Company Overview
Vascon Engineers Ltd, established in 1986, is one of the leading Construction
Engineering Company in India with presence in Real Estate business having an asset light
model and Clean Room Partition manufacturing business. With a strong track record of 38
years, your Company has created a number of projects of eminence and splendor on a timely
basis. The Company has executed over 200 projects with a construction area of over 50 mn
Sq ft and is known for maintaining high quality standards and timely execution of
projects. Your Company has a track record of successful & timely execution of Landmark
projects such as Ruby Mills (Mumbai), Suzlon One Earth (Pune), Symbiosis College (Pune),
IGI Airport Multilevel Car Parking (New Delhi), and also received its 1st Redevelopment
project in Mumbai and many more.
Global Economy
The global economy was under tremendous pressure amid the adverse changes that occur
simultaneously due to the pandemic, Russias invasion of Ukraine and the abrupt tightening
of monetary policy in order to control rising inflation. Global GDP is expected to
decelerate sharply in the second half of 2023, with a continuation of weakening in 2024.
Inflationary pressures remain, and tight monetary policy is projected to have a
significant impact on activity.
After the global economy grew to 3.1% in 2022, the economy saw a substantially slow
rate to 2.1% in 2023, amid the global cues, monetary policy tightening and recovering to
2.4% in 2024. Tight global financial conditions and reduced external demand are projected
to weigh on development in emerging markets and developing economies (EMDEs). Inflation
has been persistent, but it is expected to progressively drop as demand weakens and
commodity prices moderate, assuming that longer-term inflation expectations stay stable.
Global growth could be less than projected if banking sector stress becomes more
pervasive, or if persistent inflationary pressures drive tighter-than-expected monetary
policy. Weak growth prospects and increased risks in the short term worsen a long-term
decline in potential growth, which has been worsened by the pandemics simultaneous
shocks. This tough situation shows plenty of policy challenges. Recent bank failures
necessitate a fresh focus on global financial regulatory reform. Global collaboration is
also required to expedite the renewable energy transition, combat climate change, and
provide debt relief to the growing number of debt- burdened countries. At the national
level, sustainable policies must be adopted to contain inflation and ensure financial and
macroeconomic stability, as well as reforms that lay the foundation for a robust,
environmentally friendly, and inclusive development path.
Indian Economy
The year 2022 was noteworthy for India as it was the 75th year of independence, a
significant turning point in Indias history, and it also surpassed China to become the
worlds 5th largest economy. Amidst the global economic turmoil of FY23,
the Indian economy outperformed by its resilient performance which was largely driven
by domestic consumption in all the sectors ranging from consumer goods to commodity to
infrastructure. Post lifting up the ban, the domestic economic activities stabilized since
April-2022. Urban demand quickly recovered and remained robust throughout the year, aided
by pent-up spending and discretionary spending during the festival season, while
above-normal monsoons aided rural demand.
India is anticipated to experience GDP growth of 6-6.8% in FY24, depending upon the
trajectory of global economic and political shifts. The survey 2022-23 estimates a
baseline GDP of 6.5% in FY24. Credit growth to MSME has been exceptionally rapid,
averaging more than 30% between January and November of 2022.
Another growth driver for the Indian economy in FY23 was central government capex,
which increased by 63% between January and November 2022. Inventory backlog decreased
dramatically to 33 months in Q3 FY23. Export growth accelerated in FY22 and the first half
of FY23, causing production gears to shift from mild acceleration to cruise mode. Growth
in FY24 is expected to be rapid, driven primarily by robust loan disbursement and a
stronger capital investment cycle in India as a result of improved corporate and banking
sector balance sheets.
The major growth outlook for the Indian economy will be primarily determined by a few
factors, including (i) the ongoing surge in COVID-19 infections in China, which has had
limited health and economic consequences for the rest of the world, resulting in continued
normalization of supply chains; (ii) inflationary impulses from Chinas reopening have
proven to be neither significant nor persistent; and (iii) recessionary tendencies in
major advanced economies (AEs) have triggered.
The shift in borrower financing preferences from the volatile bond market to banks has
also had an impact on the increase in total bank lending. The Central Governments capex
climbed by 63% in the first eight months, a major growth driver for the Indian economy in
FY23.
The housing market witnessed a significant decline in inventory which went overhang for
33 months in Q3FY23 as compared to same period last year. The Survey notes states that the
Indian Economy has moved on after its encounter with the pandemic, staging a full recovery
in FY22, ahead of many well-developed nations and rising towards the growth path in FY23.
Despite many hurdles faced by India in the post Covid era, India has also had the problem
of bringing down inflation, which has been exacerbated by the European crisis. Government
and RBI actions, together with a drop in commodity prices worldwide, have finally
succeeded to reduce retail inflation below the RBIs maximum tolerance level in November
2022.
As a result, global growth is likely to slow in 2023 and to stay largely modest in the
years ahead. Slowing demand is expected to lower global commodity prices and boost Indias
CAD in FY24. A downside risk to the Current Account Balance, however, arises from a rapid
rebound driven mostly by domestic demand and, to a lesser extent, exports.(Source)
Indias Economic Resilience and Growth Drivers
Indias story is very dynamic and capable for coming years. Despite global uncertainty
and economic crises, India has fared well and demonstrated great resilience. With an
average annual growth rate of 5.5% over the last decade, India has already become the
worlds fastest growing economy, with plans to more than four-fold its present annual GDP
of close to USD 3.5 trillion to USD 7 trillion by 2027 and USD 10 trillion by 2030.
According to the IMF, India is a “glorious opportunity” and a significant
contributor to global expansion, accounting for “15 % of the worlds GDP in
2023.”
Over the next few years, India will need to maintain and increase its upward trajectory
and some of the growth drivers that will lead to attain the USD 10 Trillion target which
will include the following areas:
1. To promote and growth in the Business:
Indias expansion in the following years will necessitate significant capital spending
by both the public and private sectors, both in traditional industries and in R&D. The
government is still dedicated to structural reforms, and there are several chances to
increase investments and deepen collaborations. According to UNCTAD (United Nations
Conference on Trade and Development) 2022, India is the 7th most popular global
destination for FDI flows. The government has been particularly aggressive in promoting a
healthy ecosystem of effective regulatory processes, long-term and pro-industry efforts
and programmes. India must continue to prioritize FDI (Foreign Direct Investment), and
also prioritize DI (Domestic Investment).
2. States government being growth drivers
States governments are going to become major economic drivers to assist nation to reach
its goal of becoming a USD 10 trillion economy by 2030. To dramatically restructure
Indias development, states government must team up and benefit from each other. State
governments should promote a more favorable policy environment, and the states job should
be to emerge as a facilitator of private investment and growth.
3. Climate change and Sustainable Development Growth (SDG) 2030 goals
The global fight against global warming has reached a turning point. India has pledged
to achieve net-zero emissions by 2070, and the country has refocused on ESG, renewables,
green economy, electric transportation, green hydrogen, and has directive laws in place to
meet SDG 2030 targets. Going ahead, India must significantly increase the use of
renewables in electricity generation while also innovating to become the most competitive
worldwide producer of alternative energy such as green hydrogen.
4. Manufacturing and Exports
India being a challenging country, and aid for businesses is critical, particularly for
scaling up DI. India requires strong, globally competitive manufacturing as well as a
tripling of exports. While India has grown at a rate of roughly 6% per year on average
over the last few years, with a GDP of USD 3.4 trillion, our contribution to mercantile
trade remains a measly 1.8%. Agriculture value addition- The expansion of agricultural
infrastructure and supply chains, as well as increased R&D and exports from the food
processing sector, would provide not just better resilience but also a more equitable
allocation of resources to Indias rising population.
5. Industry 4.0 and government policies:
The government has been focusing on Industry 4.0 in order to achieve the goals of
Aatmanirbhar Bharat, and has taken steps to that end by expediting bilateral FTAs,
encouraging domestic manufacturing through Production link incentives, PM GatiShakti, the
National Logistics Policy, and others. The government must maintain a favourable attitude
towards businesses and the determination to implement rules that make doing business in
India not just easy but also enjoyable. The government should prioritise the promotion of
trust-based governance at all levels.
Outlook: 2023-24
Residing on the Outlook for 2023-24, the Economic survey articulates that the Indias
recovery from the Pandemic was comparatively rapid and the growth in coming years will be
supported by the solid demand from the domestic market and rise in the reserves. It will
be aided by the healthy financials, incipient signs of a new private sector capital
formation cycle are much more visible and most importantly to recompense for the private
sectors reluctance in capital expenditure, the government has increased capital
expenditure significantly.
Budgeted Capex has rose to 3x in last 7 years from FY16-FY23 and re strengthening the
Capex cycle. Significant structural changes have increased the Indian economys efficiency
and openness, as well as ensuring financial discipline and improved compliance within
government.
As per the IMF World Economic Outlook data it says that the growth will be declining
from 3.2% to 2.7% in 2023. Slower economic growth production combined with uncertainty
will reduce trade growth for Indian economy. It is evident that the WTOs lower prediction
for global trade growth, which has been reduced from 3.5% in 2022 to 1.0% in 2023.
Inflationary pressures may extend the tightening cycle, causing borrowing costs to
remain “higher for longer.” In such a situation, the world economy may have
modest growth in FY24. But there are two silver linings to the prospect of slower global
growth: oil is going to stay lower, and Indias CAD will be better than currently
forecast. The external situation will remain manageable broadly.
External threats to CAB (Current Account Balances) has originated from the variety of
origins. The current commodity prices have remained above pre-conflict level which has
already fallen from their highest level. High domestic consumption in the context of
rising commodity prices would exacerbate Indias overall import duty and lead to negative
trends in the current account deficit. They may be worsened by slowing export growth as a
result of slowdown in consumption at Global level.
The current state of Real Estate Sector in India
Despite geopolitical worries, an imminent global recession, rising interest rates, and
construction prices, the Indian real estate sector has seen a V-shaped rebound, roaring
ahead with expansion and exhibiting astonishing tenacity throughout. The industry
demonstrated its prowess by posting a 68% YoY growth in FY2022 and a 19% increase in
investment since FY21, clearly emphasizing its investment potential in India and abroad.
The governments sustained attention was visible in increased financial expenditures to
the Pradhan Mantri Jan Arogya Yojana (PMJAY) and Smart Cities, both of which have a strong
emphasis on ESG and sustainability in the built environment.
As the sector continues to embrace technology, it will see a dramatic shift in the
consumer and investor experience, as well as developers embarking on the creation of
sustainable structures employing technology. AI and robotics will bring about a new
paradigm for designing sustainable structures and achieving economies of scale.
• The real estate sector is one of the largest contributors to Indian GDP, and it
is expected to contribute 18% by 2030 as more areas like warehouses, logistics, industrial
parks, data centers, student housing, co-living, and senior assisted living fuel and usher
in a period of boom.
• The real estate industry is one of the oldest and most well- known in the world.
In terms of direct, indirect, and induced consequences in all sectors of an economy, it is
one of the 14 key sectors. In India, the real estate sector is the second-largest job
creator after agriculture, accounting for roughly 5-6% of the Indian GDP. In the future,
the real estate sector is expected to expand and contribute up to 15-18% of Indian GDP by
2030.
• Residential, retail, commercial, and hotel real estate segments in Amrit Kaal
are projected to demonstrate decent growth, as they are well positioned for additional
growth by an improving corporate climate and demand for office space, urban and semi-urban
housing.
• By 2030, the Indian real estate market is anticipated to reach the USD 1
trillion level, with affordable housing contributing significantly to the expansion.
The budget for 2023-2024 in India was released amid highly promising economic
prospects. In comparison to other major economies, India is predicted to develop at a
strong pace of 7% this year. The Indian economy has advanced from 10th to 5th largest
economy in the world. In just 9 years, the per-capita income has doubled to Rs 1.97 lakh.
The economic stimulus from infrastructure
A 33 % rise in infrastructure investment capital spending, or Rs. 10 lakh crore for
2023-24, or 3.3 % of GDP, will have a big positive impact on the economy and generate new
employment possibilities. Real estate development is anticipated to follow the local
economys growth.
For tier II and tier III cities, it suggests additional commercial, residential, and
retail growth. Additionally, municipalities will be able to produce additional revenue,
which will have a collective effect on the real estate market.
Housing affordability continues to be a focus
The PM Awas Yojana and the expanded Credit-Linked Subsidy Scheme (CLSS) would provide
housing for all people, significantly boosting the real estate market. The central
government would increase funding for PM Awas Yojana by 66% to Rs 79,000 Crores in order
to close this affordability gap. The credit-linked subsidy programme through 2027
Improved air connectivity
A budget of Rs 3,100 crore will be spent on the construction of 50 more airports,
helipads, water aerodromes, and sophisticated landing fields to improve regional transport
connectivity. Around the suggested sites, land values could increase, raising the value of
nearby properties.
Mission Smart Cities
Multiple Indian cities could be transformed by a new programme to create
“sustainable cities of tomorrow” with a substantial allocation of Rs 16,000
Crores, which will boost their quality of life and provide integrated infrastructure,
mobility, and urban sustainability. Such neighborhoods will eventually be able to increase
the value of their property potential as such.
Apart from the above infrastructure segment, the government is also focusing on few
other emerging segments where the real estate and infra sector can see an uptick in the
future
Co - working Space
In Tier I and Tier II cities, the young professional population, hybrid work model,
digital start-ups, and freelance culture have sparked a desire for co-working space, which
now make up about 20% of the office market. By the end of 2023, the market for co-working
spaces in India is expected to reach 50 Mn Sq. Ft.
Data Centers
Data centers have been classified as infrastructure assets, and by the end of 2024, 681
MegaWatts of additional capacity will be required. This will also increase demand for real
estate.
Warehousing
The National Logistics Policy will provide the construction sector with a boost by
outlining a tech-enabled, economical, and integrated logistics industry. Make in India
is receiving more attention, and e-commerce is expanding, thus storage is set to develop
as multi-modal logistics parks and industrial corridors expand.
Financial Performance with respect to operational performance
COMPANY PERFORMANCE
The company witnessed strong execution backed by return of gradual normalcy. In FY23
all the projects were operating at optimum level enabling faster project execution.
Company believes that the execution will continue to gather momentum going forward.
Company has also reduced its debt substantially. As on March 2023, the net debt has come
down to Rs. 11.84 Crores from Rs. 58.72 Crores in March 2022. In addition, the company has
received a rating upgrade during the FY 202223.
The EPC segment during the quarter witnessed a fast-track execution of the projects.
EPC segment revenue stood at Rs. 654.05 Crores for FY 2022-23, major projects namely the
Maharashtra State Police Housing, PWD, Raipur Hospitals that Kaushambi, Vedanta, Pune
MRDA, and Bijnor are running smoothly. Post the resumption of normal business activities,
the pandemic had no material impact on our execution. The order book is close to Rs. 2,127
Crores in FY 2022-23. We envisage the EPC segment to deliver strong performance going
forward.
The real estate segment after various headwinds in the recent past is gaining momentum.
There is gradual recovery in the demand as the economy moves towards normalcy. Companys
real estate revenue stood at Rs. 94.01 Crores for FY 202223. A quick update on the ongoing
projects; Forest Edge B is 100% sold; Windermere is 100% sold and Vascon Good Life is sold
at 63%; Tulip Phase III is 50% sold.
GMP business continues to deliver sustainable performance with revenue of Rs. 251.87
Crores for FY 2022-23 and healthy gross margins of 32%. EBITDA stood at Rs. 25.19 Crores
for FY 2022-23
Consolidated Financial Performance
• Total Consolidated Revenue stood at Rs. 1,030.43 Crores against Rs 710.07 Crores
in FY 2021-22
• EBITDA stood at Rs. 128.01 Crores as against Rs. 75.58 crore in FY 2021-22
• Profit after tax stood at Rs. 99.41 Crores as against Rs.35.92 crores in FY
2021-22
• As on March 31,2023, Total consolidated debt stood at
Rs. 134.78 crores as against Rs. 157.16 crores on March 31, 2022
• Net worth Rs. 911.77 Crores as on March 31, 2023 compared to Rs. 811.36 crores
as on March 31, 2022
Working Capital Management
• Current assets as on March 31, 2023 stood at Rs. 1,273.40 Crores compared to Rs
1,176.86 crores as on March 31, 2022.
• Current ratio as on March 31, 2023 stood at 1.96 times
compared to at 1.86 times as on March 31, 2022.
• Inventories stand at Rs. 472.54 Crores as on March 31, 2023 as against Rs.
514.42 crores as on March 31, 2022.
• Loan & Other Financial Assets stood at Rs. 427.85 Crores in FY 2022-23
compared to Rs. 364.22 crores in FY 2021-22.
• Current liabilities stood at Rs. 647.54 crores on March 31, 2023 compared to Rs.
630.83 crores as on March 31, 2022.
• Cash and bank balances was at Rs. 122.94 Crores as
on March 31, 2023 compared to at Rs. 104.04 crores as on March 31, 2022.
Key Ratios
• Debtors turnover: The Companys debtors turnover stood at 68 days in FY
2022-23 as compared to 91 days in FY 2021-22;
• Inventory turnover: Inventory turnover stood at 228 days FY 2022-23
as against 343 days in FY 2021-22; major inventory is related to Real Estate Division
and it also includes inventory for project which are not yet launched
• Interest coverage ratio: The Companys interest coverage ratio stood at 9.08
times in FY 2022-23 against 2.65 times in FY 2021-22;
• Current ratio: The Companys current ratio stood at 1.96 times in FY 2022-23
compared to 1.87 times in FY 2021-22
• Debt to Equity ratio: Debt to Equity Ratio stood at 0.15x
• Operating profit
• Net profit: Company reported the profit of Rs. 99.41 Crores in FY 2022-23 as
compared to Rs. 35.92 Crores in FY 2021-22
• Return on net worth: The return on net worth stood at 0.11% in FY 2022-23
ENGINEERING PROCUREMENT & CONSTRUCTION
REAL ESTATE ONGOING PROJECTS:
Redevelopment Project - Residential Project in Santacruz, Mumbai
In 2022, Company signed their first ever Redevelopment project based in Santacruz
Mumbai, with the own share of 77,673 Sq.ft. area (Own Share) with the expected revenue of
~Rs 250 Crores from the redevelopment project and it is expected to complete within 24-30
months.
Tulip Phase 3 - Residential Project in Coimbatore, Tamil Nadu
In 2022, the Company launched Phase-III of the Tulip, in first half of FY23, where the
company own the 49 unit of the project and out of 49 units, the company sold 44 units
within the first month of launch.
Forest Edge - Residential Project in Kharadi, Pune
In 2019, Company launched Phase-II of Forest Edge- First- ever Health Tech Home in
Pune, spread over ~3.4 acres. Forest edge is an advanced lifestyle project comprising 2
BHK apartments, and modelled as Health Tech Homes. It is one of its kind in Pune.
Forest County- Residential Project in Kharadi, Pune
Forest County, a residential Project with a total saleable area of 0.18 msft, located
in the most rapidly developing area of Pune - Kharadi. Launched two-towers consists of 132
units comprising 2 and 3 BHK apartments with sizes of 1,150 sqft to 1,685 sqft.
Windermere - A Signature Luxury Residential Project in Koregaon Park, Pune
Windermere - A Signature Luxury Residential Project, is a thoughtfully designed,
premium quality home at Koregaon Park, Pune, with the total site area of 4.75 acres, which
is developed in 2 phases. The total saleable area of the project is ~0.42 msft. The
project comprises apartments of 3,000 Sq.ft, 3,800 Sq.ft & 8,500 sq. ft with its own
private swimming pool. The project offers the latest amenities such as renewable energy
system, architectural design that ensure good ventilation and maximum natural light,
water, conservation through maximum recycling organic waste management, rain water
harvesting, etc. The Project is certified as platinum rating project from The Indian
green building council (ICBG) green home the project is designed as a five-star rated Eco
- housing project.
Vashon Goodlife - First Ever Value Housing Project in Katvi, Talegaon
Vascon Goodlife - Value Housing Project, spread across 10 acres of land, offering 1RK,
1BHK and 2BHK homes aims at providing not just affordable, but value homes with a strong
focus on nurturing learning and growth making it a first-of-its kind learning
infrastructure in a residential project. The project boasts of amenities for all age
groups, such as library, study rooms in each tower, online education room with computers
Citron - Phase II, Wagholi, Pune
Citron is a modern lifestyle Residential Project at Wagholi, Pune. Citron Phase II,
launched a 15 story L-shaped building comprising 1BHK & 2 BHK apartments, with an
endeavor to offer the best-in-class housing, to ultimately become the landmark project of
Wagholi.
GMP TECHNICALS - CLEAN ROOM PARTITION BUSINESS
As a part of backward integration your Company had acquired GMP technical solutions, an
integrated provider of engineering services, in August 2010. GMP is one of the largest
manufacturers of Clean Room Partitioning Systems and Turnkey Solution Provider.
Over the last few years, your Companys resilient efforts were towards stabilization of
GMP Business, resultant, the GMP division has achieved an EBITDA positive during the last
fiscal, overcoming all the hurdles faced by the company. During FY 22-23, GMP Technical
contributed Rs. 251.87 Crores to consolidated revenue as against Rs. 194.29 Crores in the
last fiscal and the gross profit of Rs. 79.78 Crores with an EBIT margin of 8%. Your
Company continues to focus towards sustainable improvement and achievement of marquee
projects like those from Tata Group demonstrating Companys ability and preparedness.
Going forward, GMP division to further value add towards the profitability of the Company.
STRENGTH, OPPORTUNITIES, STRATEGY
Strengths
• Robust Order Book with diversified clientele both in public as well as private
sector
• Focus on one segment i.e. building segment, with an inhouse design team and
focus on cutting-edge technology have enabled Vascon to scale up in this space
• Experienced management team with proven track record in terms of execution
capabilities and strict control over processes Opportunities
• Government impetus on Infrastructure development through construction of
airports, healthcare facilities, modernization on railways, development of smart cities,
construction of factories to push Atmanirbhar Bharat yojana, Housing for all, amongst
others. This initiative to provide huge opportunities in the infrastructure sector going
forward and Vascon is well-prepared to capitalize on this growth opportunity both in EPC
and Real Estate Segment
• Organized and branded real estate industry witnessed faster than expected
turnaround in customer sentiments Strategy
• Focus on core business that is Engineering, Procurement & Construction (EPC)
and Real Estate Development business
• Vascon continues to focus on improving operational efficiencies and
strengthening of Balance Sheet through cash flow generation via monetization of identified
noncore assets to improve liquidity and achieve higher growth
THREATS, RISKS, CONCERNS
In EPC business, delay in projects execution, stall of projects due to unprecedented
natural calamity, non-payment by developers, steep cost escalation in inputs affects the
execution of projects and results in significant cost overrun.
In Real Estate business financing, uncertainty on monetary and fiscal policy, changes
in government regulations, foreign direct investments, approval processes, environment
clearances and legal hassles & proceedings affects the execution project and results
in significant cost overrun.
HUMAN RESOURCES
Employees are the foundation of the business and essential to its ongoing success. With
its strong HR policies and practices, the Company aims to create a climate that will help
it draw in and keep the greatest people while ensuring employee wellbeing. The company
runs a lot of programs for skill development and learning to increase staff capacities.
Vascon makes use of a broad range of knowledge, credentials, abilities, professional
experience, culture, geography, and industry expertise.
In order to assure readiness, the company places a high priority on health and safety
management and regularly holds drills and dummy training sessions. It has embraced the
highest levels of international standards, guarantees that all safety instructions are
followed, and employs additional measures in accordance with legislative demands. As on
March 31, 2023,
INTERNAL CONTROL SYSTEM
The Company has deployed a vigorous Internal Controls and Audit mechanism to facilitate
an accurate and fair presentation of its financial results. The internal audit system has
been continuously monitored and updated to ensure that assets are safeguarded, established
regulations are complied with and pending issues are addressed promptly. The Audit
Committee reviews reports presented by the internal auditors on a routine basis. The
Committee makes note of the audit observations and takes corrective actions, if necessary.
It maintains a constant dialogue with statutory and internal auditors to ensure that
internal control systems are operating effectively.
RISK MANAGEMENT
The Company has developed a robust risk management framework. It has been identified as
one of key enablers to achieve the companys objectives. Increased competition, pressures
on cost and deliveries, forex & commodity price variations, impact of recessionary
trends on the award of jobs and manpower attrition are some of the major risks faced by
the industry. Measures such as advanced quantitative tools, global sourcing, standard
operating procedures, and operational excellence initiatives have been implemented so as
to protect the profitability of the business.
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