Capacite Infraprojects Ltd Management Discussions

Economic overview

Indian economy

The Indian economys sound economic fundamentals have kept it buoyed amid global headwinds. The domestic economy sustained its position as the one of the fastest-growing major economies in the world. According to the National Statistical Office (NSO), the Indian economy has clocked a growth rate of 7.2% in FY23. This expansion can be attributed to upbeat construction activity, which has been facilitated by higher infrastructure investment by both the Central Government and State governments.

By 2027, India is expected to become the worlds third-largest economy.

(Source- https://pib.gov.in/PressReleasePage.aspx?PRID=1929325 )

The Government has focused on enhancing infrastructure investments to initiate the post-pandemic economic recovery. Capital expenditure of the Government saw a spike of 63.4% in the first eight months of FY23, crowding in private investments as well. The proposed allocation for capex in the Union Budget for FY24 totalled 10 lakh crores, indicating an increase of 33.40% compared to the past year. This emphasis on driving infrastructure activity acts as a tailwind to drive sustained growth of the Indian economy.

Outlook

Strong domestic demand, rising employment indicators, reducing inflationary pressures and a high corporate sector debt profile all contribute to an optimistic outlook for the Indian economy¹. Banks, financial institutions and business entities with healthy balance sheets are helping recover the growth momentum which had been impacted by COVID. The demographic dividend, the digital revolution, policy measures aimed at transforming India into a global manufacturing hub, a rebound in service sector competitiveness, and the favourable geo-economic positioning that is underway have all improved medium-term prospects. The trends suggest that Indias economy is on an upward trajectory and the country is well-positioned to continue its growth despite global turbulence.

(Source – The Reserve Bank of India)

Industry overview

Indias construction sector

During FY23, the construction sector in India has grown by 5% in real terms, compared to the previous estimate of 5.2% growth. The Department for Promotion of Industry and Internal Trade (DPIIT) reports that FDI, which includes equity inflows, reinvested earnings and other capital inflows into India, contracted by 14.5% to H 2.9 trillion during the period from April to December in the current financial year 2022-2023 (FY23), compared to H 3.4 trillion during the same period in FY22.

However, the growth of the construction industry in FY2023 will be supported by government investments aimed at completing major infrastructure projects. The Ministry of Statistics and Programme Implementation (MoSPI) states that the value added by the construction industry grew by 8.4% year-on-year in Q4 2022, following a growth of 5.8% in Q3 and 16.2% in Q2 2022. In 2022, the total gross fixed capital formation (GFCF) increased by 14.8%.

It is projected that the Indian construction sector will experience an average annual growth rate of 6.3% during the period from FY2024-27. This growth will be fuelled by investments in transportation, electricity and housing projects. The development of Indias infrastructure, as outlined in the INR104.2 trillion Pradhan Mantri Gati Shakti Master Plan, announced in October FY2021, will contribute to this growth and the countrys economic expansion over the next 25 years².

Outlook

Urban development

The construction industry is poised for growth with the urban population expected to contribute 75% of the GDP and an increasing number of cities with populations exceeding 1 million. This growth will be driven by the rising demand for urban construction and infrastructure development. To address these needs, the Government of India has allocated a budget of H 764.32 billion specifically aimed at enhancing various

urban sectors, including housing, transportation, sanitation and infrastructure, for the fiscal year 2023-24. From this amount, the largest share is dedicated to PMAY Urban (33%) and metro (30 %) projects that involves initiatives such as metro rail, transportation planning, capacity building in urban transport and the National Capital Region Transport Corporation. These two activities account for over 60% of the total allocation. The remaining funds are allocated to AMRUT (10.5 %), Smart Cities (10.5 %) and other expenditure items.

Affordable housing

By FY2030, the projected surge in urban population exceeding 40% will generate a significant need for affordable housing. This situation offers construction companies an opportunity to prioritise the construction of mid-end and affordable housing units, facilitated by initiatives such as Pradhan Mantri Awas Yojana(PMAY). However, the demand for affordable housing in India is being driven by the expansion of the countrys middle class. According to estimates by the National Council of Applied Economic Research, the middle-class population in India is projected to increase to over 200 million by FY2025.

The increasing demand for affordable housing in India is also being propelled by the countrys expanding workforce. It is anticipated that by FY2050, India will have one of the worlds largest labour markets, with a working-age population exceeding 1 billion individuals. As this population grows, the requirement for housing will escalate, particularly in metropolitan areas where the majority of employment opportunities are concentrated³.

Infrastructure investment

The disbursement of USD 1.4 trillion through the National Infrastructure Pipeline across multiple sectors is expected to result in a substantial increase in construction projects encompassing renewable energy, roads and highways, urban infrastructure, and railways.

Smart cities

The Smart City Mission, which seeks to modernise 100 cities, is set to enhance construction endeavours focused on technology-driven urban planning. This is anticipated to stimulate innovation and encourage the integration of new technologies within the construction industry.

Green and sustainable construction

The emphasis on green development and the shift towards renewable energy sources indicate a future in which the construction industry will have to adopt eco-friendly practices and technologies⁴.

Related sub sectors in construction industry i. Real estate ii. Construction materials i. Real estate

The real estate industry in India has been instrumental in propelling the nations economic advancement by generating considerable job opportunities. Despite obstacles, the sector has demonstrated impressive adaptability in recent times, with proactive government assistance. Consequently, India is on track to become the third-largest construction market, presenting significant possibilities. The previous year saw a surge in demand, signalling favourable prospects within the sector. Anticipated outcomes include abundant business launches, employment potential and a conducive environment for startup expansion.

ii. Construction materials

The construction materials sector has had a remarkable resurgence and has returned to pre-COVID levels. The sector grew at a rate of 10% in FY2022 and is primed for considerable expansion. However, one of the most essential aspects of the construction material industry is that it has achieved a size of 3,644.5 million tonnes. Moving forward, the market is projected to expand to 4,832.6 million tonnes by 2028, with a compound annual growth rate (CAGR) of 4.94% between 2023 and 2028.⁵ The growth of the construction material sector is of great importance to the overall economy, as it contributes approximately 9% to the countrys GDP and employs over 51 million individuals⁶.

The Indian cement industry has played a significant role in generating employment, boosting fiscal revenue and promoting community development, all the while making strides in manufacturing and technology. Despite the current per capita cement consumption in India being around 26 kg, compared to the global average of 540 kg per capita, there is considerable potential for industry growth. In fact, it is projected that Indias cement demand will reach 550-600 million tonnes annually by 2025⁷. 9%

Construction material industrys contribution to Indias GDP

Emerging technological trends impacting the construction industry

Technological breakthroughs are redefining the construction industry, transforming not just the job site but also the management of construction projects. The widespread deployment of drones, which enable precise surveying even from remote locations, is an instance of this. Drones and mobile devices provide additional benefits to construction sites, such as improved material tracking and inventory management. Companies could reduce expenses by minimising material waste by adopting these tools.

Building Information Modelling (BIM) is an integral part of this technological wave. BIM allows companies to create digital representations of buildings, enabling them to track physical characteristics and functionalities. The data within BIM can facilitate informed decision-making regarding materials and fittings throughout the construction process. Moreover, BIMs usage extends beyond the initial construction phase, as it can also inform maintenance schedules and contribute to overall project budget management⁸.

Opportunities in Indias construction sector

Foreign investments

Indian government permits 100% foreign direct investment (FDI) in the construction industry, focusing on townships, malls, business constructions, and urban infrastructure projects under the automatic route. FDI is also extended for urban infrastructure projects, including urban transport, water supply, sewerage and sewage treatment ⁹.

The domestic real estate market presents a significant opportunity for foreign investors, especially in the area of affordable housing. India currently faces a shortage of more than 18 million housing units, prompting the Government to launch various initiatives to address this concern. One notable initiative is the Pradhan Mantri Awas Yojana (PMAY), which provides incentives for developers to construct affordable housing units.

Indias rapidly growing economy is also driving the demand for office and retail spaces. The countrys improving infrastructure and business environment position it as an attractive location for foreign companies as investing in commercial real estate projects offers stable returns over the long-term¹⁰.

Government schemes

The government has implemented various schemes aimed at enhancing the quality of life in India through advanced and technology-driven urban planning. Notably, the Smart City Mission, which targets developing 100 cities, is expected to revolutionise urban development. Moreover, a Technology Sub-Mission of PMAY-U has identified 54 innovative global construction technologies, ushering in a new era in the Indian construction technology sector.

In addition, the Government has made significant progress in improving sanitation. Over 3,500 cities have been certified as ODF+ (Open Defecation Free Plus), and 1,191 cities have achieved the ODF++ status under the SBM-U (Swachh Bharat Mission-Urban).

To further enhance logistics and freight movement, the Government plans to develop 35 Multimodal Logistics Parks (MMLPs) at a total capital cost of USD 6.1 billion. These MMLPs will cater to 50% of the freight movement, thereby streamlining transportation and facilitating efficient logistics operations.

Rising urban population

Growing urban population has led to increased demand for housing and infrastructure in cities. This has resulted in rapid urbanisation and the need for sustainable urban planning to ensure efficient use of resources and an improved quality of life for residents. It is projected that the urban population in India will contribute 75% of the GDP (compared to the current 63%) and there will be 68 cities with a population exceeding 1 million. The construction industry in India operates within 250 sub-sectors, with interconnections across various sectors. By 2030, over 40% of the population is expected to reside in urban areas (compared to the current 33%), leading to a demand for an additional 25 million mid-end and affordable housing units¹¹.

Indias real estate market

Despite challenges, Indias real estate sector has continued to grow steadily over the years. The sector has witnessed significant investments from both domestic and international players, leading to the development of various residential and commercial projects across the country. Within the next 2-3 years, India is poised to become the third-largest construction market, reflecting significant potential. Last year witnessed a surge in demand, indicating favourable prospects in the sector. The real estate industry is expected to create ample business opportunities, employment prospects, and serve as a platform for aspiring startups. The Budget 2023 emphasised on infrastructure development, with the Central government committing approximately H 10 lakh crore in direct investments. Moreover, the allocation for the Pradhan Mantri Awas Yojana (PMAY) witnessed a 66% increase, while the Urban Infrastructure Development Fund prioritised Tier II and Tier III cities, aiming to enhance and expand infrastructure on a larger scale1².

Outlook

During the forecast period of 2023 and 2028, the real estate sector in India is projected to grow at a Compound Annual Growth Rate (CAGR) of 9.2%. As a result, in the upcoming financial year 2023-2024 there will be an increase in the number of buyers and a decrease in home loan interest rates. Numerous rating agencies have estimated that the Indian economy will grow by 8-9%, which will subsequently stimulate the expansion of the real estate market. This growth can be attributed to a rise in business activities, improved employment opportunities, and higher income levels, all of which will inevitably lead to an upsurge in the demand for real estate.

In addition to significant policy measures such as ‘Housing for All and the Pradhan Mantri Awas Yojana, the Government is involved in the development and construction of major infrastructure projects, including highways, new airports, metros and more. These initiatives will not only drive the overall expansion of real estate assets but also enhance their quality. Interestingly, there will be rapid growth in real estate markets in Tier II and Tier III cities, presenting lucrative investment opportunities with substantial returns for investors¹³.

Government initiatives

Budgetary boost to PMAY

In the Union Budget 2023-24, a significant allocation of H 79,000 crore was made for the Pradhan Mantri Awas Yojana (PMAY). This allocation serves as an additional impetus to the governments focus on providing affordable housing to the underserved. This step will also help achieve the Governments objective of ensuring Housing for All well before the revised deadline. Moreover, the provision of subsidies will empower the prospects of affordable housing, granting the real estate industry an advantage over other asset classes.

Higher infrastructure development investments

The construction of 50 new airports, aerodromes, and helipads is expected to spur real estate development in the surrounding areas, eventually raising property prices. The subsequent multiplier effect of these initiatives will l to burgeoning real estate hotspots, offering homebuyers and early settlers the opportunity to earn attractive rentals and profits. As a result, prospective homebuyers interested in real estate investment will seek alternatives beyond the typical prime locations.

Revised tax structure

The Finance Minister proposed a change to the new regimes tax structure, intending to simplify it by reducing the number of slabs to five. Additionally, the tax exemption level will be raised to H 3 lakh, and the surcharge rate on the highest tax rate would be reduced from 37% to 25%, from 42.74% currently. There is a recommendation to increase the tax rebate maximum under the new tax regime from H 5 lakh to H 7 lakh. This creates a substantial potential for purchasers to leverage their tax savings through real estate investment. The increased liquidity available for discretionary spending, coupled with a substantial reduction in the highest surcharge, will serve as the primary catalyst in boosting real estate as an asset class¹⁴.

Atal Mission for Rejuvenation and Urban Transformation (AMRUT)

States have been granted authority under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) to choose, assess, propose and implement projects within the overall framework of the mission. Presently, states and UTs have initiated 5,882 projects worth H 82,565 crore under AMRUT. Out of these, 4,802 projects worth H 35,932 crore have been completed, while contracts have been awarded and work is in progress for 1,080 projects valuing H 46,632 crore. Moreover, approximately H 69,219 crore worth of projects have been physically completed, with an expenditure of H 61,980 crore incurred.

Through the implementation of AMRUT and convergence efforts, 137 lakh water tap connections and 105 lakh sewer connections (including households covered through Faecal Sludge and Septage Management - FSSM) have been set up.

AMRUT projects are also contributing to the development of a total sewage treatment capacity of 6,347 million litres per day (MLD), with 2,840 MLD of sewage treatment capacity already created and an additional 1,437 MLD capacity developed for recycling and reuse.

AMRUT has also facilitated the establishment of 2,322 park projects, adding 4,512 acres of green space. Ongoing Park projects are set to add an additional 908 acres of green space. Additionally, 692 Storm Water Drainage projects have been completed, resulting in the elimination of 2,960 water logging points, while work is underway to address another 801 water logging points. In promoting eco-friendly transportation and infrastructure, 273 green mobility projects have been successfully completed. Out of the H 35,990 crore allocated for projects, H 31,784 crore has been released so far¹⁵.

Indias commercial real estate market

The Indian economy has witnessed significant demand for various types of commercial real estate, including office spaces, retail outlets and co-working spaces, among others in recent years. Despite market volatility, Indias real estate is emerging as a preferred investment avenue. This trend can be attributed to the increasing per capita income and the development of social infrastructure in Tier-II and Tier-III cities. Additionally, the shift to hybrid work models has led to a substantial demand for office spaces in major cities throughout the country in CY2022.

The commercial real estate sector in India is projected to reach a market size of USD 90 billion by FY2030, growing at a compounded annual growth rate (CAGR) of 8%. This remarkable growth is driven partially by favourable government policies such as Make in India, Smart Cities Mission and Digital India. While urbanisation has already generated significant demand across all segments, the expansion of both domestic and international businesses is fuelling the growth in the commercial real estate sector.

Additionally, the expansion of the IT and services sectors has increased the need for logistics spaces and modern warehouses. The growth in office expansions and the popularity of coworking spaces are also contributing to the rapid expansion of this sector. The commercial real estate segment has exhibited robust growth, defying the odds, and is well-positioned to lead the overall growth in the future. It is anticipated to offer high returns and impressive growth prospects over the next decade¹⁶.

Trends of the commercial real estate sector in India

Increase in rental rate

The thriving economy and worker return to office spaces have increased demand for commercial real estate. Co-working spaces offer flexible lease terms and profitable long-term leases. This has led to new office space projects, like Tata Realtys Gurugram construction project, offering 550,000 square feet of grade A+ office space for corporate leasing by December FY2026.

Greater demand for office spaces from corporate companies

CBRE South Asias research shows a 97% year-over-year increase in lease activity in the Indian office market, reaching 11.4 million square feet. The technology sector accounted for 34% of lease expansion in Bangalore, Chennai and Delhi-NCR. The Banking, Financial Services, and Insurance (BFSI) companies contributed 17%, while flexible space operators, E&M companies, and consulting and analytics firms contributed 13%, 12%, and 11%, respectively. Large corporations often lease office spaces, as seen with Amazon and Samsung leasing 700,000 and 357,000 square feet respectively. Managed office spaces are increasingly adopted by businesses due to their flexible pricing structure and easy scalability options, enabling seamless expansion efforts without significant effort or complications.¹⁷

Opportunities of Indias commercial real estate sector

Top performing states

Commercial Real Estate Requirement¹⁸

Indian residential real estate market

The residential real estate market in India experienced a constant growth in both demand and prices during the first quarter of FY2023, continuing the trend seen over the previous five quarters. Cities like Bengaluru, Mumbai, Chennai, and Hyderabad experienced a notable significant spike in prices, with appreciation ranging from 5% to 7%. Additionally, the sales of residential units reached 79,126, indicating a modest 1% growth compared to the previous year. However, the surge in interest rates has affected the sales of affordable and low-income group housing segments¹⁹.

In FY23, the residential real estate market in India achieved new records in terms of sales volume and value. The top seven cities, including Delhi-NCR, Mumbai, Kolkata, Chennai, Pune, Bengaluru and Hyderabad, witnessed a total of 379,000 units sold, reflecting a 36% increase compared to the past year. The total value of these sales amounted to H 3.47 trillion, marking a substantial 48% rise from FY22.

Among these cities, the Mumbai Metropolitan Region (MMR) emerged as the leader in terms of both sales volume and value, making up 30% of all units sold and 48% of total sales value for the fiscal year. Pune finished second with a 17% proportion of the number of units sold, while Delhi-NCR was placed third with a 15% share of the value of properties sold.²⁰

The Hyderabad market experienced the highest sales growth of 19% year-on-year (YoY), whereas sales in the larger markets of Mumbai and Bengaluru slightly dropped by -6% and -2% YoY, respectively. This trend aligns with the consistent upward movement observed over the past three quarters. Additionally, there was a considerable increase in the share of sales in the H 10 million and above ticket-size category, reaching 29% in Q1 2023 compared to 25% a year ago. This can be attributed to the homebuyers desire to upgrade to larger living spaces with enhanced amenities.

The proportion of home sales in the H 5-10 million range also increased similarly, reaching 38% in Q1 2023 compared to 35% in FY22. However, the percentage of homes with a ticket size of H 5 million and below declined from 41% in Q1 2022 to 32% in Q1 2023 due to rising prices and a more adverse impact of the pandemic on homebuyers in this segment, which affected demand. Interestingly, the mid-size segment now represents a larger portion of the total sales compared to the category of homes priced below H 5 million²¹.

Outlook

Expected recovery in demand

In FY22, affordability played a crucial role in driving housing sales. However, due to inflation, developers were forced to raise prices. A series of repo rate hikes totalling 250 basis points (bps) since May 2022 have affected the demand dynamics in the affordable housing segment in FY23. This has also led buyers in the mid and premium segments to postpone their purchases. Nevertheless, the governments increased focus on infrastructure development and budgetary support, such as tax concessions, will result in higher disposable income for middle-class homebuyers. This, in turn, will drive home sales in the medium term.

Anticipated growth in Tier II and III cities

The governments renewed emphasis on infrastructure development and enhanced connectivity in emerging cities is expected to drive significant growth and stimulate the development of Tier II and Tier III cities. Notably, in cities like Tiruchirappalli, Puducherry and Mangalore, there was a substantial increase of over 80% in absorption during the period of FY22 to 9M FY23. Additionally, the peripheral markets of Mumbai, Bengaluru and Hyderabad experienced a much higher absorption rate of 53% compared to 16% in the main markets.

Housing prices may surge

Property prices increased by 8-10% year on year in FY23, with an additional 5% year on year growth expected in FY24. Construction expenses increased by 8% to 10% in FY23, owing mostly to increasing input costs, resulting in a 5-6% year-on-year increase in blended costs for developers. However, developers may hesitate from raising prices in the next six to seven months as they navigate macroeconomic uncertainty and observe demand dynamics evolve.²²

Super high-rise segment in India

The Mumbai Metropolitan Region (MMR) stands out as a leader in the high-rise segment, with over 200 skyscrapers and approximately 5,600 high-rise buildings. The Delhi-NCR region is close behind and has witnessed the development of 18 skyscrapers and around 5,200 high-rise buildings in recent years. Kolkata, in contrast, has 14 skyscrapers and 800 completed high-rises. Due to upbeat real estate markets, other cities such as Bangalore, Mangalore, Hyderabad, Chennai, Kochi, Pune, Ahmedabad and Surat have also experienced significant activity in the high-rise segment. While these skyscrapers contribute to the citys skyline, it is worth noting that their presence in India remains relatively limited compared to other countries.

India has been experiencing various innovative approaches to construction, with technology being employed creatively in the real estate sector. There has been considerable infrastructure development occurring throughout the country, including numerous projects slated for redevelopment. This has piqued the interest of international brands investing in infrastructure, real estate and technology. With ambitious growth and investment plans, India is positioning itself as a major manufacturing hub, not just for domestic companies but also for international ones.²³

Company overview

Capacite Infraprojects Ltd. is a small-cap business operating in the construction industry. As of FY23, the Company had achieved a revenue of H 1,790.8 crore. Contract Revenue and

Scrap represent two key revenue segments for Capacite Infraprojects Ltd. for the fiscal year ending on March 31, 2023. The Company specialises in providing project design, construction, and management services to major real estate and government entities in India. Our team of professionals and skilled employees drives the construction of high-rise and super-high-rise projects in the country. By leveraging our creative skills and domain expertise, we have become leaders in our markets. Capacite Infraprojects does not view itself as merely a construction company, it considers itself an ‘Engineering Specialist. By focusing on EPC delivery and cutting-edge technology, the Company has become a trusted brand in various sectors, including high-rise, super-high-rise, commercial, IT/ITES, healthcare, gated communities, MLCPs and premium private residences.

Strengths

Strong cash flow

The Companys sharp focus on cash flow management is evident in its initiatives to reduce receivables, control debt and invest in technologies that accelerate construction processes and enable the pursuit of higher-margin projects. Moreover, a significant portion of the Companys order book comprises reputable clients with strong financial positions and steady cash flows.

Quality

The Quality Assurance/Quality Control (QA/QC) cell provides support to project sites by facilitating the development of optimal concrete mix designs, specifically for high strength, free-flowing concrete and concrete suitable for vertical pumping. Additionally, the QA/QC cell is responsible for overseeing the inspection and testing plan for all materials and products.

Innovation

Automation and software systems are employed to track client complaints, enabling prompt technical responses. The IT department provides project sites with training, documentation, technical support, and assistance to address any issues.

Plant and machinery

The Company has established a robust plant and machinery cell responsible for various tasks, including identifying requirements, planning resources, selecting new equipment for procurement, mobilising, installing and commissioning equipment at project sites. This cell also handles equipment inspection, testing and calibration, as well as routine preventive maintenance. Following a comprehensive evaluation of functional requirements, movement constraints and performance criteria, tower cranes, passenger and material hoists, concrete pumps and placers are strategically deployed at project sites.

ERP Buildsmart - RIBCCS

A department of information technology and enterprise resource planning was established, with the IT cell in charge of hardware, software, and IT infrastructure. The IT department is responsible for implementing the Companys integrated cost management system, which comprises Buildsmart ERP and Candy from RIB CCS. Buildsmart ERP has been seamlessly linked across all of the Companys offices and project locations, allowing for comprehensive procurement of products and services as well as streamlining accounting operations.

Safety

The Company prioritises occupational health, safety, environmental sustainability and cleanliness at its project sites. It has received certifications for its Environmental Management System and Occupational Health and Safety Management Systems. The HSE (Health, Safety, and Environment) cell of the

Company is responsible for the development and monitoring of project specific HSE plans, as well as the identification of hazards, assessment of risks and formulation of emergency response plans.

Professional

The QA/QC cell plays a crucial role in supporting project sites by facilitating the development of optimal concrete mix designs, specifically for high strength, free-flowing concrete and concrete suitable for vertical pumping. Additionally, it closely tracks the inspection and testing plan for all materials and products. The cell effectively addresses customer concerns by providing technical responses. It provides comprehensive support to project sites through training, documentation, technical assistance and guidance.

Formwork

The formwork cell assumes various responsibilities related to the design, detailing, planning, customization, procurement, deployment, training, implementation and maintenance of projects. It ensures the optimum utilisation of formwork, meeting cycle time and productivity targets. Moreover, the cell handles the stacking, handling, cleaning, maintenance and upkeep of formwork supplies.

Financial overview

Key ratios

According to the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is obligated to disclose significant changes in key financial ratios. These changes are defined as a variation of 25% or more compared to the immediately preceding financial year. The following key financial ratios and their corresponding explanations are provided below:

Ratios	FY 2022-23	FY 2021-22 (Restated)
Debtors Turnover (no. of days)	94	109
Inventory Turnover (no. of days)	137	156
Interest Coverage Ratio (in times)	5.97	6.2
Current Ratio (in times)	1.45	1.43
Debt Equity Ratio (in times)	0.34	0.34
EBITA (in %)	20.02	17.12
Net Profit Margin (in %)	5.27	3.63
Return on Net Worth (in %)	8.79	5.01

[Please note that the Return on Net worth is a required field, and other ratios will only be provided if there is a change of 25% or more]

Operational overview

The Company specialises in constructing high-rise and super high-rise residential, commercial and institutional buildings, including super speciality hospitals. With a sector-specific focus on construction, the Company has secured a diverse order book from renowned clients in both the private and public sectors. Despite being relatively new, the Company has established a robust presence in the factory and building sector, due to its lean balance sheet, flexible management and ability to adapt to change.

Risk management

Risk management is an integral aspect of the Companys operations, and the management takes a proactive approach to systematically addressing risks. Considering the nature of its business, the Company is exposed to various risks arising from economic, political, legal, environmental, personnel, operational and currency fluctuations, among others. The Risk Management Committee oversees and monitors the Companys risk management strategy. The Executive Management Team regularly reviews key risks and evaluates the effectiveness of mitigating measures implemented by the Company. The Risk Management Committee assesses initiatives aimed at further strengthening the Companys risk management framework, taking into consideration its growth strategy and the dynamic business environment in which it operates.

Internal control

The organisation has implemented suitable internal control systems and procedures to manage its business processes effectively. Clear roles and responsibilities are defined for all managerial positions within the organisation. The internal control system of the Company is appropriate considering its size, scope and complexity. The Audit Committee regularly evaluates the adequacy and effectiveness of the internal control systems, providing recommendations for any necessary changes. The committee ensures the protection of assets, adherence to established requirements and timely resolution of pending concerns.

The audit is carried out following an annual internal audit plan, which is reviewed and approved by the audit committee. The Company identifies inherent reporting risks for each significant aspect of the financial statements and implements procedures to mitigate them. Regular reviews are conducted to address any changes in the business landscape, regulations, and internal policies, ensuring the ongoing effectiveness of the risk mitigation controls. As of March 31, 2023, the audit committee has evaluated the internal financial controls and found them to be adequate and functioning effectively, in accordance with the evaluation requirements outlined in Section 177 of the Companies Act 2013 and Regulation 18 of the SEBI Regulations, 2015.

Human resources

The Company has a workforce of 1667 employees as of March 31, 2023. Its work culture is shaped predominantly by the employees themselves. Their behaviour, attitudes and interests play a crucial role in defining the culture within the organisation. Great organisations are built on the shoulders of happy employees. Recognising this, the Company considers its personnel as its most valuable long-term asset. The Company offers competitive compensation, attractive benefits and a pleasant working environment to its workforce.

By investing in employee training, implementing effective employee relations programmes and involving employees in decision-making processes, the Company aims to achieve operational excellence and enhance profitability.

Managing employees is not solely the responsibility of human resources and direct supervisors. It requires the establishment of work practices, supportive leadership, and employee management strategies that foster positive relationships throughout the organisation. Attracting, developing and retaining top talent necessitate creating an organisational culture that encourages people to realise their full potential. Just as the Company sets strategic business goals, it also identifies strategic human capital goals that align with those objectives.

CSR

The Company is committed to giving back to society and believes that long-term growth and progress are inextricably linked to the development and well-being of society as a whole. The Company acknowledges its shared responsibility to contribute positively to the betterment of society. It understands that even small steps can lead to significant changes in the long run, and thus endeavours to make meaningful contributions for the benefit of society at large.

At present, the primary focus areas for CSR activities include:

(i) Promoting healthcare initiatives

(ii) Engaging in disaster management, which involves activities such as relief efforts, rehabilitation and reconstruction.

Disclaimer

The MDA section includes certain statements about future prospects that may be considered forward-looking statements. These statements involve various identified or unidentified risks and uncertainties that could potentially lead to different actual results. Furthermore, in addition to the changes in the macro-environment, global events like the COVID-19 pandemic may introduce unforeseen, unprecedented, uncertain, and continually evolving risks to the Company and its operating environment. The figures and facts presented in the report are based on assumptions made using available internal and external information. As the factors underlying these assumptions can change over time, the estimates on which they are based are also subject to change accordingly. It is important to note that these forward-looking statements reflect the Companys current intentions, beliefs, or expectations, and they are valid only as of the date they were made. The Company has no obligation to revise or update any forward-looking statements, whether due to new information, future events, or other factors.