Constronics Infra Ltd Management Discussions

a. INDIAN INFRASTRUCTURE INDUSTRY

The infrastructure sector is a key driver of the Indian economy. The sector is highly responsible for propelling Indias overall development and enjoys intense focus from the Government for initiating policies that would ensure the time-bound creation of world-class infrastructure in the country. The infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. In other words, the infrastructure sector acts as a catalyst for Indias economic growth as it drives the growth of the allied sectors like townships, housing, built-up infrastructure, and construction development projects.

India has achieved notable milestones in infrastructure advancement, exemplified by the inauguration of landmark projects such as the Atal Tunnel, the worlds longest highway tunnel, and the construction of the Chenab Bridge, recognized as the worlds highest railway bridge. Moreover, the nation has made significant strides with iconic ventures like the Statue of Unity, which stands as the tallest statue globally, and transformative undertakings like the Zojila Tunnel, positioned as Asias longest tunnel, facilitating all weather connectivity in the region of Ladakh.

In pursuit of Indias ambitious goal of achieving a US$ 5 trillion economy by 2025, prioritizing robust infrastructure development has become imperative. The government has initiated the National Infrastructure Pipeline (NIP) alongside complementary endeavors such as ‘Make in India and the production-linked incentives (PLI) scheme to catalyze growth within the infrastructure domain. Traditionally, over 80% of infrastructure expenditure has been allocated towards transportation, electricity, water, and irrigation.

While these domains retain their significance, the government is now directing attention towards emerging sectors, in response to evolving environmental and demographic trends in India. There exists a compelling imperative for heightened efficiency and efficacy across the entire spectrum of infrastructure provision, spanning from housing facilities to water and sanitation services, and extending to digital and transportation infrastructure. Such enhancements promise to drive economic expansion, elevate living standards, and enhance sectoral competitiveness.

Roads and Highways constitute the largest portion of infrastructure spending, followed by investments in railways and urban public transport. The government has set ambitious objectives for the transportation sector, including the expansion of the national highway network to 200,000 kilometers by 2025 and the augmentation of airport capacity to accommodate 220 airports. Furthermore, plans entail the operationalization of 23 waterways by 2030 and the establishment of 35 Multi-Modal Logistics Parks (MMLPs). The aggregate budgetary allocation for ministries overseeing infrastructure development has surged from approximately INR 3.7 trillion in FY23 to INR 5 trillion in FY24.

Although the 2025-26 Budget will significantly support the construction industry, soaring construction costs, delays in land acquisition and tendering and supply chain constraints could affect the progress of construction work in the short to medium term. Construction material costs are expected to rise further due to the current crisis in Ukraine, geo-political tensions in Middle East Asia with rising energy costs impacting the energy intensive production of cement, bricks, and concrete Between 2023 and 2026, has also been major concern for the growth of Company.

c. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS

The company has a well-defined and elaborate Risk Management procedure, which is based on three pillars: Business Risk Assessment, Operational Controls Assessment and Policy Compliance processes. The Board of directors monitors the key risks in the various business segments and evaluates strategies to mitigate these. It also reviews each tender carefully for any potential risks before the bidding process begins. The Companys internal control systems are commensurate with the nature of its business. The Audit Committee reviews the adequacy and effectiveness of our internal control environment and monitors the implementation of audit recommendations. The company has a qualified and independent audit committee, where majority of directors are independent.