dilip buildcon ltd share price Management discussions

.Global Economy:

The world continues to bear the brunt of the wide-spread economic uncertainties and poor growth prospects, owing to the Lingering aftermath of the pandemic, geopolitical tensions, and the pressing need to address climate change by promoting and implementing policies to achieve triple bottom-line results, coupled with growing policy challenges. This has pushed many countries to the brink, although the big global picture signals marginal improvement. The pandemic promoted the most aggressive interest rate hikes ever witnessed in decades, which further snowballed into surging inflation in both developed and developing countries. Nonetheless, the silver Lining is that despite rising rates, household spending and employment - especially in the developed economies, continues to stay resilient, posing challenges for central banks to tame inflation.

According to UNs World Economic Situation and Prospects, by the forthcoming fiscal, global economy is Likely to gain momentum, expanding by 2.5 percent in 2024, with inflationary pressures easing during the second half of 2023. This rate is, however, well below the worlds longer-term (2000-2019) average growth rate of 3.1 percent. Many structural challenges, including scarring from the pandemic, subdued investment, mounting debt vulnerabilities, and funding shortages, remain unaddressed; the global economy is on the verge of a prolonged period of subpar growth.

1.1 Outlook:

Pent-up demand, supply disruptions, and commodity price spikes continue to plague global economy. In addition, inflation reached a record high in many economies Last year. This prompted Leading central banks to spearhead tight measures to mitigate its effects, and keep inflation expectations anchored. The rapid rise in interest rates and the anticipated slowdown in economic activity to control inflation, have together, with

supervisory and regulatory gaps and the materialisation of bank-specific risks, contributed to strains in parts of the financial system, raising financial stability concerns. Usually strong liquidity and capital positions of banks suggested that they would be able to adapt well and accommodate the effects of monetary policy tightening. However, some financial institutions that relied heavily on continuation of the extremely low nominal interest rates of the past years made a departure from the said anticipation, and went through acute stress. They ended up being unprepared or unable to adjust to the pace of the rising rates.

The unforeseen failures of two specialised regional banks in the United States in mid-March 2023 have disrupted financial markets, with bank depositors and investors reevaluating the safety of their holdings and shifting away from institutions and investments perceived as vulnerable.This has also resulted in a brokered takeover. With the recent increase in financial market volatility and multiple indicators pointing in different directions. World Economic Outlook is highly uncertain. The balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled.

The major forces that affected the World in FY 2022, included Central Banks tight monetary stances to allay inflation, limited fiscal buffers to absorb shocks amid historically high debt levels, commodity price spikes and geoeconomic fragmentation with the Ukraine-Russia conflict, and Chinas Economic reopening. These are anticipated to continue into 2023. But these forces are now overlaid by and interacting with new financial stability concerns. A hard landing, particularly for advanced economies,is forthcoming.

2. Indian Economy:

According to the World Banks latest India Development update.

Indias growth continues to be resilient despite some signs of moderation in growth.The update notes thatatthough significant chaLLenges remain in the Global Environment, India has been one of the fastest-growing economies in the World. The overall growth remains robust and is estimated to be 6.9 percent for the full gear with real GDP growing 7.7 percent YoY during the first three quarters of FY 2023.There were some signs of moderation in the second half of FY 2023.

Growth was underpinned bg strong investment activitg bolstered bg the Governments capex push and buogant private consumption, particularly among higher-income earners. Inflation remained high, averaging around 6.7 per cent in FY 2023, but the current-account deficit narrowed in Q3 on the back of strong growth in service exports and easing Global commodity prices.The World Bank has revised its FY 2024 GDP forecast to 6.3 per cent from 6.6 per cent (December 2022).

Growth is expected to be constrained bg slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic- related fiscal support measures.

Although headline inflation is elevated, it is projected to decline to an average of 5.2 per cent in FY 2024, amid easing global commoditg prices and some moderation in domestic demand. The Reserve Bank of India has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. Indias financial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth. As a result, the debt-to-GDP ratio is projected to stabilise. On the external front, the current account deficit is projected to narrow to 2.1 per cent of GDP from an estimated 3 per cent in FY 2023 on the back of robust service exports and a narrowing merchandise trade deficit.

As per the Ministry of Finance, India is now being called a Bright Spot in the global economy. The GDP, as per the latest announcement from the Ministry, has touched the US$ 3.75 trillion mark in 2023, up from around US$ 2 trillion in 2014. Indias economy has been ranked as the fifth largest in the world from the tenth largest, according to the Ministry of Finance. In terms of current prices, Indias GDPwas US$ 3,737 billion, which ranks above the UK (US$ 3,159 billion), France (US$ 2,924 billion), Canada (US$ 2,089 billion), Russia (US$ 1,840 billion), and Australia (US$ 1,550 billion) at current prices.

2.1 Union Budget FY 2023-24: Governments thrust on Infrastructure Development

Receipts Highlights for FY 2023-24:

Receipts (excluding borrowings) in 2023-24 are estimated to be Rs 2,716,281 crore, an increase of 11.7% YoY. Gross tax revenue is budgeted to increase by 10.4% YoY, which is about the same as the estimated nominal GDP growth of 10.5% in FY 2024. Corporation tax and income tax are estimated to increase at the same rate as the nominal GDP (10.5%).

Excise duties (mainly imposed on petroleum products) are expected to rise by 5.9% in FY 2024. GST revenue is budgeted to

increase at a higher rate (12%). The net tax revenue of the central government (excluding states share in taxes) is estimated to be Rs 2,330,631 crore in FY 2024, which is 11.7% growth YoY.

Devolution to states from centres tax revenue is estimated to be Rs 1,021,448 crore in FY 2024, an increase of 7.7 per cent YoY. In FY 2023, the devolution to states increased by Rs 131,756 crore, from an estimate of Rs 816,649 crore at the budgeted stage to Rs 948,405 crore at the revised stage (16 per cent).

Non-tax revenue is estimated at Rs 301,650 crore in FY 2024, an increase of 15.2 per cent YoY.

Capital receipts (excluding borrowings) are targeted at Rs 84,000 crore, a marginal increase of 0.6% YoY. Recoveries of loans and advances were 64 per cent higher in the revised estimates of FY 2023 at Rs 23,500 crore compared to budget estimates of Rs 14,291 crore.

Expenditure Highlights for FY 2023-24:

Total expenditure in FY 2024 is expected to be Rs 4,503,097 crore, which is an increase of 7.5% YoY. Out of this: (i) Rs 1,4,67,880 crore is proposed to be spent on central sector schemes (4% increase over the revised estimate of FY 2023), and (ii) Rs 4,76,105 crore is proposed to be spent on centrally sponsored schemes (a 5.4 per cent increase YoY).

The government has estimated to spend Rs 234,359 crore on pension in FY 2024, which is 4.3 per cent lower YoY. In addition, expenditure on interest payment in FY 2024 is estimated to be Rs 1,079,971 crore, which is 24 per cent of the governments expenditure. In FY 2024, interest payments are expected to ncrease by 14.8 per cent YoY. The Effective Capital Expenditure of the Centre is budgeted at Rs. 13.7 lakh crore, which will be 4.5 per cent of GDP.

Pradhan Mantri Awas Yojana:

The highest allocation in FY 2024 at Rs 79,590 crore. This is an increase of 3.2 per cent YoY. As compared to the revised estimates of FY 2023, the allocation for the rural component of the scheme has increased by 13 per cent and the urban component has declined by 13 per cent in FY 2024. For FY 2023, the allocation towards the scheme has been increased by 60.7 per cent as compared to the budget estimates.

3.lnfrastructure and Investment:

Investments in infrastructure and productive capacity have a large multiplier impact on growth and employment. After the subdued period of the pandemic, private investments are growing again.The Budget takes the lead once again to ramp up the virtuous cycle of investment and job creation.

The Capital Investment outlay is being increased steeply for the third year in a row by 33 per cent to Rs. 10 lakh crore, which would be 3.3 percent of GDP.This will be almost three times the outlay in FY 2020.

Budget Allocation for the Ministry of Road Transport and Highways (in Rs crore):

	Actuals 21-22	RE 22-23	BE 23-24	% (BE over RE)
NHAI	57,081	1,41,606	1,62,207	14.5%
Roads & Bridges	66,237	74,984	1,07,713	43.6%
Totat	123,551	217,027	270,435	24.6%

Note: BE - Budget Estimate; RE - Revised Estimate

Railways:

The newly established Infrastructure Finance Secretariat will give more importance to private investment in infrastructure, including railways, roads, urban infrastructure and power, which are predominantly dependent on public resources. A capital outlay of Rs. 2.40 lakh crore has been provided for the Railways.

Logistics

One hundred critical transport infrastructure projects, for Last and first mile connectivity for ports, coat, steel, fertilisers, and food grains sectors have been identified. They will be taken up on priority with investment of Rs. 75,000 crore, including Rs. 15,000 crore from private sources.

Urban Infrastructure Development Fund (UIDF)

Union Budget FY 2024 has announced the setting up of the UIDF through use of priority sector lending shortfall. Rs. 10,000 crore per annum will be made available for this purpose. The Fund will be managed by the National Flousing Bank, and wilt be used by public agencies to create urban infrastructure in Tier 2 and 3 cities on the basis of given guidelines.

As per the Budget announcement, States will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF. The Fund would be operationalised broadly along the lines of the existing Rural Infrastructure Development Fund.

Road Sector:

India boasts of the worlds second-largest road network, with over 6.37 million kilometers. In recent years, there has been a substantial increase in the pace of construction of national highways, from an average of 12 kilometres per day in 2014-15 to around 45 kilometres per day in 2022-23. The total length of highways has expanded from 97,830 kilometres in 2014 to 145,155 kilometres today.

Blighway construction in India increased approx. 10 per cent CAGR between FY13-FY23. Despite the pandemic and lockdown, India has constructed 10,993 km of highways in FY23.

The Government of India has allocated Rs. 111 lakh crore (US$ 1.4 trillion) under the National Infrastructure Pipeline for FY 2019- 25. The roads sector is likely to account for 18 per cent capital expenditure over FY 2019-25.

Source: ibef.org 4.0verview of finances

The total expenditure of the Ministry in FY 2024 is estimated at Rs 270,435 crore.This is 25 percent higher than the revised estimates for FY 2023. The highest expenditure (60 per cent of the total expenditure) is towards NHAI. In FY 2024, NHAI is allocated Rs 162,207 crore, all of which is budgetary support.

5.Government Initiatives

Some of the recent Government initiatives are as follows: MoRTBI is developing 27 Greenfield corridors of 9,860 km length at a total capital cost of Rs. 408,437 crore. Ambala - Kotputli corridor has been opened to public traffic and sections of Delhi Mumbai Expressway (Delhi - Dausa, Vadodara - Ankleshwar, Jhalawar (Rajasthan) - MP/Gujarat Border) and Amritsar - Jamnagar Corridor (Bikaner to Pachpadra (Jodhpur)) will be dedicated to the nation in the coming months.

A new national masterplan for new Expressways for the next 25 years during "Amrit Kaal" to improve the efficiency of passenger and freight movement in the country, is under progress. It is in line with the vision of the Elonble Prime Minister to enable integrated infrastructure development with economic development. New corridors, such as Bengaluru - Kadapa - Vijayawada, Varanasi - Ranchi - Kolkata, and Atal Progress Way are targeted foraward in the ongoing and coming financial year. Overall road projects exceeding 65,000 kilometres in length, costing more than Rs. 11 lakh crore, are in progress, of which, work

in respect of projects of more than 39,000 kilometres Length has been completed and in balance Length of more than 26,000 kilometres works are in progress.

6.Tribal Sub Plan (TSP) for NH Works:

The Ministry has been earmarking dedicated funds underTribal Sub-Plan (TSP) component since FY 2012, which was limited to the Scheme for the development of National Highwags (NHs) in Left Wing Extremism (LWE) affected areas. Elowever, the dedicated outlag under the TSP component of the Ministry has been significantlg enhanced to 4.3 percent of the annual capital budgetarg allocation (excluding the loan part of the external aid component and plough back of revenue received bg auctioning of NHs on Toll-Operate-Transfer (TOT) model) effective from the financial gear FY 2019 by taking up NH projects confined within TribalAreas under National Highways (Original) Scheme.

Sr No.	FinancialYear	Total Quality for eligible Capital Scheme as per RE	Outlay underTribal Sub Plan (TSP) Component as per RE	Expenditure Incurred (provisional upto 31.12.2 022)W
1	2022-23	165,696.6	6,396	2,721.0

The Capital expenditure announced in the budget for FY 2024 is estimated at Rs 258,606 crore, while revenue expenditure is estimated at Rs 11,829 crore. The proportion of capital expenditure in total expenditure has increased from the revised estimates of FY 2023, from 95% to 96%.

7.lncreased budgetary allocation to NHAI

Institutions like NHAI raise sources through internal and extra- budgetary resources (IEBR) by appropriating surplus toll revenues, or through lines of credit. In FY 2023, noting the rising debt burden of NHAI, the government increased its budgetary allocation and reduced its dependence on IEBR. In FY 2024, NHAI has been allocated Rs 162,207 crore, 15 per cent more than the revised estimates for FY 2023. As of March 2022, NHAIs total outstanding debt was Rs 348,522 crore.

Between FY 2018 and FY 2020, the amount raised by NHAI from extra budgetary sources formed a majority of its funding. From FY 2023 onwards, almost all of NHAIs finances from budgetary allocation.The total money spent by NHAI between FY 2018 and FY 2024 is estimated to increase by 14 per cent.

Maintenance and Repair of Highways:

In FY 2024, the Ministry has been allocated Rs 2,600 crore for maintaining highways (1 per cent of the Ministrys budget).

PM Gati Shakti:

For Permanent Bridge Fee Fund on FY 2024, Rs 21,460 crore is budgeted as revenue from fees and tolls, 8 percent greater than the revised estimates for FY 2023.

In FY 2024, transfer from National Investment Fund is estimated at Rs 10,565 crore, same as the budget estimates for FY 2023. In FY 2024, Rs 10,000 crore is estimated to be transferred from Monetisation of NHs Fund, lower than the budget estimate of Rs 20,000 in FY 2023.

8. Railways:

Indias railways have undergone substantial modernisation and expansion. Capital expenditure on railway infrastructure has steadily increased over the past five years. Capital expenditure in FY 2024 is estimated at Rs 260,200 crore, an increase of 6 per cent over the previous year. There is a significant change in the pattern of financing capital expenditure. In FY 2024, 92% of capital expenditure is estimated to be financed through budgetary support from the Central Government and 7 per cent from extra budgetary resources. In comparison, in FY 2023, their contributions are estimated at 65 per cent and 33 per cent, respectively.

Railways internal revenue for FY 2024 is estimated at Rs 2,65,000 crore, an increase of 9 per cent over the revised estimates of FY 2023. In FY 2023, revenue is estimated to be 1 per cent higher than the budget estimate.

In FY 2024, traffic revenue is estimated to be Rs 264,600 crore, comprising 99.8% of the total revenue. 68 per cent of the traffic revenue is estimated to come from freight services (Rs 179,500 crore), and another 26 per cent from passenger services (Rs 70,000 crore). Both passenger and freight revenue are estimated to increase by 9 per cent over the previous year. The total revenue expenditure in FY 2024 is projected to be Rs 262,790 crore, an increase of 9 percent over revised estimates of FY 2023. Expenses towards salaries and pension are estimated to comprise 64 per cent of the total revenue expenditure.

9. Airport:

Indias aviation sector has experienced substantial growth, positioning the country as the worlds third-largest market. To promote regional connectivity and revive unserved or underserved airports, the government has allocated a budget of Rs. 4,500 crores under the Ude Desh ka Aam Nagarik (UDAN) scheme.

The number of airports with civilian flights has doubled in the last nine years, from 74 in 2014 to 148 in 2023. Additionally, the government has also accorded in-principle approval for setting up 21 greenfield airports across the country.

Further, the upcoming greenfield Noida International Airport will also be the countrys largest centre for aircraft maintenance, repair and operation (MRO), bolstering the aviation sector and generating employment opportunities.

10. Mining:

Indias coal production reached a new milestone of 698 million Tonne (MT) during FY 2023 (April-January 2023), a 16 per cent YoY growth, driven by a 15.2 per cent YoY increase in production by Coal India Limited (CIL). The power sector continued to be the largest consumer of domestic coal, accounting for the total dispatches of 609 MT during FY 2023 (April-January 2023), an increase of 10.5%YoY. Coal production from captive mines increased by 30.7 per cent YoY in FY 2023 (April-January 2023) and contributed 13.4 per cent to the total coal production during this period, vs. 11.8 per cent during the same period in FY 2022. By the end of this fiscal year, coal production is estimated to reach 850-900 MT, driven by Coal India Limiteds expected

ramp-up in production to achieve the Ministry of Coats target to produce 1 billion tonnes by FY 2026 and 1.5 billion tonnes by FY 2030. Steady growth in captive coat production was Led by the Governments support and allowing the sate of up to 50 per cent of the annual production from existing operational captive coal mines in the open market. Coal imports increased by 25.6 per cent YoY to 192 MT as of FY 2023 (April-December). To reduce dependence on imported coal over the medium-long term, the Government has taken various initiatives including auctioning of coal blocks for commercial mining, FDI under the automatic route, expansion of existing mines, the opening of new mines under CIL and development of evacuation infrastructure.

Governments Initiative:

•The Government plans to monetise assets worth Rs. 28,727 crore (US$ 3.68 billion) in the mining sector over FY 2022-25.

•In 2022, the PLI Scheme for domestic production of specialty steel has been approved with an outlay of Rs. 6,322 crore (US$ 762.4 million) by the Cabinet.

•Mines and Minerals (Development and Regulation) Amendment Act, 2021, notified on 28.03.2021, for giving a boost to mineral production, improving ease of doing business in the country and increasing the contribution of mineral production to GDP.

•Enactment of Mines and Minerals (Development and Regulation) Amendment Act, 2021 enabled captive mine owners (other than atomic minerals) to sell up to 50% of their annual mineral (including coal) production in the open market.

•Import duty on Anthracite/Pulverized Coal Injection (PCI) coal, Coke and Semi-coke, and Ferro-Nickel were reduced to zero.

•Export duty on Iron ores/ concentrates and iron ore pellets was raised to 50% and 45% respectively.

•In addition, a 15 percent export duty was imposed on pig iron

and several steel products.

District Mineral Foundation (DMF) has been established in 622 districts of 23 States and a total of Rs. 71,128.71 crore (US$ 8.5 billion) has been collected till October 2022 under DMF.

1.Company Overview

DBL is Indias foremost infrastructure company, with strong capabilities in roads and bridges, water sanitation, mining, dams, sewage treatment, irrigation projects and construction and development of residential and commercial buildings. The Company is present in 19 states and 1 union territory.

The current order book of the company is Rs. 253.9 billion. DBL has not only been among the fastest growing infrastructure and construction companies in previous five years, but it is also the largest owner of construction-related equipment with 10,340 vehicles. DBLs time management skills are unmatched with more than 90% of the projects getting completed before deadline, reflected in receipt of early completion bonus of Rs. 5,717 million in the last 11 years by the Company.

DBLs key competitive advantages

DBL operates in a rather competitive business landscape, and we take pride in the fact that we have been growing above industry average since inception. The bigger achievement is that this growth doesnt come at the cost of profitability and we work with the margins, which are conservatively calculated and continuously monitored for any unwanted variations. This has been possible on the back of DBLs nimble-footedness and uncompromising standards of execution.

As a result, DBL is today synonymous with punctuality, excellence and delivery of high-quality projects. This has been possible due to our robust business model, which integrates in- house designing, ownership of the latest equipment, exclusive team, selection of projects after wholesome analysis, capability to execute anywhere in the country, and strong relationships with customers all over the nation. Our major competitive advantages include:

i) Backward integration for capturing better value and control overvalue chain

Going against the flow and prevailing conventional wisdom, DBL has excelled in building backward integration capability for controlling the cycle Design, Build, and Operate. For a continuous supply of equipment, which is good in quality and also cost-effective, following products are manufactured by our group companies:

1. Manufacturing of high-quality road furniture i.e., octagonal street light poles, metal beam crash barrier, retro reflective signage, road marking paint, bus shelter, overhead gantries, overhead cantilevers, reinforced earth walls, etc.

2. Manufacturing, producing, casting, recycling, upcycling, assembling, reconstructing, engineering and other related activities of all kinds of machineries, equipment and tools like tooth point, jaw plates, cone metal, wear plates, bearing plates, etc.

3. Manufacturing of strip seal expansion joint, and structural elastomeric bearing used in bridges.

This strategy offers crucial input in completing projects on time. DBL considers it a responsibility to reduce waste, keep a check on pollution, and improve efficiency. We do this by reducing the usage of materials and reusing them whenever possible. For reusing the road furniture, the foundry repurposes the metal scraps.

ii) Equipment ownership for better execution and cost control

A total fleet of 10,340 Latest equipment empowers mobilisation, availability, and prudent jurisdiction over execution. The delays and expenditures due to unfortunate breakdowns are also eliminated. All the equipment in the fleet is of the same model and company, so as to ensure the availability of spare parts, and huge savings due to maintenance. To track the whereabouts of the tools, GPS is installed in each of them. They are operated by trained full-time workers to ensure maximum efficiency.

iii) In-house design, engineering and construction for maintaining consistent quality

DBLhas extensive experience in completing large infrastructure projects in different sectors including bridges and culverts, roads and highways, canals, dams, tunnels, coal mining and watersupply projects.The entire process is monitored by ourin- house design, construction, and engineering team. The team is responsible for overseeing the projects right from the blueprint to its commissioning. This helps in customising the projects as per the clients needs, while minimising the dependence of third parties. Every department, from building construction, to business development and tendering, engineering, contract management, design and technical audit, and equipment management have been awarded broad responsibilities.

iv) Extensive geographical reach, and no major region is unfamiliar for DBL

We are present in 19 states and 1 Union territory in India, due to which we cover almost 85% of the countrys geography. In 2009, in a first, we had diversified our geographical presence outside Madhya Pradesh by entering Himachal Pradesh. Over previous 13 years, we have won and executed projects across the length and breadth of the country, from West Bengal in East to Gujarat in West and from Himachal Pradesh and Punjab in North to Tamil Nadu and Kerala in South.

DBL has been able to successfully manage project bidding, execution and workforce mobilisation challenges across several different regions of the country and has proved that the Company is not restricted to a particulargeographicalarea.The creation of infrastructure has resulted in thriving construction activity, and regions of high growth opportunity keep evolving. Presences in multiple regions isolate DBL from getting negatively impacted in temporary slow-down in any one area.

v) Business diversification

DBL is one of the nations leading full-service infrastructure companies. Through the last two decades, the Company has diversified and successfully forayed into newer segments, including Roads, Bridges, Tunnels, Metros, Airports, Mining, and Irrigation. At present, the Companys order book consists of orders from MoRTH, NHAI, AAI, Coal India and other Central and State Government undertakings. The technical experience is getting richer and with every entry into newer segments, the range of in-house capabilities is continuously expanding. The Company will continue to chart newer territories, while expanding and diversifying its order book.

vi) In-house execution team brings the edge in project completion

DBL has one of the Largest in-house execution teams in India with a workforce of 26,743. Continuous trainings, up killing, and the development of managerial talent are topmost priorities for us.

vii) Valuable client relationships which withstood the test of time and are not replicable easily

We have established a robust relationship with the public sector clientele on the back of our track record, and excellent pre- qualification credentials. DBL has been focusing more on EPC projects, from the State and Central Governments and with a diversified clientele, our business has Lower pay meant/receivable risks.

We are proud to have worked on projects awarded by the State and Central Governments and authorities Like Ministry of Roads Transport & Highways, National Highways Authority of India, Airport Authority of India, Northern Coalfields Limited, Singareni Collieries Limited, Maharani Coalfields Limited and State Government.

DBLs working relationship with every project sponsorship authority in India is cordial Our technical and financial qualifications are a result of proper execution of previous projects and transparent financials.

vii) Relentless focus on cost control and working capital management

Our working capital management benefits from our decision to concentrate more on higher margin projects and excellent project management skills. It is our endeavour to lessen the Net Working Capital further by reducing the number of project sites, downsizing inventory, and improving the share of mining, which has fortnightly payments.

4. Risks, challenges, and how DBL spearheads mitigation measures

The infrastructure sectoris the backbone of Indias socioeconomic development. However, it is marked by new risks and concerns every year. While performing in a dynamic environment, DBL has designed a comprehensive framework for the classification, handling, and moderation of risks. Some of the risk mitigation strategies are:

1) Competition risks

DBL is competing with several other companies for the acquisition of concessions for projects. After intense competition for two decades, including irrational bids, the market has become more prudent. Companies are becoming increasingly cautious, in addition to making rational bids.

Mitigation: Since the market is shaped by cut-throat competition, the Company keeps changing its policies and processes in accordance with the trends so as to ensure a sustained business plan. We make efforts to complete the project before the stipulated time and within the budget.This helps us earn the early completion bonus, which directly impacts our income and adds to the margins.

2) Timely completion of the project

While completing infrastructure projects, especially the BOT projects, on-time completion can be the most crucial for the financial viability of the project. Any stress on the completion time is bound to affect the financial model and hence, margins and returns on the project. This year, apart from issues like land acquisition and project clearances, the cash flow was also tightened due to increased scrutiny by lenders and payment approving authorities. All these factors contributed to the delay in the delivery of a few projects.

Mitigation: The Company proactively treats the said issues as top priority and assists the authorities in the processes related to obtaining land acquisition and clearances.

3) Capital-intensive business risk

The infrastructure sector depends heavily on capital investment. The availability of funds is central to bidding for projects, especially under BOT-tolland hybrid annuity models.

and self and family welfare schemes.

6) Debt financing risk

The Company has considerable debt and is prone to the risks of debt financing. The amount of debt and the boundaries levied on the Company, by past or present loan deals, can have severe consequences. This is also dependent on the cost of borrowing. Mitigation: Our talented and skilled team sees to it that the risks are managed adequately by measures like adequate cash flow planning.

5. DBLs financial and operational performance

Overview of performance for DBLas consolidated entity The Companys performance during the year FY 22-23 has been satisfactory, considering the challenging environment posed by pandemic. The Company has been focusing on efficient conversion of order book into revenues and relentlessly pursuing operational excellence along with maximum possible cash conservation to enhance shareholder value.

Mitigation: Our working capital cycle is carefully optimized. We first pool our assets and resources, which are to be employed for completing various projects within geographical proximity. As a result of our high credit rating, we are able to get loan facilities at competitive rates of interest. The Companys debt-equity ratio has reduced considerably, which indicates smart deployment of funds and healthy internal accruals.

4) Input cost risk

Order inflow and order book

DBLgroup secured 10 new orders worth 109,181 million for FY 22-23. DBL has won new orders across 3 sectors i.e., road, metro and water supply, which demonstrates a diversified business approach. New orders have been won in 4 states, which proves DBLs geographical spread. DBL is disciplined in bidding projects at desired margins, which DBL will not compromise only for the sake of winning projects and increasing order book.

It is essential that the right material of high-quality be available in the desired quantity to deliver the projects on time. A sudden increase in the input costs directly impacts the margin.

Mitigation: The Company does not involve in the subcontracting and ensures an optimal use of equipment, proper construction activities, and the use foreworn mines and crushers for meeting the demands of stone aggregates. Other important raw materials are purchased directly for market leaders to guarantee the right quality, price, and on time supply. To safeguard our margins, we enter relevant cost escalation provisions in our contracts with customers.

5) Labour risk

Our workforce is our most invaluable asset. It is critical to pay attention to employee needs and ensure that the work environment promotes professionalism and efficiency. It has become imperative to strive for continuous upskilling of personnel, while ensuring their growth as professionals.

Mitigation:

The Company focuses on forming a group of motivated individuals, who have the passion and zeal to work hard and excel in the industry. The employees are expected to be goal- oriented and committed to exceeding expectations of the clients. The incentives provided are at par with the industry standards. Training and team building activities are conducted periodically to reduce stress and increase efficiency. All employees are provided generous retirement benefits, social security measures,

Revenue from operations

The consolidated revenue stood at Rs. 06,436.45 million in FY 22-23 as against Rs. 95,664.29 million in FY 21-22, registering a growth of 11.26% YoY. The increase was mainly due to timely execution of projects during the year.

Revenue from operations ( in millions)

Operating costand the Consolidated Operating Profit (PBDIT)

During FY 22-23, Manufacturing, Construction and Operating (MCO) expenses increased by 11.54% to Rs. 92,384.32 million compared to Rs. 82,824.39 million in the previous year. These expenses mainly comprise cost of construction and change in inventories. Staff expenses for FY 22-23 stood at Rs. 2,140.04 million as compared to Rs. 2,254.54 million in the previous year. PBDIT, before exceptional items increased by 26.33%, was at Rs. 10,245.51 million for FY 22-23 as compared to Rs. 8,110.03 million in the previous year due to timely execution of projects during the year.

Depreciation and amortisation

Depreciation and amortisation expenses for FY 22-23 decreased by 0.3% to Rs. 3,984.97 million as compared to Rs. 3,997.71 million in the previous year.

Other income

Other income for FY 22-23 increased by 77.05% and stood at Rs. 679.64 million as compared to Rs. 383.87 million in the previous year.

Finance cost

The interest expense for FY 22-23 was at Rs. 9,013.64 million, which was lower by 17.26% in comparison to Rs. 10,569.62 million for the previous year on account of decrease in the level of borrowings.

Profit afterTax

Consolidated Profit afterTax (PAT) including Other Income was loss of Rs. 13.92 million for FY 22-23 as compared to loss of Rs. 5,496.76 million in the previous year.

Earnings Per Share

Consolidated Earnings per share (EPS) for FY 22-23 stood at negative Rs. 0.10 compared to a negative Rs. 37.77 in the previous year.

Net worth and capital employed

The NetWorth of the shareholders stood at Rs. 39,983.92 million as at March 31, 2023 as compared to Rs. 35,497.83 million as at March 31, 2022. Capital employed decreased to Rs. 106,563.60 million as at March 31,2023 as compared to Rs. 123,329.79 million as at March 31,2022.

Liquidity and gearing

Cash and cash equivalents balance declined to Rs. 4,260.03 million in FY 22-23 as compared to Rs. 5,827.88 million in the previous year. Net debt to equity ratio has decreased to 1.55 as at March 31,2023 as compared to 2.37 as at March 31,2022.

Consolidated cash flow statement

Particulars	FY 2023	FY 2022
Net Cash Generated from Operating Activities (A)	28,451.72	16,237.02
Net Cash Generated Used in Investing Activities (B)	257.88	4,453.55
Net Cash Generated from Financing Activities ?	(30,277.46)	(22,950.54)
Cash and Cash Equivalents (D=A+B+C)	(1,567.85)	(2,259.97)
Cash and Cash Equivalents at the beginning (E)	5,827.88	8,087.85
Cash and Cash Equivalents at the end (F=D+E)	1,979.57	3,429.46

The totaL borrowings as at March 31,2023 stood at Rs. 66,579.69 million as compared to Rs. 87,831.96 million as at March 31,2022.

Overview of performance for DBLas standalone entity Revenue from Operations

The Standalone Revenue stood at Rs. 101,195.28 million forFY 22- 23 compared to Rs. 90,061.48 million in FY 21-22, registering a growth of 12.36% YoY. The increase was mainly due to a surge in business from Metro, Airports, Irrigation and Water Supply projects i.e., 111% and 139% YoY

Revenue from operations ( in millions)

Operating Costand PBDIT

Manufacturing, Construction and Operating (MCO) expenses increased by 11.66% YoY at Rs. 87,236.52 million mainly due to rise in commodity prices. These expenses mainly comprise cost of construction and change in inventories. Staff expenses for FY 22-23 at Rs. 1,795.22 million decreased by 4.74% as compared to

the previous year.

PBDIT before exceptional items increased by 33.70% at Rs. 10,530.83 million for FY 22-23 as compared to Rs. 7,876.63 million in the previous year.

Depreciation and amortisation

Depreciation and amortisation charge for FY 22-23 was lower by 1.29% at Rs. 3,880.98 million as compared to Rs. 3,931.67 million in the previous year.

Other income

Other income for FY 22-23 was increased by 89.98% at Rs. 646.46 million as compared to Rs. 340.28 million in the previous year.

Finance cost

The interest expense for FY 22-23 stood at Rs. 5,137.31 million was declined by 15.06% in comparison to Rs. 6,048.19 million for the previous year.

Profit After Tax

Standalone Profit afterTax (PAT) including Other Income was of Rs. 2,217.75 million for FY 22-23 as compared to a loss of Rs. 859.74 million in the previous year.

Earnings Per Share

Standalone Earnings per share (EPS) for FY 22-23 stood at Rs. 15.17 as compared to a negative Rs. 5.91 in the previous year. Net worth and capital employed

The Net Worth of the shareholders at Rs. 46,031.38 million as on March 31, 2023 increased by Rs. 2,670.03 million as compared to Rs. 43,361.35 million as at March 31, 2022. Capital employed increased to Rs. 72,888.71 million as on March 31, 2023 as compared to Rs. 74,078.95 million as on March 31,2022.

Liquidity and gearing

Cash & cash equivalent balance increased to Rs. 3,097.65 million in FY 22-23 as compared to Rs. 3,328.94 million in the previous year. Net debt to equity ratio has decreased to 0.52 as on March 31,2023 as compared to 0.63 as at March 31,2022.

Standalone cash flow statement

Particulars	FY2023	FY2022
Net Cash Generated from Operating Activities (A)	11,356.89	(101.81)
Net Cash Generated Used in Investing Activities (B)	(2,579.16)	4,885.27
Net Cash Generated from Financing Activities ?	(9,009.03)	(4,376.58)
Cash and Cash Equivalents (D=A+B+C)	(231.29)	406.87
Cash and Cash Equivalents at the beginning (E)	3,328.94	2,922.08
Cash and Cash Equivalents at the end (F=D+E)	817.19	930.52

7. Internal control systems and their adequacy

To safeguard our assets and resources, the Company has relevant internal control systems, which meet the requirements

of an organisation of DBLs size and the businesses we conduct. It is ensured that all the resources are acquired in an economical manner and they are protected from any kind of misuse. All the transactions conducted are ratified, logged and reported to the right personnel.

nformation Technology (IT) is essential to DBLas it smoothens all the processes and binds the Company as a unit. As a result, decision-making is quick and informed, the operations are disciplined, and the brand reputation is boosted. DBLalso utilises ERP solutions on its SAP platform to streamline its business operations. Ultimately, comprehensive data is collected, which provides valuable insights, makes decision-making easy, and secures sensitive information. To strengthen this sector in the organisation, the Company has aligned its business model to suit the economic and sector realities.

The internal control system is supported well by the Companys policies, procedures, guidelines, and the reviews carried out by the internal audit department in the Company. In accordance with the annual audit plan, various departments of the Company are audited by internal auditors, and the reports are submitted to the Audit Committee of the Board and the management periodically.

8. Human capital

As of March 31,2023, the number of employees in the company is 26,743. Talent management has always been a crucial factor for DBL It is an essential business function and a responsibility, which helps in ensuring a bright future of the organisation by offering better opportunities in the Company. The objective is to consistently build a pool of talented individuals, who can sustain growth and move the Company closer to its goals.

The Company sees to it that both moral and financial support are given to the employees for their growth. The Company ensures constant motivation of the workforce by the following:

Retirement benefits and social security measures: To provide social security and retirement benefits to the employees and their legal heir/family members, the Company has provided the Provident Fund benefits to all the employees working at various projects of the company. Over 26,743 employees/ family members are getting benefited from this scheme. This scheme covers the following special benefits:

• Provident Fund benefits

• Pension benefits due to death/ total permanent disability retirement

• EDLI benefits due to death and total permanent disability

• Gratuity benefits

• Group personal accident insurance policy

• DBL employees voluntary benevolent fund scheme

• Workmen compensation policy and ESI benefits

• Group Mediclaim insurance policy

HR benefits policies and welfare schemes:

• Leave benefits

• Loans and advances

• Camp accommodation

• House rent benefits

• transportation benefits

• Subsidised mess facilities

• Medical reimbursement benefit

• Special allowance on transfer to south/ Jharkhand/ other hardship zone

• Free child education policy for drivers and operators

• One lakh gift policy for the marriage of drivers and operators daughters

9. Cautionary statement

Statements made in this Management Discussion and Analysis Report may contain certain forward-looking statements based on various assumptions on the Companys present and future business strategies and the environment in which it operates. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India and abroad, volatility in interest rates and in the securities market, new regulations and Government policies that may impact the Companys businesses as well as the ability to implement its strategies. The information contained herein is as of the date referenced and the Company does not undertake any obligation to update these statements. The Company has obtained all market data and other information from sources believed to be reliable or its internal estimates, although its accuracy or completeness cannot be guaranteed.