Atlantaa Ltd Management Discussions

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.

Market Size

In Interim Budget 2024-25, capital investment outlay for infrastructure has been increased by Rs. 11.11 lakh crore (US$ 133.86 billion), which would be 3.4 % of GdP. As per the Interim Budget 2023-24, a capital outlay of Rs. 2.55 lakh crore (US$ 30.72 billion) has been made for the Railways, an increase of 5.8% over the previous year.

Starting with 6,835 projects, the NIP project count now stands at 9,142 covering 34 sub-sectors, as per news reports. Under the initiative, 2476 projects are under the development phase with an estimated investment of US$ 1.9 trillion. Nearly half of the under-development projects are in the transportation sector, and 3,906 are in the roads and bridges subsector.

Indias logistics market is estimated to be US$ 317.26 billion in 2024 and is expected to reach US$ 484.43 billion by 2029, growing at a CAGR of 8.8%.

India intends to raise its ranking in the Logistics Performance Index to 25 and bring down the logistics cost from 14% to 8% of GDP, leading to a reduction of approximately 40%, within the next five years. At almost 20 kms, Mumbai monorail is the third largest route in the world after China with 98 kms and Japan with 28 kms.

Indian logistics market is estimated to touch US$ 320 billion by 2025. The overall infrastructure capex is estimated to grow at a CAGR of 11.4% over 2021-26 driven by spending on water supply, transport, and urban infrastructure. Investment in infrastructure contributed around 5% of the GDP in the tenth five-year plan as against 9% in the eleventh five-year plan. Further, US$ 1 trillion investment in infrastructure was proposed by the Indias planning commission during the 12th five-year plan, with 40% of the funds coming from the private sector.

Government Initiative and investment

• Capital expenditure (capex) allocation

The Central government has increased its capital expenditure (capex) allocation to US$ 133.9 billion (Rs. 11.11 trillion) for the fiscal year beginning April 1, 2024, with a focus on advancing Indias infrastructure, as part of a strategic move to stimulate economic growth. An increase of 11.1% from the previous year, the FY25 interim budget allots US$ 133.9 billion (Rs. 11.11 trillion) for capital expenditures, or 3.4% of GDP.

• Three significant economic railway corridor initiatives-energy, port connectivity, mineral and cement, and high traffic density-will be carried out by the railway industry. Additionally, in order to improve passenger safety, convenience, and comfort, forty thousand standard rail bogies will be converted to Vande Bharat standards.

• In the aviation sector, the number of airports has doubled to 149, and currently, 1.3 crore passengers are transported on 517 new routes. Indian airlines have taken the initiative to order more than a thousand new aircraft.

• The Indian government has introduced various formats to attract private investments, especially in roads and highways, airports, industrial parks and higher education and skill development sectors. Private Equity-Venture Capital firms invested US$ 3.5 billion (across 71 deals) in Indian companies in May 2023.

• The government is working towards the development of a national highway network of 2 lakh kilometres by 2025.

• Gatishakti National Master Plan (NMP)

The government launched the PM Gatishakti National Master Plan (NMP) with a focus on major transport sectors to enhance multimodal connectivity infrastructure in various economic zones. It aims to bring together the infrastructure schemes such as Bharatmala, Sagarmala, UDAN etc. under a digital platform. The NMP offers a detailed database of trunk and utility infrastructure, ongoing and future projects from different ministries/departments of both the Central Government and States/UTs. Integrated with the GIS-enabled PM Gatishakti platform, this allows for streamlined planning, design, and monitoring of next-generation infrastructure projects on a single portal. As per the India Investment Grid (IIG) database, there are currently 15,580 projects worth $2388.93 Bn at various stages of development.

• Bharatmala Pariyojana Projects

The Bharatmala Pariyojana is progressing with Phase I focusing on developing 34,800 km of National Highways. It emphasizes corridor-based development and is set to conclude by 2027-2028, covering 31 States/UTs and over 550 districts. Additionally, the government targets building 22 new greenfield expressways, signalling significant advancements in Indias transportation infrastructure.

• UDAN

The Ministry of Civil Aviations flagship Regional Connectivity Scheme UDAN (Ude Desh Ka Aam Nagarik) aims to enhance air connectivity to regional airports in small towns. Launched in 2016, UDAN focuses on making flight services accessible to common citizens by developing infrastructure and air connectivity. In its first 5 years, UDAN served over one crore passengers, inaugurating 425 new routes and 58 airports. The Budget for 2023-24 allocated INR 1,244.07 Cr to UDAN, doubling the previous years budget, with plans to revive 22 airports. Additionally, the government outlined the revival of 50 additional airports, heliports, water aerodromes, and advanced landing grounds.

• Ports

Indian Ports "Turn Around Time" has reached 0.9 days which is better than USA (1.5 days), Australia (1.7 days) and Singapore (1.0 days), as per the World Banks Logistics Performance Index (LPI) Report 2023. Sagarmala, the flagship Central Sector Scheme of the Ministry of Ports, Shipping and Waterways, promotes port-led development in the country through harnessing Indias 7,500 km long coastline, 14,500 km of potentially navigable waterways and strategic location on key international maritime trade routes. The Union Minister for Ports, Shipping and Waterways said that the countrys total port capacity will increase from the existing 2,600 MTPA (Mn Tonnes per annum) to more than 10,000 MTPA in 2047. From April to November 2023, cargo of 86.47 MMT moved through Waterways as compared to 80.44 MMT during April to November 2022, i.e. an increase of 7.49%. The government also aims to operationalise 23 waterways by 2030.

• Railways

Indias railway sector is undertaking ambitious projects such as the Mumbai-Ahmedabad Speed Rail Corridor, the worlds highest pier bridge under construction, and the Chenab bridge in Jammu & Kashmir - the worlds highest railway bridge. With a total Broad Gauge network of 61,508 km electrified as of December 2023, the sector has also introduced 35 indigenously designed Vande Bharat Express trains, with six more set to launch soon. These trains serve up to 247 districts across the country. Indian Railways aims to become a Net Zero Carbon Emitter by 2030, with 211 MW of solar plants and 103 MW of wind power plants commissioned as of October 2023, along with 2150 MW of renewable capacity tied up.

• National Infrastructure Pipeline (NIP)

Private sector participation is vital for financing key infrastructure projects in India, given the governments fiscal constraints and the need for prudent spending. India launched the National Infrastructure Pipeline (NIP), in 2020 which envisages an investment of INR 111 Lakh Cr over 2020 to 2025 i.e., an annual average investment of almost INR 22 Lakh Cr. Public Private Partnerships (PPP) have been identified as a valuable instrument to speed up infrastructure development and investments envisaged under NIP. Involving the private sector promotes industry competitiveness, enabling access to a wider talent pool and enhanced resource utilization. There are several PPP projects currently in pipeline across sectors such as the development of Pune metro line 3, Hyderabad and Bengaluru metro extensions, development of multi modal logistics park in Chennai, and more.

• Smart Cities Mission

It is essential for India to prioritize the development of both urban and rural areas to ensure overall national progress. By 2030, it is projected that 40% of Indias population will reside in urban areas, contributing significantly to the countrys GDP. However, rapid urbanization poses challenges in managing infrastructure and delivering services effectively. The Smart Cities Mission is a key initiative aimed at addressing these challenges efficiently. As of February 2024, 6,753 projects out of a total of 7,991 have been completed under the Smart Cities Mission, showcasing tangible progress. Moreover, India has made significant strides in digital infrastructure development, with rural areas expected to contribute significantly to new internet user growth, with around 56% of total new internet users coming from rural India by 2025, according to a report by TransUnion CIBIL. This trend underscores the increasing connectivity between rural and urban regions in the country

Benefits Of Government Infrastructure Projects

The development of infrastructure provides numerous economic, social and environmental benefits. On the economic front, it helps to increase GDP growth by stimulating private investments in sectors such as manufacturing, services and transport. It also helps to create job opportunities by providing employment opportunities for skilled labour. Furthermore, it improves trade and investment opportunities by improving connectivity between different parts of the country.

On the social front, it helps to improve healthcare facilities by providing better access to hospitals and health centres. It also helps to improve education facilities by providing better access to educational institutions across the country.

On the environmental front, it helps to reduce pollution levels by providing better public transport systems such as metro rails and buses. It also helps to improve water quality by providing better sewage treatment systems and better water supply systems.

RoadAhead

Roads and highways sector is considered to be the most vibrant infrastructure segment where a lot of activities ongoing consistently for a long time. While other construction segments see ups and downs, the development of roads and highways has been happening in the country in a sustainable manner.

REAL ESTATE Introduction

Real estate sector is one of the most globally recognized sectors. It comprises of four sub sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term.

Market Size

Real estate sector in India is expected to reach a market size ofUS$ 1 trillion by 2030 from US$ 200 billion in 2021 and contribute 13% to the countrys GDP by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs. Indias real estate sector is expected to expand to US$ 5.8 trillion by 2047, contributing 15.5% to the GDP from an existing share of 7.3%. According to Savills India, real estate demand for data centres is expected to increase by 15-18 million sq. ft. by 2025.

According to the Economic Times Housing Finance Summit, about three houses are built per 1,000 people per year compared with the required construction rate of five houses per 1,000 population. The current shortage of housing in urban areas is estimated to be ~10 million units. An additional 25 million units of affordable housing are required by 2030 to meet the growth in the countrys urban population.

Growth drivers:

Increasingpopulation

India, with a population of 144,18,38,920 has recently surpassed China. With a median age of 28.2 years, Indias growing population underscores the critical need to prioritize infrastructure and real estate development. Improving connectivity through enhanced infrastructure is vital to ensure efficient and seamless transportation for its citizens.

Urbanisation

The government announced 77,523.58 crore (US$ 9.3 billion) to the Ministry of Housing and Urban Affairs

Industrialization

The launch of the PLI scheme will fuel industrial growth, leading to an increased demand for faster transit times and improved road infrastructure. This highlights the need for enhanced road connectivity throughout the country.

Infrastructure investment

To achieve Indias goal of becoming a $5 trillion economy by 2027, infrastructure development is crucial. The infrastructure sector has become the biggest focus area for the Government of India. Indias GDP is expected to grow by 8% over the next three fiscal years.The budget places a strong emphasis on the development of roads, shipping, and railways. Global investment and partnerships in infrastructure, such as the India-Japan forum for development in the Northeast are also indicative of more investments.

Under Interim Budget 2024-25, capital investment outlay for infrastructure has been increased by 11.1% to Rs.11.11 lakh crore (US$ 133.86 billion), which would be 3.4 % of GDP . Two Hundred & Twenty Two 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.

Financial overview

• Total revenue from operations Increased from 1405.80 Lakhs in FY 2022-23 to 8852.13 Lakhs in FY 2023-24.

• Other income Increased from 388.41 lakhs in FY 2022-23 to 765.29 Lakhs in FY 2023-24.

• Finance cost decreased from 458.46 lakhs in FY 2022-23 to 132.34 Lakhs in FY 2023-24.

• Profit after tax Increased from (3178.97) Lakhs in FY 2022-23 to 4906.83 Lakhs in FY 2023-24.

• Earnings per share (EPS) on basic and diluted basis stood at 6.02 in FY 2023-24 versus (03.90) in FY 2022-23.

Consolidated Performance:

• Total revenue from operations increased from 5165.10 lakhs in FY 2022-23 to 13276.88 Lakhs in FY 2023-24.

• Other income Increased from 813.09 lakhs in FY 2022-23 to 1609.44 Lakhs in FY 2023-24.

• Finance cost decreased from 611.85 lakhs in FY 2022-23 to 444.15 Lakhs in FY 2023-24.

• Profit after tax Increased from (3240.00) Lakhs in FY 2022-23 to 46786.47 Lakhs in FY 2023-24.

• Earnings per share (EPS) on basic and diluted basis stood at 57.41 in FY 2023-24 versus (03.98) in FY 2022-23.

Key Risks

While the management is very optimistic about the Companys growth outlook, it is subject to certain risks and uncertainties. A spade of policy reforms by the statutory bodies has made the Indian infrastructure space more attractive for the new players to enter and therefore possible rise in competition in the sector. Atlantaa Limited has around four decades of experience in the industry and has positioned itself in niche space following a conservative approach. Infrastructure being a capitalintensive sector requires high level of long-term debt financing. Moreover, increasing interest rates during the span of project can challenge the profit margins. Infrastructure projects involve complex design and engineering, substantial procurement of machinery and equipment, extensive construction management and sophisticated activities executed over an extended period of time. Moreover, availability of input material and volatility in its cost, arrangement of manpower could be other risks the Company is exposed to. The Company maintains a healthy and long-term relationship with its suppliers and workforce to ensure seamless execution of its projects. It also maintains strong execution efficiencies by effectively mobilizing its machineries and other resources. India is positioned for a sustainable and long-term growth.

Risk management

The Company has implemented a robust risk management framework to identify and mitigate operational and business risks. The senior management and risk management committee regularly review major risk areas. Comprehensive policies and procedures are in place to identify, mitigate and monitor risks at various levels. The company conducts a comprehensive risk review through an external agency, which provides recommendations to the Board on risk management strategies and possible controls.

Internal control systems and their adequacy

The company has an adequate internal control system in place, which is regularly monitored and updated to safeguard assets, comply with regulations and promptly address any issues. All significant transactions are authorized, recorded and reported correctly. The audit committee diligently reviews internal audit reports, takes corrective action as required and maintains open communication with both statutory and internal auditors to ensure the effectiveness of internal control systems.

Cautionary Statement

Statements in the Management Discussion and Analysis describing Atlantaa Limiteds objectives, projections, estimates, expectations may be “forward-looking statements”. Actual results may differ materially from those expressed or implied. Important factors that could make difference to the Atlantaa Limiteds operations include economic conditions in which Atlantaa Limited operates, change in government regulations, tax laws, statutes and other factors such as litigations and industrial relations.