AVP Infracon Ltd Management Discussions

Economic Overview

Global Economic Overview

The global economy in FY25 navigated a moderate growth trajectory, beset by persistent inflationary pressures, shifting geopolitical alliances, and volatile commodity prices. According to the International Monetary Fund, global GDP is projected to grow by about 3.3% in 2024, and 3.4% in 2025, propelled primarily by sustained momentum in select advanced economies and continued expansion in large emerging markets. However, infrastructure investments globally were influenced by supply chain rebalancing, energy transition policies, and heightened risk aversion among investors resulting in a focus on resilience and adaptability in capital projects.

Indian Economic Environment

India solidified its reputation as the fastest-growing major economy, clocking real GDP growth of approximately 7.6% in FY25, powered by government- led capex, steady industrial output, and resilient domestic consumption. The countrys robust economic framework was underpinned by flagship initiatives such as the National Infrastructure Pipeline (NIP), PM Gati Shakti, Make in India, and continued ease-of-doing- business reforms. The Union Budget for 2025-26 saw a record allocation of over Rs. 11 lakh crore (~$135 billion) to infrastructure, incentivizing both public and private sector participation. Improved logistics, supply chain digitization, and expanded financing access further bolstered sectoral vitality.

Indian Infrastructure Industry: Overview, Policies, and Outlook

Indias infrastructure sector is the fundamental pillar supporting the nations long-term economic aspirations, including the goal of becoming a USD 5 trillion economy. The scale of this opportunity is substantial and continues to expand. The Indian infrastructure market, valued at $190.7 billion in 2025, is projected to reach $280.6 billion by 2030, charting a robust Compound Annual Growth Rate (CAGR) of 8%. The road construction sub-sector, which is central to the nations connectivity agenda, exhibits even more vigorous growth potential. Valued at USD 142.40 billion in 2024, the road construction market is forecast to expand at a CAGR of 10.20%, reaching an estimated USD 341.31 billion by 2033.

The sheer magnitude of the project pipeline underscores this growth narrative. The National Infrastructure Pipeline (NIP), a comprehensive framework for infrastructure development, has expanded its scope to include 9,142 projects, indicating a vast and growing reservoir of opportunities for construction and engineering firms. Within this broad landscape, transport infrastructure commands the largest sectoral share, aligning perfectly with the core competencies of AVP Infracon Limited. The sustained, high-growth projections for both the overall sector and the specific road construction segment signal that the current demand is not a transient, cyclical peak but a long-term, structural growth story. This provides a strong basis for long-term strategic planning, justifying investments in capacity expansion, technological upgradation, and geographic diversification to capitalize on the unfolding opportunities.

Union Budget FY 2025-26: A Renewed Mandate for Infrastructure

The Union Budget for FY 2025-26 serves as the primary fiscal engine driving the infrastructure sector, reaffirming the governments unwavering commitment to nationbuilding. The budget is distinguished by a sustained, high level of capital outlay, which provides clear and tangible support for the industrys growth trajectory.

The total capital investment outlay for infrastructure was increased to a record Rs. 11.21 lakh crore (approximately USD 128.64 billion), a figure that constitutes a significant 3.1% of the nations GDP. This allocation builds upon the high base of the previous year, demonstrating a consistent and long-term policy focus. The Ministry of Road Transport and Highways (MoRTH), the principal client for the road construction industry, received a substantial allocation of Rs. 2.87 lakh crore.

Furthermore, the government has continued its strategic policy of supporting state-level infrastructure development by extending the 50-year interest-free loan facility to states for their capital expenditure. The outlay for this scheme was enhanced to Rs. 1.5 lakh crore for FY26, a move that is expected to stimulate infrastructure creation across various states, thereby broadening the addressable market for construction companies. The following table summarizes the key budgetary allocations that are set to catalyze growth in the sector.

Foundational Government Initiatives

Beyond the significant fiscal allocations, the governments infrastructure push is architected around a series of strategic, long-term initiatives designed to create an integrated and efficient ecosystem for project development and execution. These programs represent a fundamental shift from siloed project planning to a holistic, technology-driven, and financially sustainable approach.

• PM Gati Shakti National Master Plan: This initiative is a transformative digital platform aimed at ensuring integrated planning and coordinated execution of infrastructure projects. By bringing together 44 Central Ministries and 36 States/UTs on a single platform with 1,614 integrated data layers, the plan facilitates multimodal connectivity and reduces logistical bottlenecks. A key objective is to lower Indias logistics costs from the current 14% of GDP towards a globally competitive target of 8%. For contractors, this improved planning de-risks projects by ensuring they are economically viable and strategically located, leading to smoother execution and more reliable payment cycles. The decision to provide private sector access to Gati Shakti data and maps will further enhance project planning and efficiency.

• Bharatmala Pariyojana: As the flagship program for highway development, Bharatmala Pariyojana targets the construction and upgradation of 34,800 km of national highways. As of November 2024, construction has been completed on 18,714 km (54% of the target), with a total expenditure of Rs. 4.72 lakh crore, representing 88% of the initial planned financial outlay. The significant progress and continued execution under this program ensure a robust and visible pipeline of large-scale road projects for the industry.

• National Monetization Pipeline (NMP): The launch of the second Asset Monetization Plan for the period 2025-30 is a critical component of the governments strategy for sustainable infrastructure financing. The plan aims to generate Rs. 10 lakh crore by monetizing operational public sector assets, with the proceeds being ploughed back into the creation of new infrastructure. This creates a self-sustaining funding cycle that ensures a continuous flow of capital for new projects, providing long-term visibility and stability for the construction sector.

Roads and Highways Sector: The Road Ahead Market Outlook and Growth Drivers

The roads and highways sector, the backbone of Indias transport infrastructure, is poised for a period of sustained and accelerated growth. Indias road network, already the second largest in the world at over 66.71 lakh km, is undergoing a phase of rapid expansion and qualitative upgradation. The government has set an ambitious target to expand the national highway network to 2 lakh km by 2025. To achieve this, the construction momentum is set to be maintained, with a goal of adding up to 13,000 km of highways in FY25 alone. This is supported by a significant increase in the pace of construction, which has already surged from an average of 12.1 km per day in 2014-15 to an impressive 33.8 km per day in 2023-24.

This expansion is driven by powerful underlying economic and social trends. Rapid urbanization, rising vehicle ownership, and the exponential growth of the e-commerce and logistics sectors are creating unprecedented demand for a high-quality, efficient, and seamless transportation network. The focus of development is now shifting from merely adding network length to enhancing network quality. There is a clear emphasis on upgrading existing highways and constructing new, high-specification roadways. The length of national highways with four or more lanes has increased by 2.5 times since 2014, and there is a concerted push towards developing access-controlled greenfield expressways. This trend towards higher- value, more technically complex projects creates significant opportunities for established and proficient EPC companies that possess the requisite expertise, equipment fleet, and project management capabilities.

The Public-Private Partnership (PPP) Ecosystem

Recognizing that public funds alone cannot meet the nations vast infrastructure needs, the government has actively engineered a policy environment to encourage and facilitate private sector participation. The private sector is viewed not merely as a contractor but as a long-term partner in nation-building. The Union Budget for FY25-26 has explicitly mandated that each infrastructure-related ministry must formulate a three- year pipeline of projects that can be implemented in Public-Private Partnership (PPP) mode.

For the national highways sector, MoRTH has set a specific and ambitious target of attracting Rs. 35,000 crore in private sector investment during FY25. To achieve this, the government has refined and promoted innovative financing models that are designed to de-risk projects for private developers and make participation more attractive. The Hybrid Annuity Model (HAM), in particular, has become the preferred mode for highway projects. Under the HAM framework, the government provides 40% of the project cost as a grant during the construction period, significantly lowering the upfront capital burden and financial risk for the private partner. This policy structure is a direct enabler of growth, opening up a new stream of large-scale, higher-margin opportunities for capable EPC firms.

Embracing the Future: Innovation, Technology, and Sustainability

The road construction industry is undergoing a significant transformation, driven by the adoption of modern technologies and a growing emphasis on sustainability. These are no longer peripheral considerations but are rapidly becoming core requirements in project tenders and execution standards.

The concept of “smart highways" is gaining traction, involving the integration of Intelligent Traffic Management Systems (ITMS), automated digital toll collection (FASTag), and real-time surveillance and monitoring systems to enhance safety and traffic flow. In the construction phase, there is rapid adoption of new technologies such as Building Information Modeling (BIM) and digital twins, which allow for more precise planning, better collaboration, and more efficient project execution.

Simultaneously, there is a strong and growing focus on environmental sustainability. This is manifesting in several ways, including the development of solar- powered highway corridors, the use of recycled materials like municipal waste in road construction, and the adoption of green technologies to minimize carbon emissions and environmental impact. Companies that proactively invest in these technological and sustainable capabilities will hold a distinct competitive advantage in bidding for the next generation of infrastructure projects.

Corporate Overview and Strategic Strengths

Established in 2009, AVP Infracon Limited has, over 15 years, cemented its position as a premier infrastructure development company, specializing in the Engineering, Procurement, and Construction (EPC) of technically complex and high-value projects. With a strong operational base in Tamil Nadu, the company is now strategically expanding its footprint into other high- growth states. Our core business segments include the construction of roads, national and state highways, bridges, and flyovers, where we have built a reputation for excellence, timely execution, and an unwavering commitment to safety.

A cornerstone of AVP Infracons strategy and a key competitive advantage is our deep commitment to backward integration and in-house execution. This model provides unparalleled control over the project supply chain, mitigates risks, ensures quality, and protects margins. This strategic strength is built upon:

• An extensive in-house fleet of 124 units of modern construction equipment.

• Three strategically located, company-owned Ready Mix Concrete (RMC) plants.

• A recent strategic investment of Rs. 17 crore in a new blue metal crusher unit, which will cater to the increased demand for aggregates and ensure a steady supply of high-quality raw materials for our expanding operations.

This strategy of backward integration serves as a powerful defensive moat in an industry that is often susceptible to supply chain disruptions and input cost volatility. By controlling key elements of the supply chain, we transform a significant portion of variable costs into manageable fixed costs, leading to better project cost control, greater predictability in margins, and an enhanced ability to deliver projects on schedule.

Financial Performance

Fiscal Year 2025 was a landmark year for AVP Infracon Limited, characterized by exceptional growth across all key financial metrics and a significant scaling of our operations. This performance is a direct result of our strong execution capabilities, operational discipline, and the favorable industry tailwinds. The consolidated financial highlights for the year are presented below.

Particulars	FY 2024	FY 2025
Total Revenue (Rs. in crore)	160.87	292.81
EBITDA (Rs. in crore)	36.09	62.85
EBITDA Margin (%)	22.44%	21.46%
Profit Before Tax (Rs. in crore)	25.56	45.37
Net Profit (Rs. in crore)	18.83	33.27
PAT Margin (%)	11.60%	11.30%
Earnings Per Share (EPS) (Rs.)	10.25	13.25
Net Worth (Rs. in crore)	93.98	126.17
Return on Equity (ROE) (%)	20.04%	26.40%
Return on Capital Employed (ROCE) (%)	26.65%	34.35%

The company achieved a remarkable 82.02% growth in consolidated revenue, which surged to Rs. 292.81 crore, driven by the efficient execution of our order book and the securing of fresh contracts. This top-line growth was accompanied by strong profitability. EBITDA grew by 74.17% to Rs. 62.84 crore, while Net Profit saw a 76.69% jump to Rs. 33.27 crore. The ability to maintain a robust PAT margin of 11.30% while scaling rapidly highlights the effectiveness of our cost control measures and the benefits of our integrated business model.

Furthermore, the company demonstrated exceptional capital efficiency. The Return on Equity (ROE) improved significantly to 26.04%, and the Return on Capital Employed (ROCE) reached an impressive 34.35%.

This signifies our ability to generate high returns on the capital invested in the business, creating substantial value for our shareholders.

Operational Excellence in FY25

The stellar financial performance in FY25 was underpinned by a series of strategic operational achievements that have strengthened our core business while simultaneously paving the way for future growth. These actions demonstrate a company in a phase of strategic transition, executing a sophisticated “core and explore" strategy.

• Strengthening the Core Business: We continued to win significant contracts in our primary domain, including a notable Rs. 86.54 crore order for road widening from the Superintending Engineer Highways, alongside several other sub-contracts totaling over Rs. 100 crore. To support this growth, we reinforced our backward integration with the Rs. 17 crore investment in a new crusher unit.

• Strategic Diversification: We successfully ventured into new, high-potential verticals that are aligned with national development priorities. Our entry into the renewable energy space was marked by the execution of a 2.08 MWp Solar EPC project valued at Rs. 9.23 crore. We also secured a Rs. 21 crore turnkey contract for the construction of a cold storage facility and warehouse, tapping into the growing demand for modern agricultural and logistics infrastructure.

• Enhanced Financial Credibility: Our strong performance and prudent financial management were recognized by the market, leading to an upgrade in our credit rating from Acuite Ratings & Research Limited to ‘ACUITE BBB /Stable for long-term facilities and ‘ACUITE A3+ for short-term facilities. This enhanced rating improves our access to finance at more competitive rates, providing a crucial advantage for future growth.

• Commitment to Corporate Governance:

Demonstrating our commitment to sustainable and responsible corporate citizenship, we established the “AVP FOUNDATION," a charitable trust dedicated to undertaking our Corporate Social Responsibility (CSR) activities in a structured and impactful manner.

Order Book, Outlook, and Future Trajectory

AVP Infracon is strategically positioned to continue its high-growth trajectory, supported by a robust order book, a clear strategic roadmap, and a favorable industry environment.

As of March 2025, our unexecuted order book stands at over Rs. 400 crore, providing strong revenue visibility for the upcoming fiscal year. Building on this foundation, the management has set a confident revenue target of Rs. 500+ crore from our core EPC business in FY26. This will be supplemented by an additional targeted revenue of Rs. 75-100 crore from our new solar EPC vertical, taking the total expected top line to nearly Rs. 600 crore.

To fuel growth beyond FY26 and in line with our longterm vision of achieving a four-figure turnover (Rs. 1,000 crore), we are targeting new order inflows of Rs. 700-800 crore during the fiscal year. We are committed to achieving this growth while maintaining our industryleading profitability, and we will continue to bid selectively for projects that meet our target PAT margin levels.

Our future strategy is multi-pronged, focusing on deepening our core competencies, widening our geographic footprint, and extending our presence in new verticals. A key strategic objective is to de-risk our business from geographic concentration by expanding our operations beyond Tamil Nadu. We have set a clear target of generating at least 25-30% of our revenue from other states in the near future. This comprehensive and credible roadmap positions AVP Infracon for a future of sustained, high-quality growth.

Ratio Analysis

Metrices	FY 2023-24	FY 2024-25	% of Variance	Reason
EBITA Margin	22.43%	21.44%	-0.99%	Due to increase in expense
PAT Margin	11.70%	11.36%	-0.34%	Due to increase in expense
ROE	0.20	0.26	6.00%	NA
Interest Coverage	4.57	4.50	-7.00%	Due to increase in Interest Payment
Debt to Equity	0.78	1.37	59.00%	NA
Current Ratio	2.19	1.42	-77.00%	Due to increase in short term debt
Inventory Turnover	0.96	1.12	16.00%	NA
Receivable Turnover	2.51	4.63	84.46%	NA

Risk and Mitigation

1. Financial Risks:

• Substantial Working Capital: The business demands substantial working capital, and any delays in securing the necessary funds could negatively affect the financial performance.

• Dependency on Government Projects: The majority of our income comes from agreements with a small number of government entities. If there are unfavourable changes in the policies of the central or state government, it could result in the closure, termination, restructuring, or renegotiation of our contracts, potentially impacting our business and financial performance significantly.

2. Operational Risks:

• Concentrated Geographical Focus: The entirety of companys revenue is sourced from the State of Tamil Nadu which increases the vulnerability to unfavourable developments such as heightened competition, economic shifts, and demographic changes.

• Other Uncertainties: The Projects face various implementation and other uncertainties, such as the risks of exceeding planned time and cost, which could have negative effects on the business, operational results, and overall prospects

3. Strategic Risks:

• Joint Venture Challenges: Collaborating with other companies may lead to partnership conflicts or misaligned objectives, impacting project execution and success.

• External Challenges: Challenges in effectively overseeing the expansion of our operations and implementing our growth strategies, potentially leading to adverse effects on our business, financial condition, operational results, and future prospects.

4. Market Risks:

• Competitive Pressure: Intense competition and fluctuations in market demand could affect market share, pricing strategies, and overall revenue.

• Technological Advancement: The prosperity of the business may be compromised if the company do not stay abreast of technological advancements within the construction industry.

Human Resource

Our people are our greatest asset. As of March 2025, we proudly employ 63 full-time staff and 120 contract professionals who play a vital role in driving the companys growth and success. We are dedicated to fostering a positive and productive workplace through well-rounded HR policies and practices that focus on attracting top talent, providing continuous training and development, and nurturing a culture of innovation and excellence. By prioritizing our employees growth and well-being, we are building a motivated and skilled team that consistently delivers outstanding results. Our strategic HR initiatives are aligned with the companys objectives, enhancing operational efficiency and reinforcing our mission to be a leader in the infrastructure sector.

Internal Control System

AVP Infracon Limited places utmost emphasis on a rigorous internal control framework to safeguard stakeholder interests and support sustainable growth. Central to this system is a comprehensive suite of well- documented policies, delegated authority protocols, and standard operating procedures designed to ensure compliance with statutory guidelines and the companys own stringent benchmarks.

The internal audit department operates independently, executing a dynamic, risk-based audit plan approved by the Audit Committee. Regular internal and external audits encompass financial accounting, project execution, compliance frameworks, and IT security. Guided by international standards, the company leverages real-time, digital monitoring tools for project and financial control, resource tracking, and anomaly detection. Periodic process reviews result in update and fine-tuning of controls to address emergent risks and opportunities.

Whistleblower avenues, fraud-prevention programs, and strong documentation protocols underpin a culture of integrity and accountability. For FY25, enhancements included the integration of AI-driven analytics for risk identification, upgraded cybersecurity measures, and targeted training in compliance, all of which contributed to rapid issue remediation and strengthened oversight. Senior management and the Board of Directors regularly review all control systems and outcomes, reinforcing AVP Infracons commitment to high standards of corporate governance. This robust internal control environment promotes sustainable expansion, fosters regulatory compliance, and strengthens confidence among clients, investors, and employees alike.

Cautionary Statement

The objectives, projections, outlook, expectations, estimates, and other information expressed in the Management Discussion and Analysis may be regarded as forward-looking statements under applicable securities laws and regulations. These statements are based on certain assumptions that cannot be guaranteed by the Company. Various factors, some of which may be beyond the Companys direct control, could significantly impact its operations. Consequently, actual results may differ materially from these projections, whether expressed or implied, due to factors beyond the Companys ability to effectively implement its growth strategy. The Company assumes no obligation to update or publicly amend, modify, or revise forward-looking statements to reflect subsequent developments, information, or events occurring after the date of the statement. The Management of AVP Infracon Limited presents below an analysis of its performance for the accounting year ended March 31, 2025 (covering the period from April 1, 2024, to March 31, 2025).