Brahmaputra Infraproject Ltd Merged Management Discussions

BRAHMAPUTRA INFRAPROJECT LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS The objective of this report is to share and keep you abreast with the happenings and transformations occurring within the Company, that in the industry and economy, its technology and its overall business strategies. Among other things, the MD &A provides an overview of the previous year of operations and how the company fared in that time. It also provides the report on the upcoming year, outlining future goals and approaches to new Project. We begin with a general review of the industry, macro economy followed by the operational and financial details of the company including details of its human resources. Cautionary statement: Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimate expectations may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the Companys operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and other factors such as litigation and industrial relations. Economic Outlook: The Indian economy went through a tough phase in the year 2011-12. After reporting around 8.5% growth rate in the preceding two years, Indias growth rate recorded a moderate 6.9% in year 2011-12. Indias growth was impacted by both deteriorating global economy as well by domestic issues like high interest rates, inflation, infrastructure constraints, rupee depreciation and liquidity crunch among others. Indian Government has announced measures to augment the supply side response of the economy to maintain price stability and growth. Steps taken by RBI regarding monetary policies have though started showing results with marginal fall in inflation rates. However, risks related with the crude prices still remain the biggest challenge. Industry Structure: The construction industry is an integral part of the Indian economy. It is the second largest industry of the country after agriculture and it has to play a vital role in the nations progress towards achieving the status of developed nation from developing nation. The rise in investment proposals in the infrastructure sector is the silver lining in the cloud. More than half of the construction activity is generated from infrastructure sector, followed by industrial, commercial and residential sectors. Hig hways/Expressways: For a country of Indias size, an efficient road network is necessary both for national integration as well as for socio - economic development. Road connectivity forms the backbone for economic and social development of any country through connectivity and opening up the backward regions to trade and investment. Our national highways constitute only 2% of the total road network but they carry nearly 40% of the total traffic. The Indian Government has set ambitious plans for upgrading of the National Highways in years to come. Further, to encourage participation of private sector, the Department of Road Transport and Highways has laid down comprehensive policy guidelines for private sector participation in the highway sector. With an aim to increase the capacity in the various transport sectors, the 12th Five Year plan necessitates the involvement of private sector more aggressively. Your company has successfully implemented the project of construction of major interchanges, Minor Bridges, Vehicular Underpasses and Car Track under passes on Yamuna Expressway connecting Greater Noida to Agra, Uttar Pradesh. Whereas, project of construction of 6 Laning of Pune-Satara Road (NH-4), Pune, Maharashtra, is under execution. Further. We have also started bidding and securing projects from the Govt./PSU/Semi-Govt. Sector and recently bagged a project from IRCON for a Road Over Bridge in the State of Rajasthan. Building Construction: In Building Construction segment, the company has one project of construction of structural civil works Buildings of Indiabulls Centrum Park-Gurgaon, Haryana, which is under execution. Opportunities and strengths: 12th Five Year Plan aims to put the economy back on high growth trajectory of 9 percent. Preliminary assessment suggests that investment in infrastructure during the Twelth Plan (2012-17) would be about Rs.4.10 Million Crores to achieve a share of 9.95 percent as a proportion of GDP. The government of India has already initiated number of policies to attract private investments in the Road Sector such as capital grants, tax exemption, longer concession period, collection of toll and retaining the same in BOT projects, duty free import of specified modern high capacity equipment for highway construction. Your Company, since its inception, has executed prestigious projects and in this short period of time has built up commendable credentials. Based on these credentials, we have taken a conscious decision to target such projects like Bridges, ROBs etc where the existing depreciated resources of the Company such as Shuttering Material, Plants and Equipment etc can be utilized to increase the profit margins and to have an edge over the competitors. Threats, Risks and concerns: The Construction industry is marked with low entry barriers, with domination of large number of small players. Key risks synonymous to the construction industry include the global recessionary trend, economic slowdown, increasing interest rates, non-availability (or undue increase in cost) of raw materials, such as cement, steel and labour, coupled with market fluctuations. Brahmaputra Infraproject Limited is adequately equipped to face and mitigate any such adverse situation. The Company does not apprehend any inherent risk in the construction industry in the long run. Beyond standard business risks, the Company faces competition from both its old competitions as well as new entrants in the sector. This contingency, however, is more than offset by the Companys robust strengths, pioneering experience, in handling projects and themes of all kinds and dimensions, a cutting-edge management approach and its accent on continued innovation. Brahmaputra follows a process of risk management that comprises risk identification, risk analysis and measurement followed by the design of suitable risk mitigation or management framework covering control activities/procedures. The key risks identified by the business and accompanied mitigation plans include periodical review of the operating effectiveness of the internal controls. Corrective actions, wherever necessary, are taken to further strengthen the internal control mechanism. Internal Control Systems and their Adequacy: The Company has a proper and adequate system of internal controls to ensure that all its assets are safeguarded and protected against loss from un- authorized use or disposition and to ensure that all transactions are duly authorized, recorded and reported correctly and adequately. The Companys internal controls are supplemented by an extensive programme of internal audits, review by management and documented policies, guidelines and procedures. The internal control is designed to ensure that financial and other records are reliable for preparing financial information and for maintain accountability of assets. All financial and audit control systems are also reviewed by the Audit Committee of the Board of Directors of the company. Human Resource/Industrial relations: Human capital has continued to be the key engine for our growth and aspirations. The Company has been constantly reviewing its HR policies and practices to keep abreast with the market changes and has embarked upon several initiatives to focus on creating a positive work environment that provides employees with ample growth and development opportunities as well as ensuring high levels of motivation and engagement. Industrial relations have continued to be cordial throughout the year. Measures for safety of employee, scientific training, welfare, performance based appraisal system, compensation, career growth and social security schemes continued to remain key priority of the Company. Financial performance and results: The Financial statements have been prepared in compliance with the requirements of the Companies Act and the Accounting Standards issued by the Institute of Chartered Accountants of India. 1. Turnover: The Company recorded turnover of Rs. 8044.57 Lacs during the year 2011-12 as against 15,188.67 Lacs in previous year. 2. Finance charges: Finance charges for the year amounted to Rs. 450.42 Lacs as against the previous year of Rs.339.48 Lacs. This is due to increased working capital limit and short/long term loans. 3. Depreciation: The current year depreciation amounted to Rs.391.25 Lacs as against Rs.391.55 Lacs of previous year. 4. Profit: a) Profit before Depreciation and Taxation amounted to Rs.1,031.41 Lacs as against the previous year of Rs. 1,564.54 Lacs. b) Provision for taxation & deferred tax for the year amounting to Rs.204.12 Lacs as against the previous year of Rs. 388.48 Lacs. c) Profit after tax for the year amounted to Rs.421.22 Lacs as against the previous year of Rs. 779.61 Lacs. 5. Fixed Assets: During the year the fixed assets of the company increased from Rs. 2,455.76 Lacs to Rs. 2,663.08 Lacs. 6. Inventories: Inventories amounted to Rs. 3,420.32 Lacs as against Rs.1,780.92 Lacs of previous year. 7. Sundry Debtors: Customers receivable amounted to Rs.4081.39 Lacs as against Rs.432.58 Lacs of previous year. 8. Long term Loans and Advances: Long term Loans and advances represent Rs.10.17 Lacs as against Rs.11.84 Lacs in previous year. 9. Current liabilities and Provisions: The amount of Rs.5636.80 Lacs include Short term borrowings, Current maturities of Long term debt, Creditors for suppliers of raw materials, stores and spares, provisions for expenses and taxes, dividend and tax payable thereon, liabilities for gratuity and leave encashment. The Company remained prompt, as usual, in repayment of principal and interest and during the year.