AVP Infracon Ltd Management Discussions

GLOBAL ECONOMY OUTLOOK

The global economy maintained its resilience through 2025 despite persistent geopolitical tensions, evolving trade policies and uneven economic conditions across regions. Looking ahead, renewed conflict in the Middle East has added uncertainty to the global outlook, with potential implications for energy prices, inflation, supply chains and financial stability.

According to the International Monetary Fund (IMF), global growth is projected at 3.1% in 2026 and 3.2% in 2027 under its reference forecast. Continued technological advancement, investment activity and resilient labour markets are expected to support economic growth. However, geopolitical risks, commodity price volatility and changes in global trade dynamics could weigh on business sentiment and economic activity.

Inflationary pressures may remain elevated in the near term, particularly amid energy-related uncertainties. Against this backdrop, policymakers across major economies are expected to balance measures aimed at maintaining macroeconomic stability with efforts to support investment and sustainable long-term growth.

INDIAN ECONOMY OUTLOOK

India continued to be among the fastest-growing major economies in FY26, supported by robust domestic demand, stable macroeconomic conditions and sustained government initiatives. Despite a challenging global environment marked by trade disruptions and geopolitical uncertainties, the Indian economy recorded 7.6% growth in FY26, compared with 7.1% in FY25. Growth remained broad-based, with manufacturing and services contributing strongly, supported by easing inflation, favourable monetary conditions and continued public capital expenditure.

Strong consumer demand, accelerating infrastructure development and rising formal employment are expected to provide a firm foundation for economic activity. The World Bank projects Indias growth at 6.6% in FY27, reflecting near-term external pressures, including geopolitical risks and elevated energy prices.

Over the medium to long term, favourable demographics, rapid urbanisation, rising incomes and ongoing structural reforms are expected to sustain Indias growth momentum and reinforce its position as a key driver of global economic growth.

GLOBAL INFRASTRUCTURE CONSTRUCTION INDUSTRY OUTLOOK

The global infrastructure construction market is projected to grow from USD 3.82 trillion in 2025 to USD 5.49 trillion by 2031, registering a CAGR of 6.22% during 2026–2031. Growth is being supported by increased public infrastructure spending, energy transition initiatives, urbanisation and the need to modernise ageing infrastructure.

Transportation remains the largest infrastructure segment, accounting for 37.1% of market revenue in 2025, while utilities are expected to witness strong growth as investments in power grids, renewable energy and storage accelerate. At the same time, infrastructure development is increasingly shifting towards renovation and modernisation, driven by the need to extend the life of existing assets and improve resilience.

Public funding continues to be the primary source of infrastructure investment, accounting for 61.2% of spending in 2025, while private capital is expected to expand at a faster pace through public-private partnerships and concession-based models. Rising construction costs, funding constraints, labour shortages and regulatory delays, however, remain key challenges for the sector.

INDIAN INFRASTRUCTURE INDUSTRY OUTLOOK

Indias infrastructure sector continues to be a key enabler of economic growth, supported by sustained public investment, rising private participation and increasing demand for connectivity and essential services. Investment is being directed across roads, railways, airports, ports, urban transport, utilities and logistics, while emerging areas such as renewable energy, power transmission, green hydrogen and digital infrastructure are creating additional avenues for growth.

The sector is also undergoing a shift towards integrated and multimodal infrastructure development, with greater emphasis on improving connectivity, logistics efficiency and the utilisation of existing assets. Alongside new construction, renovation and modernisation are gaining importance as India seeks to improve asset efficiency, resilience and long-term serviceability.

Government-led programmes continue to support the development of the infrastructure ecosystem. PM GatiShakti is facilitating coordinated planning across multiple infrastructure and transport ministries, while the National Logistics Policy seeks to improve supply-chain efficiency and reduce logistics costs. Programmes such as Bharatmala, Sagarmala and UDAN are further supporting road, port and regional air connectivity.

Indias Infrastructure Transformation

- PM GatiShakti: 44 MINISTRIES + 36 STATES/UTS Integrated infrastructure planning

- Metro Network: 993 km Operational network

- Logistics Performance: 38th globally LPI ranking in 2023

- Bharatmala: 20,378 km Constructed by March 2025

Major National Initiatives

Source – Press Information Bureau (PIB), Government of India, Mordor Intelligence

BUSINESS PERFROMNACE AND OUTLOOK

COMPANY OVERVIEW

AVP Infracon Limited, established in 2009, is an infrastructure development and construction company with over 15 years of experience in executing technically complex infrastructure projects. The Company has developed capabilities across national and state highways, expressways, bridges, flyovers, viaducts, irrigation projects, urban infrastructure and other civil construction activities. Its operations have historically been concentrated in Tamil Nadu, while the Company continues to explore opportunities to expand its geographical presence.

AVP follows an integrated execution approach supported by its in-house construction resources and infrastructure assets. The Company has a fleet of 200+ construction equipment units, three RMC plants and one blue-metal unit, enabling greater control over procurement, material availability and project execution.

The Company has established relationships with key government and infrastructure agencies, including NHAI, state highway authorities and other public-sector bodies. This provides access to a steady pipeline of infrastructure projects and supports the Companys presence in the roads and highways segment.

Going forward, AVP intends to leverage its existing execution capabilities while expanding into new geographies and adjacent infrastructure segments, including irrigation and building construction. The Company is also evaluating joint-venture opportunities to participate in larger-value projects and enhance its scale of operations.

OUTLOOK

Indias continued emphasis on infrastructure development, road connectivity, urbanisation and public capital expenditure provides a supportive environment for infrastructure construction companies. The ongoing development of highways, bridges, urban infrastructure and other public assets is expected to sustain demand for EPC and civil construction services.

AVPs established capabilities in roads and highways, relationships with government agencies and integrated project-execution model position the Company to participate in this expanding opportunity. The Company plans to broaden its geographical footprint beyond its existing markets and diversify into irrigation, buildings and other infrastructure-related opportunities.

Management has also identified joint ventures for larger projects, technology upgrades, cost efficiency and enhanced in-house integration as important elements of its growth strategy. These initiatives are expected to support scalability while maintaining focus on execution quality and profitability.

SWOT ANALYSIS

Strengths

Established execution track record:

With more than 15 years of experience, AVP has developed capabilities across highways, roads, bridges, flyovers, viaducts and urban infrastructure projects.

Integrated operating capabilities:

The Companys fleet of 200+ equipment units, three RMC plants and blue-metal unit provide greater control over key inputs and project execution.

Strong government relationships:

Established relationships with NHAI and state government agencies support the Companys access to infrastructure projects and repeat business.

Diversified infrastructure capabilities:

AVP operates across multiple infrastructure categories, reducing dependence on a single project type and providing opportunities to participate in different infrastructure programmes.

Strong financial growth:

Revenue increased from Rs 160.9 crore in FY24 to Rs 292.8 crore in FY25 and Rs 441.4 crore in FY26, demonstrating significant expansion in the Companys operating scale.

Weaknesses

Geographical concentration:

The Companys historical concentration in Tamil Nadu exposes it to regional economic, regulatory and competitive conditions. Geographic diversification remains important for reducing this concentration.

Working-capital intensity:

Infrastructure projects typically require substantial working capital for mobilisation, inventory, receivables, retention money and performance guarantees. Efficient working-capital management will remain important as the Company expands.

Dependence on government projects:

A significant portion of the Companys business is linked to government and public-sector infrastructure projects. Changes in government spending, project awards or execution timelines could affect business performance.

Increasing working-capital cycle:

The Companys FY26 operating metrics indicate higher debtor and inventory days compared with FY25, highlighting the need for continued focus on collections and inventory management.

Opportunities

Infrastructure-led economic growth:

Continued government investment in highways, transportation and urban infrastructure provides a sizeable opportunity for EPC and construction companies.

Geographical expansion:

Expansion into additional states can diversify the Companys revenue base and provide access to a larger infrastructure opportunity pool.

Entry into new segments:

Management intends to expand into irrigation and building construction, creating additional avenues for growth beyond the Companys traditional road and highway portfolio.

Large-value projects through partnerships:

The Company plans to explore joint ventures with other infrastructure companies to bid for and execute larger projects, potentially increasing its addressable project size.

Technology and backward integration:

Investment in technology and greater in-house integration can support cost efficiency, execution control and operational scalability.

Threats

Competitive intensity:

The infrastructure and EPC industry is highly competitive, with companies competing on project execution capabilities, technical qualifications, pricing and financial strength. Aggressive bidding could exert pressure on project margins.

Input-cost volatility:

Fluctuations in prices of bitumen, cement, steel, fuel and other construction inputs can affect project costs and profitability, particularly where escalation mechanisms are limited.

Project execution risks:

Delays related to approvals, land availability, weather, labour, material availability or changes in project scope may affect project schedules and financial returns.

Government and regulatory dependence:

Changes in government policies, infrastructure spending priorities, tendering processes or regulatory requirements may influence the timing and availability of new projects.

Financing and working-capital requirements:

Expansion in project scale can increase the requirement for working capital and financial resources, making liquidity and funding management important considerations.

SEGMENT-WISE PERFORMANCE

AVPs operations are primarily focused on infrastructure construction and EPC activities. While the Company operates across multiple project categories, the available FY26 disclosures do not provide a separate revenue or profitability split for each operating segment. Accordingly, performance is discussed based on the Companys principal areas of activity rather than presenting an unsupported segment-wise revenue allocation.

Roads and Highways

Road and highway construction remains the Companys core operating area. AVP undertakes construction, widening, strengthening and related works across national and state highways. During FY26, the Company continued to secure projects from NHAI and state highway authorities, reinforcing its position in this segment.

Bridges, Flyovers & Viaducts

The Company has established capabilities in the construction of bridges, flyovers, viaducts and associated road infrastructure. These projects complement its core highway capabilities and enable AVP to undertake technically complex civil works.

RISKS AND CONCERNS

AVP operates in a project-driven industry where business performance can be influenced by factors beyond the Companys direct control. Key risks and concerns include:

Project execution risk: Delays in obtaining approvals, availability of land, changes in project specifications, adverse weather conditions, labour availability and supply-chain disruptions may affect project timelines and profitability.

Customer concentration: Dependence on government agencies and a limited number of major customers may expose the Company to changes in project awards, government spending and customer-specific developments.

Geographical concentration: A significant presence in Tamil Nadu exposes the Company to regional economic and policy developments. Geographic diversification is therefore an important strategic priority.

Raw-material price risk: Volatility in prices of bitumen, cement, steel, fuel and other inputs may impact project margins.

Working-capital risk: Construction projects require significant upfront expenditure and may involve delayed collections, retention money and performance guarantees, which can increase funding requirements.

Competition: Increasing competition in the EPC sector may result in aggressive bidding, lower margins and pressure on order acquisition.

Regulatory risk: Infrastructure projects are subject to various statutory approvals, environmental requirements, contractual conditions and government regulations. Changes or delays may affect project execution.

The Company continues to monitor these risks through its internal processes and management oversight, with the objective of identifying potential challenges at an early stage and taking appropriate mitigating measures.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

AVP Infracon has established internal control mechanisms covering financial reporting, operational processes, asset protection, regulatory compliance and risk management. The internal control framework is supported by defined approval processes, periodic reviews and internal audit mechanisms.

The Companys internal audit function evaluates key business processes and controls based on identified risks and their potential impact. Internal audit observations are reviewed by management and the Audit Committee, with corrective measures undertaken wherever required.

At the project level, the Company monitors operational progress, material consumption, equipment utilisation and financial performance to maintain execution discipline and identify deviations in a timely manner.

The internal control framework is designed to provide reasonable assurance regarding the reliability of financial reporting, safeguarding of assets, prevention and detection of irregularities and compliance with applicable laws and regulations.

FINANCIAL PERFORMANCE AND OPERATIONAL PERFORMANCE

Financial Performance

Revenue growth reflects the Companys increased scale of project execution and continued order inflows. However, EBITDA and PAT margins moderated during FY26, reflecting higher operating and input costs.

OPERATIONAL PERFORMANCE

The Companys operating performance was supported by execution across roads, highways and associated infrastructure projects. Its integrated construction resources, comprising 200+ equipment units, three RMC plants and one blue-metal unit, continued to support project execution and procurement efficiency.

The Company also continued to strengthen its project pipeline through contracts from NHAI and state authorities. The continued addition of projects provides execution visibility while supporting future revenue growth.

At the same time, the increase in working-capital metrics during FY26 highlights the importance of improving collections, inventory utilisation and cash conversion as the Company expands its operating scale.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Human capital remains an important enabler of AVPs project execution capabilities. The Company relies on experienced professionals, project-management teams, engineers, site personnel and skilled workers to execute infrastructure projects while maintaining quality and safety standards.

AVP focuses on employee capability development, operational discipline and workplace safety. The Companys expanding project portfolio and geographical ambitions will require continued investment in skilled manpower and strengthening of project-management capabilities.

The Company also maintains policies and mechanisms relating to employee welfare, workplace conduct and prevention of sexual harassment. Stable employee relations and an effective workforce remain important to ensuring continuity of project execution.

RATIO ANALYSIS

Details of significant changes in key financial ratios, along-with detailed explanations:

CLOSING THOUGHTS

FY26 represented another phase of significant scale-up for AVP Infracon. The Company continued to strengthen its position in the infrastructure sector through project execution, expansion of its operating capabilities and development of its project pipeline.

With established capabilities across roads and highways, an integrated execution platform and relationships with key infrastructure authorities, AVP is positioned to participate in Indias continuing infrastructure development.

The Companys next phase will focus on geographical diversification, entry into adjacent infrastructure segments, larger project opportunities, technology adoption and improved operating efficiency. At the same time, disciplined working-capital management, prudent project selection and effective risk management will remain critical to converting growth opportunities into sustainable shareholder value.

The Companys focus remains on building a larger, more diversified and resilient infrastructure platform while maintaining its commitment to quality, timely execution and responsible growth.

DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the Company have been prepared in accordance with the applicable Accounting Standards (AS) and the provisions of the Companies Act, 2013. The Company has not followed any accounting treatment different from that prescribed under the applicable Accounting Standards during the financial year 2025-26.