked incentive (PLI) scheme
for 10 sectors. These incentives could attract outsized investments, catalysing
Indias growth journey.
Outlook
The emergence of the second COVID-19 wave dampened outlook for a strong
projected rebound in real GDP growth of 10.5% in FY 2021-22, which had been supported by a
strong revival achieved in Q4 FY 2020-21 and impact of fiscal stimulus packages under Atma
Nirbhar 2.0 and 3.0 schemes, increased capital outlays and the promotion of investments in
the Union Budget 2021-22.
As a result of the setback caused by the second wave, real GDP growth
for FY 2021-22 may finish lower than expected before India returns to robust growth in FY
2022-23 with a projected 6.8% growth over FY 2021-22. (Source: Financial Express)
Indian infrastructure sector overview
The infrastructure sector is a major growth driver for the Indian
economy. The sector is immensely accountable for propelling Indias overall
development and the government is showing intense focus for formulation and implementation
of policies that would ascertain the creation of world class infrastructure in the
country. The work plan to Indias infrastructure is enthralling and visionary which
keeps a lot of promise for the sector in the coming decade. India aspires to spend USD 1.4
trillion on infrastructure in between 2019-23 for promotion of sustainable development in
the country according to an industry report. This outlines the upward curve of the sector
which is on the rise. As the Covid-19 restrictions were lifted, the infrastructure work
has gained momentum and the national highways are constantly being rehabilitated based on
newer technologies.
According to the Department for Promotion of Industry and Internal
Trade (DPIIT), FDIs in the construction development and construction sector was pegged at
USD 25.78 billion and USD 17.22 billion, respectively, between April 2000 and September
2020. Infrastructure activities accounted for 13% of the total FDI inflows of USD 81.72
billion in FY 2020-21.The country is expected to become the third largest construction
market in the world by 2022. The Government of India has undertaken key measures to
strengthen the economic development of the country and to propel Indias emergence as
an economic powerhouse. It is aiming to eliminate structural and political blockages,
attract increasing investments and revamp the economic performance comprehensively. The
government of India introduced National Infrastructure Pipeline, expected to deepen
infrastructure investments that could catalyse India towards achieving USD 5-trillion in
economic size during this decade. The government allocated H111 Lakh crore (USD 1.5
trillion) to National Infrastructure Pipeline to complete projects by 2025. The National
Infrastructure Pipeline comprises a revised number of 7,400 projects, expected to widen
and deepen the countrys network of roads, railways, social and economic
infrastructure, water, sanitation and power supported by the creation of Development
Finance Institution. This is expected to create outsized road building opportunities in
India across the foreseeable future. The government of India is extremely keen on
developing the infrastructure sector in the country which is validated through numerous
initiatives announced for this sector as part of the Union Budget 2020-21. (Source: IBEF,
Times of India)
Announcements on Union Budget 2020-21
The government has initiated H103 trillion infra projects besides
allocating H1.70 trillion for transport infrastructure and speed up highways construction.
The government has already provided H22,000 crore as support to
Infrastructure Pipeline prior to the budget announcements of FY 2020-21 The government
plans to accelerate the development of highways including development of 2,500-kilometers
access control highways, 9,000-kilometers of economic corridors, 2,000-kilometers of
coastal and land port roads and 2,000-kilometers of strategic highways.
The government aims to complete Delhi-Mumbai expressway and two other
packages by 2023 and start working on Chennai-Bengaluru expressway.
The government proposed to monetise at least twelve lots of highway
bundles of over 6000-kilometers before 2024 Indian railways aim to achieve electrification
of 27,000 Km of tracks.
The government plans to complete Jal
Vikas Margon National Waterway-1 in this financial year and proposes to
complete 890 Km Dhubri-Sadiya connectivity by 2022 The government proposes to develop 100
more airports by 2024 to support Udaan scheme and anticipates the air fleet number to
increase from 600 to 1,200 during the same time period.
The budget allocated H22,000 crore to power and renewable energy sector
in FY 2020-21 (Source: Business Standard)
Company overview
Incorporated in the year 1983, Supreme Infrastructure India Limited
(SIIL) is a public limited company with its head office near IIT Powai, Mumbai. SIIL has
steadily reached its position of being a diversified infrastructure EPC player with an
inevitable presence across various industries. The Company is promoted by
Bhawanishankar.H. Sharma and the companys board of directors consist of people
with more than 25 years of experience in the field of civil construction projects and
agency business. The company implements extensive projects across roads, bridges,
railways, power, buildings, irrigation and seweage. The company enjoys strong presence in
the roads BOT segment, where it has launched 18 projects, out of which 11projects are
functional, 7 projects are ceased and remaining projects are under consultation with
respective authority.
Financial overview
Total revenues from operations increased by 9% to H24,312.10 Lakh in FY
2021 as against H22,076.37 Lakh in FY 2020. Net loss of the company increased by 24 % to
H(64,231.30) Lakh in FY 2021 compared to H(49093.38) Lakh in FY 2020.
Risk management
The Company recognises that estimation and successful management of
their risks is vital for a consistent performance and dispensing ample value to its
shareholders. The Company evaluates risks periodically and undertakes precautionary steps
to combat the same.
Acquisition of land is a decisive factor. There are delays in handling
over obstacle-free land very often and improving progress of work and idling of resources.
Commercial terms in the business are getting rigid, creating immense pressure on working
capital. The sector is also uncovered to delays in numerous approvals, creating to a
domino effect. Excessive environmental events (such as incessant rainfall, flood and
earthquake), National Green Tribunal bans and construction bans due to pollution creates
an unfavourable risk to the business.
Internal control systems and their adequacy
The internal control and risk management system is organised and
employed accordingly with the principles and criteria set up in the corporate governance
code of the organisation. It is an inherent part of the general organisational structure
of the Company and Group and involves various persons to coordinate among each other to
complete their respective duties. The Board of Directors provides various guidelines to
directors and management, monitoring and support committees. The control and risk
committee and the head of the audit department are supervised by the board appointed
statutory auditors.
Human resources
The Company believes that its dedicated and motivated employees are its
greatest asset. The Company till now has offered competitive compensations, healthy work
environment and the employee performances are recognised through a planned reward and
recognition programme. The Company intends to develop a workplace where every employee can
recognise and attain his or her true power. The Company motivates individuals to undertake
voluntary projects apart from their scope of work that help them to learn and nurture
creative thinking. Total number of employees in the Company stood at 81 as on 31st march,
2021.
Cautionary statement
This statement made in this section describes the Companys
objectives, projections, expectation and estimations which may be ‘forward looking
statements within the meaning of applicable securities laws and regulations.
Forward–looking statements are based on certain assumptions and expectations of
future events. The Company cannot guarantee that these assumptions and expectations are
accurate or will be realised by the Company. Actual result could differ materially from
those expressed in the statement or implied due to the influence of external factors which
are beyond the control of the Company. The Company assumes no responsibility to publicly
amend, modify or revise any forward looking statements on the basis of any subsequent
development, information or events.
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