Artefact Projects Ltd Management Discussions.

This analysis report briefly describes the Company, current industry and business environment, ability of company to avail opportunities, exhibit strength, handling of threats/weaknesses, financial performance, internal controls and other related issues.

INDUSTRY DEVELOPMENTS:

The Government has allocated Rs 20,000 crore to set up and capitalize a Development Financial Institution (DFI)-to act as a provider, enabler and catalyst for infrastructure financing and a Rs. 5 lakh crore lending portfolio will be created under the proposed DFI in three years.

Under the Bharatmala Pariyojana, with an estimated investment of Rs. 5.35 lakh crore, already 13,000 km of roads worth Rs. 3.3 lakh crore have been awarded for construction. A large amount of money has been earmarked for ongoing and new economic corridors/expressways, and Rs. 1,10,055 crore have been allocated to the Railways, of which Rs. 1,07,100 crore is for capital expenditure with a promise to complete 100% electrification of broad gauge routes by December 2023.

(Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1693907)

BUSINESS OUTLOOK:

Increased impetus to develop infrastructure in the country is attracting both domestic and international players. In order to boost the construction of buildings in the country, the Government of India has decided to come up with a single window clearance facility to accord speedy approval of construction projects.

In the road sector, the Governments policy to increase private sector participation has proved to be a boon for the infrastructure industry as many private players are entering the business through the public-private partnership (PPP) model. India is expected to become the third largest construction market globally by 2022. India plans to spend US$ 1.4 trillion on infrastructure projects through the National Infrastructure Pipeline (NIP), from 2020 to 2024, to ensure sustainable development in the country.

In the Union Budget 2021, the Government allocated Rs. 60,241 crore (US$ 8.28 billion) for road works and Rs. 57,350 crore (US$ 7.88 billion) for the National Highways. The Government plans to construct 8,500-kms road by March 2022. Moreover, an additional 11,000 kms of National Highway corridors will be completed by March 2022. The Government announced an outlay of Rs. 118,101 crore (US$ 16.20 billion) for the Ministry of Road Transport and Highways.

The Ministry of Road Transport & Highways announced that it achieved a milestone by constructing 13,298 kms of National Highways, with construction of 37 kms per day in FY21.

The Nominal GDP is expected to grow at of 14.4% (i.e., real growth plus inflation) in 2021-22. The Revenue deficit is targeted at 5.1% of GDP in 2021-22, which is lower than the revised estimate of 7.5% in 2020-21 (3.3% in 2019-20). Fiscal deficit is targeted at 6.8% of GDP in 2021-22, down from the revised estimate of 9.5% in 2020-21 (4.6% in 2019-20). The Government aims to steadily reduce fiscal deficit to 4.5% of GDP by 2025-26.

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

THE INFRASTRUCTURE SECTOR - DEVELOPMENT, OPPORTUNITIES AND THREATS: DEVELOPMENT AND OPPORTUNITIES:-

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling Indias overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development.

Ministry for Road Transport & Highways and Micro, Small and Medium Enterprises stated that the government is giving utmost priority to infrastructure development and has set a target of road construction of worth Rs.15 lakh crore (US$ 206 billion) in the next two years.

National Infrastructure Pipeline (NIP)

The National Infrastructure Pipeline aims to invest Rs. Ill lakh crores by 2025 in multiple projects spanning transport, energy, social and commercial infrastructure, communication, water and sanitation, among others.

These macro developments will be a giant leap in National Infrastructure to propel India to 3rd largest economy of world and shall also throw up huge opportunities.

THREATS:-

A threat faced by the industry is slowdown in the economy and aftereffects of Covid-19 pandemic. The government response to the pandemic of COVID19 and the need for coordinated monetary and fiscal policy actions will determine the speed of growth of economy thereafter. Further, threats remain of constrained government revenue streams and lower tax collections.

The businesses worldwide have been hugely impacted by the outbreak of COVID-19 epidemic.

However the response of the Indian Government is quite proactive and in right direction. Hence, the threats may ultimately turn out to be an opportunity.

The Company is serving government clients like NHAI, Ministry of Road Transport, State Government Road Development Corporations and local bodies.

These agencies have awarded long term continuous contracts to the company which are time based. Hence, there is hardly any break in continuing of contracts execution.

There is no disruption in the companys project activities. The company has sufficient orders in hand to cater to next 2 years. Hence the company does not foresee any material adverse impact of Covid-19 on its current operations except slower realisations.

RISKS AND CONCERNS:

The Companys ability to foresee and manage business risks is crucial in its efforts to achieve favorable results. While management is positive about the Companys long-term outlook, it has been taking all efforts to counter and overcome the possible short term risks and impacts. __

Hence, your Company proposes to focus on its core strength in highways, mining and urban infrastructure to lower risks involved, and to focus in sectors where it has strong domain expertise. Your Company has collaborated with reputed Foreign and Domestic conglomerates for consultancy business expansion in the areas of Technology w.r.t. water supply sewage, Power generation & distribution, Railways and Metros etc. for horizontal expansion in the Infrastructure space.

Management intervention shall reduce the risk of slower revenue receipts.

INTERNAL CONTROLS AND THEIR ADEQUACY:

Your Company has adequate system of internal controls. Controls are undertaken to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorized, recorded and reported correctly. Such internal controls are supplemented by Internal Financial Control Manual and Programme of internal audits, review of documented policies, guidelines and its procedures. These are designed to ensure that financial and other records are reliable for preparing financial information and other reports and for maintaining regular accountability of the Companys assets. The internal auditors of your Company present their report on a quarterly basis to the Audit Committee of the Board.

A Management Information System covers major operating parameters and is monitored regularly by the Board of Directors. Any material change in the business outlook is considered and a response is prepared by the Management. Material deviations from planning and budgeting are reviewed on a quarterly basis by the Board for corrective actions.

NET WORTH:

As on 31st March, 2021, the Net Worth of the Company stood at Rs.4699.70 Lacs as compared to Rs. 3947.49 lacs during the previous financial year. This was mainly due to profits for the year and increase in Equity Capital of the Company by conversion of share warrants. There is significant change in the Net worth as compared to the previous financial year. The Book value of the equity shares of the company stood at Rs. 64.60 per share (Previous year Rs. 56.55 per share).

SECURED LOANS:

Total Secured Loans outstanding of the Company stood at Rs. 1605.80 Lacs as against Rs. 949.05 Lacs for the previous year. This comprised of Bank Term Loan of Rs. 601.30 lacs, working capital secured loan of Rs. Rs.1004.09 Lacs and Vehicle Loan of Rs. 0.41 Lacs.

During this year there is increase in secured loan on account of availment of Term Loan of Rs. 6 crores of sanctioned loan to company.

FIXED ASSETS:

The gross block of fixed assets stood at Rs. 2652.79 Lacs as against Rs. 2661.53 Lacs for the previous year. There is minor decrease is in Gross block of Fixed Assets on account of disposal of certain unserviceable Equipments.

CURRENT ASSETS: SUNDRY DEBTORS:

Sundry Debtors stood at Rs. 1491.52 Lacs as against Rs. 1466.15 Lacs during the previous financial year. Debtors are mainly due to project end billings and others are mainly outstanding of last quarter of the year, pending approvals. With all clients being Government/ PSU Clients, and considering their procedure for approvals, the formal approval based payments makes it a business requirement to sustain higher levels of Sundry Debtors as a normal business feature. The Company however continues to make efforts to reduce the level of debtors constantly.

CASH & BANK BALANCES:

The Cash and Bank Balances stood at Rs. 599.24 Lacs. This is higher since it mainly consists of balance with Bank in fixed deposits, being 100% cash margins for Bank guarantees issued by the company. The same shall be available to the Company once a regular Bank Guarantee limit is sanctioned to the Company.

LOANS & ADVANCES:

Current Loans and advances stood at Rs. 2531.87 Lacs (Previous year Rs. 1081.07 Lacs). The increase is a normal business requirement of Company for short term.

CURRENT LIABILITIES & PROVISIONS (EXCLUDING CURRENT MATURITY OF SECURED LOAN):

The current liabilities and provisions stood at Rs. 1609.31 Lacs (previous year Rs 1562.05 Lacs). This mainly consists of Trade Payables of Rs. 403.38 Lacs, Statutory Liability of Rs. 269.77 Lacs and other payables and provisions amounting to Rs.936.16 Lacs.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company continues its committed importance on its Human capital. Your company enjoys cordial relations at all level.

During the year, the organization structure of all key functions have been reviewed and strengthened so as to facilitate delivery of business goals.

The Company has adopted Indian Accounting Standard (IND-AS), notified under the Companies (Accounting) Rules, 2015.

At the end of the Year 2020-2021, the break-up of Human Resource was employment of 234 Technical, 112 Non-Technical and 45 Supporting Staff, total being 391 number of staff.

DETAILS OF SIGNIFICANT CHANGES IN FINANCIAL RATIOS:

Particulars 2021 2020
Operating Ratio 26.30% 25.62%
PBIDT Ratio 24.39% 24.38%
PBT Ratio 15.46% 13.29%
PAT Ratio 11.34% 10.71%
Net Worth (Rs.) 4699.70 lacs 3947.49 lacs
Return on Networth 8.34% 9.09%
Return on Equity (PBT/Equity) 11.38% 11.29%
Interest Coverage Ratio 3.72 3.02
Debt Equity Ratio (Secured Loan/Equity) 0.34 0.24
Current Ratio 2.01 1.48
Debtors Turnover Ratio 215.12% 217.55%
Inventory Turnover Ratio 3181% 1974%
EPS (Basic)* 6.72 6.58
EPS (Diluted)* 6.59 6.58

CAUTIONARY STATEMENT:

Statement in this Management Discussion and Analysis report describing the Companys objectives, projections, estimates and expectations may be forward looking statements with the meaning of applicable laws and regulations. Actual results might differ.