Chavda Infra Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

ECONOMIC OUTLOOK

The Indian economy demonstrated resilience in FY2025, sustaining its position as one of the worlds fastest- growing large economies. GDP expanded by ~6.5%, in line with the long-term trend, underpinned by balanced growth across consumption, investment, and industry. Private consumption regained momentum, rural demand rebounded, and business investment accelerated, supported by improved credit availability and a stable policy environment.

Government capital expenditure was a major growth catalyst, with allocations targeted at railways, roads, ports, and urban infrastructure. Over 2,000 km of new railway lines were commissioned and port capacity was enhanced, lowering logistics costs and improving connectivity. These investments create a strong multiplier effect for the construction and EPC sectors by unlocking demand for high-quality, time-bound project execution.

INFLATION AND COST DYNAMICS

A defining feature of FY2025 was the moderation of inflation. CPI fell to 4.6% during the year and further to 3.3% by March 2025, restoring household spending power and stabilizing input costs. This easing was enabled by prudent RBI monetary policy, timely fiscal interventions, and softer commodity prices. Industrial output grew 6.2%, led by construction, electricity, and utilities, sectors closely aligned with Chavda Infras business model.

Despite this favourable backdrop, structural cost pressures persisted. Over the past three years, labour costs have risen by -150%, while steel, copper, cement, and aluminium prices increased 30-90%. In premium urban markets, construction costs per square foot rose from ^2,200 in 2021 to nearly ^2,800 in 2024, a 27% jump. Chavda Infra has mitigated volatility through long-term supplier contracts, inventory planning, and contract escalation clauses, enabling partial pass-through of rising costs, particularly in premium and institutional projects. However, affordable and mid-segment housing remains more sensitive to cost inflation. Recent government reforms, such as reducing GST on cement from 28% to 18%, are expected to provide incremental relief, especially for cost-conscious segments.

GLOBAL & SUPPLY CHAIN DYNAMICS

The global environment in FY2025 was marked by geopolitical tensions, trade disruptions, and volatile energy prices, all of which affected supply chains for critical construction inputs. Indias dependence on imported machinery and high-grade materials continues to present vulnerabilities, while fluctuations in crude oil prices impact transportation and project costs.

At the same time, structural shifts such as "friendshoring" and Production Linked Incentive (PLI) schemes are creating opportunities for greater supply chain resilience and domestic manufacturing. Chavda Infra is well positioned to benefit from Gujarats improving logistics infrastructure, upgraded ports and multimodal connectivity provide a natural hedge against global disruptions. A proactive risk management framework and diversified supplier base further strengthen the companys operating resilience.

OUTLOOK AND RISK CONSIDERATIONS

Looking ahead, the RBI projects GDP growth at ~6.5% for FY2026, with inflation expected to move towards the 4% target range. The governments continued emphasis on affordable housing, renewable energy, healthcare, and digital infrastructure aligns with long-term national priorities and creates a multi-year demand runway for the EPC sector.

Indias demographic dividend, combined with rapid technology adoption and policy support, further reinforces growth prospects. For Chavda Infra, this macro context translates into sustained demand in urban housing, commercial spaces, and institutional infrastructure.

Risks remain: geopolitical uncertainties, supply chain bottlenecks, and input cost volatility require ongoing vigilance. For Chavda Infra, effective procurement strategies, disciplined project selection, and operational agility will be critical in balancing opportunity with risk and sustaining profitable growth in the years ahead.

Source: Press Information Bureau-Government of India, Economic Survey FY25, Reserve Bank of India & Deloitte

INDUSTRY OVERVIEW

The construction and real estate sectors remain cornerstones of Indias economic development, contributing meaningfully to GDP, employment, and infrastructure creation. Valued at ~USD 740 billion in 2025, the sector is projected to exceed USD 1 trillion by 2030, driven by urbanization, rising household incomes, proactive government policy, and large-scale infrastructure spending. This translates into an attractive ~8% CAGR, creating a multi-year growth runway for well-positioned EPC players.

(Source: Mordor Intelligence, 2025)

MARKET SEGMENTATION AND GROWTH DRIVERS

The industry is broadly segmented into residential, commercial, and infrastructure. Residential remains the largest and fastest-growing category, supported by middle-class housing demand and government initiatives such as PMAY. Commercial spaces including offices, retail, and hospitality are expanding alongside Indias corporate footprint, with hubs like GIFT City emerging as magnets for investment. Infrastructure development continues to scale, led by sustained public capital expenditure on highways, metros, airports, and utilities.

A structural driver underpinning all three segments is rapid urbanization. With urban population share projected to rise from 35% today to nearly 70% by 2050 (UN data), demand for modern housing, integrated townships, and smart, sustainable cities will accelerate. This demographic shift offers consistent, long-term visibility for construction firms.

WORKFORCE AND SKILLS

The sector employs more than 50 million people, largely in the informal segment, and faces challenges of productivity, skill gaps, and safety. National initiatives like PMKVY and industry-led training programs are improving technical competence, digital literacy, and safety standards. For companies like Chavda Infra, which rely on disciplined execution, the ability to attract, train, and retain skilled workers is a differentiator in meeting timelines and quality benchmarks.

policy and regulatory environment

The regulatory landscape continues to mature. RERA has strengthened consumer protection and transparency, while evolving norms around environmental approvals, labour laws, and building codes are pushing the sector towards greater sustainability and formalization. On the policy front, government allocations exceeding USD 130 billion in FY25 for expressways, railways, urban transit, and digital infrastructure, along with corridor projects such as DMIC and smart city development, are creating significant business opportunities. Challenges around approvals and land acquisition remain, but policy direction is clear and supportive.

COMPETITIVE LANDSCAPE

The industry remains fragmented, with large national players competing alongside regional contractors. States like Gujarat are emerging as specialized hubs, supported by proactive governance and business- friendly policies. In this context, Chavda Infra has carved a niche as a high-rise EPC specialist, leveraging deep local expertise, technology adoption, and strong client relationships. Unlike scale-driven peers, Chavdas agility and execution reliability provide a competitive edge. Selective expansion beyond Gujarat is a strategic priority to broaden addressable markets while retaining operational discipline.

TECHNOLOGY AND INNOVATION

Technology adoption is reshaping the industry. Tools such as BIM, drones, IoT-enabled monitoring, and AI- based project management are improving precision, reducing delays, and enhancing safety. According to Autodesk-Deloitte (2025), over half of Indian firms have adopted BIM and AI platforms, signalling rapid digital transformation. Chavda Infra complements its execution expertise with investments in advanced aluminium formwork, digital monitoring systems, and smart safety equipment. Robotics, though nascent, is steadily gaining traction, offering long-term solutions to labour shortages and productivity challenges.

SUSTAINABILITY AND GREEN BUILDING

Sustainability has moved from a differentiator to a mainstream requirement. India is among the top global markets for LEED and GRIHA-certified projects, supported by incentives, expedited clearances, and green financing options. Developers are prioritizing energy-efficient designs, water conservation, and lifecycle carbon reduction. Chavda Infra is aligned with these trends, integrating BIM-based lifecycle planning, waste minimization practices, and sustainable material use, enhancing both environmental outcomes and investor appeal.

outlook

Indias construction sector is set for long-term growth, with demographic momentum, urbanization, government policy, and technology adoption as key drivers. For Chavda Infra, this environment provides clear tailwinds: urban housing and commercial growth, policy-driven infrastructure spending, and investor preference for sustainable, technology-enabled execution. By focusing on high-rise specialization, sustainable construction, and disciplined project selection, the company is well positioned to capture emerging opportunities while prudently managing risks such as input cost volatility and intensifying competition.

Source: invest India, Research and Markets, ServCrust

BUSINESS PERFORMANCE AND OUTLOOK

COMPANY OVERVIEW

Chavda Infra Ltd. continued its steady growth and evolution during FY25, further establishing its reputation as a trusted name in Gujarats construction and real estate industries. With a heritage spanning over thirty years, the company has transformed from a local contractor into a fully integrated EPC services specialist, partnering with leading developers and corporates and executing projects that span residential, commercial, and institutional segments.

View our business in blocks of 3 years. Aim to double our business and key metrics every 3-years

The years performance reflected consistency and discipline in execution. Chavda Infra achieved revenue of Rs. 261 crores, marking an 8% rise from the previous year, while EBITDA improved to Rs. 56 crores, underlining a focus on efficiency and careful cost management. Net profit stood at Rs. 21 crores, up 12% year-on-year, with profit margins remaining stable. The companys order book reached Rs. 703 crores, a significant increase that points to healthy project visibility and sustained demand from both longstanding clients and new partnerships.

The company has also invested in advanced aluminium formwork technology and maintains a robust inventory of modern construction equipment. This investment not only enhances construction speed, safety, and quality but also sets the company apart in the competitive EPC landscape by enabling consistent execution of complex and high-rise projects. Our execution capabilities are a testament to our reputation in the market. Chavda Infra has successfully secured major orders, even in instances where the company was not the lowest bidder. Reflecting client trust in the companys ability to deliver on quality and timelines.

The companys focus on high-rise buildings positions it as a specialist in constructing landmark developments and shaping skylines in Ahmedabad, GIFT City, and beyond. Landmark developments in premier locations, such as The Identity and BeFree in GIFT City, alongside multiple projects in Ahmedabad and surrounding urban centres, demonstrate the companys capabilities in delivering high-rise residential, commercial, and specialty institutional buildings. Ownership of advanced construction facilities like ready-mix concrete plants and investment in modern technologies have allowed Chavda Infra to ensure consistent quality and timely project delivery.

Throughout the year, the company maintained its attention on measured expansion and prudent financial management. A net debt-to-equity ratio of 1.4x reflects our balanced approach and underscores our intent to support upcoming opportunities while maintaining financial flexibility.

OUTLOOK

Chavda Infra enters FY26 with careful optimism. The governments emphasis on urban development, affordable housing, and advanced infrastructure aligns closely with the companys areas of expertise and market presence. Continued investments in urban centres, especially in strategic locations like GIFT City, are expected to translate into meaningful opportunities for high-value, high-impact projects.

Strategically, the company aims to build on its foundation by deepening client relationships, pursuing selective new business that meets its quality benchmarks, and adapting to evolving market expectations. Chavda Infra remains committed to responsible project selection, prioritizing contracts that contribute both to reputation and returns, rather than chasing order book size for its own sake.

The management team continues to focus on operational resilience, especially in the face of intermittent delays or sector-specific challenges. Improving receivables and enhancing cash flow remain high on the agenda, and the companys ability to mobilize experienced teams and internal resources positions it well for timely, effective execution.

Looking ahead, Chavda Infras vision is centred on sustainable growth that reflects its legacy: doubling of business size every three years, underpinned by a blend of innovation, expertise, and disciplined financial stewardship. With a skilled workforce, a deep-seated culture of quality, and a portfolio that reflects both breadth and depth, the company stands prepared to meet the changing needs of the marketplace while continuing to deliver value to clients, partners, and shareholders alike.

SWOT ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian construction and real estate sector continue to be a vital driver of economic growth and urban transformation, especially in regions like Gujarat, where Chavda Infra operates. This industry is characterized by increasing complexity, evolving client expectations, and the growing significance of sustainability and technology. Over the last several years, rapid urbanization has intensified demand for better infrastructure, premium residential spaces, modern commercial developments, and institutional facilities. Government initiatives such as smart cities, affordable housing schemes, and large-scale infrastructure projects have infused vitality into the sector, creating a steady pipeline of opportunities.

At the same time, this dynamic industry faces challenges beyond typical market cycles. Regulatory tightening and evolving environmental norms require higher compliance and transparency standards. Fluctuating raw material prices, especially for cement, steel, and labour, and persistent inflationary pressures continue to squeeze margins. The competitive landscape is intensifying, prompting companies to innovate and maintain exceptional execution and financial discipline. Simultaneously, socio-political factors such as labor availability influenced by migration patterns and federal infrastructure spending plans impact project feasibility and timelines.

For Chavda Infra, this evolving industry environment calls for agility, innovation, and strong relationships with diverse stakeholders, as well as an ability to expertly manage complex projects spanning residential, commercial, and institutional realms.

STRENGTHS AND WEAKNESSES

Chavda Infra boasts a solid foundation built on a proven track record of completing over 130 projects across residential, commercial, and institutional sectors. The company has developed strong expertise in high-rise construction, leveraging advanced aluminium formwork technology and owning ready-mix concrete plants that enhance operational efficiency. Its diversified and balanced portfolio helps mitigate market risks while ensuring steady revenue streams. A robust internal control environment, underpinned by an integrated ERP system and multi-tier approval processes, reinforces the companys operational discipline. Supported by an experienced senior management team and a skilled workforce of approximately 346 employees committed to quality and safety, Chavda Infra maintains a stable financial position characterized by improving margins, a growing order book of around Rs.703 crores, and conservative leverage.

However, the company faces certain challenges, including exposure to input cost volatility and the critical reliance on timely project execution, which could affect profitability. The inherently high working capital requirements typical of the construction industry may place pressure on liquidity if not managed carefully. Geographically, the companys concentration in Gujarat limits its exposure to rapidly expanding metropolitan markets elsewhere. Additionally, while institutional projects contribute to the portfolio, their share remains modest compared to residential and commercial segments, highlighting potential for growth. Operational concerns such as labor availability and regulatory compliance continue to require focused attention. Lastly, the company is mindful of broader dependencies on macroeconomic conditions and the continuity of supportive infrastructure policies, which are vital to sustaining long-term growth.

OPPORTUNITIES AND THREATS

The company sits at the intersection of several promising opportunities. Urban clusters like Ahmedabad, Gandhinagar, and the emerging GIFT City development are hotspots for residential, affordable to luxury projects, alongside expanding commercial real estate demand. Government authorizations coupled with public-private partnerships continue to unlock infrastructure and institutional facility development, offering avenues to deepen expertise and market share.

Chavda Infras focused investments in advanced aluminium formwork technology and captive ready-mix concrete plants position it to deliver projects faster and with superior quality, providing a competitive edge. The rising preference for high-rise buildings in urban areas matches Chavdas clear strategic focus and execution capability, supporting sustainable growth.

However, the company must carefully navigate inherent sector risks. Input costs, especially for cement, steel, and labor, are subject to volatility, which can pressure margins if not effectively managed. The project execution landscape remains unpredictable, with delays possible due to regulatory approvals, supply chain disruptions, or labor shortages. Haryanas economic uncertainties and the potential slowdown in real estate demand pose additional market risks. Strict regulatory oversight, including environmental and safety laws, demands vigilance and compliance investment to avoid operational disruptions or reputational damage.

Sustained inflationary pressures and geopolitical uncertainties add an external layer of complexity. The companys strong risk management systems and integrated internal controls are thus critical to navigate these threats efficiently and capitalize on favourable market momentum.

SEGMENT-WISE PERFORMANCE

Chavda Infras portfolio reflects a well-diversified approach to real estate construction activities, with meaningful contributions from residential, commercial, and institutional segments, each playing a distinct strategic role:

• Residential Segment: The residential vertical forms the cornerstone of Chavda Infras revenue, accounting for approximately 55% of total revenue as per the latest financial disclosures. The company has a proven track record of executing high-quality premium and luxury housing complexes such as La Marque, Manali, and The 31st. These projects meet the increasing demand for urban residences that blend modern amenities, architectural sophistication, and durable construction. Project execution here benefits significantly from Chavda Infras experience, technological adoption, and client trust developed over 130+ completed projects. Growing urban migration and rising disposable incomes fuel this segments potential further.

• Commercial Segment: The commercial real estate business contributes around 32% of annual revenue, with projects like the Trogon Twin Tower and BeFree in GIFT City exemplifying the firms growing stature. The rising demand for premium office spaces, retail outlets, and mixed-use complexes among corporates and investors positions this segment for sustained growth. Chavda Infras focus on high-rise commercial construction and ability to meet stringent timelines add to its appeal as a preferred contractor.

• Institutional Segment: Although this segment represents about 13% of revenue currently, it is a critical niche reflecting specialized expertise. The company has delivered important projects for reputable institutions such as Nirma University and Hiramani Aarogyadham Hospital. These institutional developments demand stringent quality, safety, and compliance standards, underscoring Chavdas capability in managing complex, high-value projects that enhance its market reputation.

This balanced revenue mix diversifies business risk and lays a foundation for steady cash flows across market cycles, supporting the companys long-term strategic goals.

OUTLOOK

Chavda Infra looks to FY26 and beyond with a cautiously optimistic outlook. Favorable macroeconomic factors, including projected steady GDP growth, moderated inflation, and government infrastructure commitments, underpin a positive business environment. The real estate markets evolving preferences toward quality, technologically sound, and high-rise structures create aligned growth avenues.

Managements focus on deepening client relationships, prudent project selection prioritizing quality and margins over volume, and sustaining operational discipline remains core to navigating sector dynamics. Further investments in proprietary construction technology and skilled teams will help the company continue meeting ambitious timelines and technical challenges.

The companys vision to double business size every three years demonstrates ambition tempered with realism, supported by solid governance, risk management, and financial prudence. Its ability to steer through intermittent sector-specific challenges will be key to sustained outperformance and value creation for shareholders and clients alike.

RISKS AND CONCERNS

Operating in the construction sector, Chavda Infra faces a range of risks:

• Project Execution Risks: Delays caused by site complexities, labour or material shortages, and supply chain bottlenecks could impact timelines and costs. The company mitigates this through strong vendor relationships, experienced site management, and process discipline.

• Market and Demand Risks: Fluctuations in real estate demand, especially from residential and commercial clients, can affect volumes and pricing. Diversified project portfolio and geographic focus help moderate such risks.

• Input Cost Volatility: Cement, steel, and labour costs represent significant expenses vulnerable to market cycles. The company employs long-term supplier contracts and strategic procurement to manage cost volatility.

• Financial Risks: Maintaining liquidity to fund ongoing projects and servicing debt obligations remains a critical concern addressed by conservative leverage, timely collections, and working capital oversight.

• Regulatory and Compliance Risks: Changes in zoning laws, environmental norms, and tax regulations require ongoing compliance efforts supported by dedicated teams, limiting potential penalties and delays.

• Safety and Environmental Risks: Ensuring safe construction practices and minimizing environmental impact are priorities, with regular safety audits, training, and adherence to norms underscoring the companys commitment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Chavda Infra has established rigorous internal control systems designed to provide a robust framework across project life cycles and corporate functions. Key features include:

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Chavda Infra has established rigorous internal control systems designed to provide a robust framework across project life cycles and corporate functions. Key features include:

• Documented policies and SOPs: Covering critical operations such as project planning, procurement, contract administration, and billing, ensuring clarity and consistency in process flows.

• Integrated ERP System: Enables thorough real-time monitoring of project costs, inventory levels, and cash flows, enforcing segregation of duties, multi-level approval protocols, and audit trails that safeguard asset integrity.

• Periodic Independent Reviews: Internal audits alongside statutory audits and management reviews ensure compliance with accounting standards, operational efficiency, and fraud prevention.

These controls facilitate accurate transaction authorization, timely financial reporting, and strong governance, underpinning stakeholder confidence.

FINANCIAL PERFORMANCE & OPERATIONAL PERFORMANCE

Chavda Infras financial health is closely tied to its operational execution. Revenue growth of 8% year-on-year, EBITDA improvement of 33%, and steady profit margin maintenance illustrate effective cost control and project delivery. Order book expansion to ^703 crores and significant order inflows underscore robust market demand.

Working capital management, alongside prudent debt levels (debt-to-equity ratio of 1.4x), along with focused collections strategies, ensures ample liquidity for ongoing project needs. This financial stability enhances credibility with clients, lenders, and suppliers, reinforcing a virtuous cycle of business growth.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Human capital is fundamental to our companys success. With a workforce of around 346 employees, the company emphasizes skill development, safety training, and fostering a culture of accountability and quality. Competitive remuneration practices, aligned with transparent performance evaluation, sustain employee motivation and retention.

Industrial relations remain stable, with zero reported workplace grievances in the past year, reflecting positive engagement and effective communication practices. Continued investments in safety protocols and learning platforms equip teams to meet growing project complexity and scale confidently.

RATIO ANALYSIS

Particulars	FY25	FY24	FY23	% Change (FY25 vs FY24	h) Explanations
Debtors Turnover	5.49	4.75	3.85	15.58%	Improvement due to enhanced receivables collection and tight credit controls, shortening outstanding days.
Inventory Turnover	2.67	2.51	1.92	6.37%	Moderate rise reflecting better inventory management despite project scale increase; no drastic change.
Interest Coverage Ratio	6.01	5.3	7.2	13.40%	Improved EBIT relative to interest cost due to better operating performance; still below FY23 high due to some higher debt in FY24.
Current Ratio	1.25	1.25	1.2	0.00%	Stable liquidity indicating balanced current assets and liabilities quarter-over-quarter.
Debt Equity Ratio	0.94	1.75	3.5	-46.29%	Significant deleveraging via equity infusion and controlled borrowings, improving financial stability.
Op. Profit Margin	21.60%	21.60%	17.80%	0.00%	Maintained healthy margins aided by cost discipline and operational efficiencies over the last two years.
Net Profit Margin	8.00%	7.90%	5.50%	1.27%	Marginal improvement reflecting effective cost management and stable pricing in a competitive market.

These ratios, integrated with qualitative operational decisions, serve as dynamic indicators of the companys proactive governance and readiness to leverage emerging opportunities while navigating risks prudently.

CLOSING THOUGHTS

From a broader economic perspective, macro factors such as fluctuating interest rates, infrastructure spending trajectory, and urbanization pace will critically shape demand dynamics. Chavda Infras prudent financial planning and responsive strategy position it to adapt to these realities, balancing growth aspirations with risk mitigation.

In this environment, measured resilience, agility in capital allocation, and continuous improvement in execution quality will determine the companys sustainability and its capacity to deliver long-term stakeholder value.