Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling Indias overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In 2016, India jumped 19 places in World Banks Logistics Performance Index (LPI) 2016, to rank 35th amongst 160 countries.
The government has outlined various infrastructure development initiatives in the country, which include smart cities, nationwide connectivity networks of roads, power, gas and water grids. We are also witnessing Indias potential to grow as a manufacturing hub. There is demand for good quality construction and we will invest to cater to that demand. Also, the governments focus on the implementation of an ambitious infrastructure development programme will also increase scope for ease of doing business for various companies which will lead to enhancing the supply chain management resulting in a faster economic growth.
Foreign Direct Investment (FDI) received in Construction Development sector (townships, housing, built up infrastructure and construction development projects) from April 2000 to March 2017 stood at US$ 24.3 billion, according to the Department of Industrial Policy and Promotion (DIPP).
However, over the past few years, all stakeholders are trying to kick-start stalled infrastructure projects by stepping up infrastructure investment, improving the productivity and quality of infrastructure spending, removing procedural bottlenecks, and improving governance. In the current perspective, the real challenge is not only to identify a core set of projects that are crucial for accelerating overall economic growth but also to ensure channelization of investment for such viable infrastructure projects and expedite their implementation by addressing issues like delays in regulatory approvals, land acquisition and rehabilitation in fast-track mode.
ECONOMIC AND INDUSTRY OVERVIEW
The industrial sector has continued to perform well in the wake of various reforms measures undertaken by the government recently.
India topped the World Banks growth outlook for the first time in fiscal year 2015-16, during which the economy grew 7.6%. Growth is expected to have declined slightly to 7.1% for the 2016-17 fiscal year. According to the IMF, Indias growth is expected to rebound to 7.2% in the 2017-18 fiscal and 7.7% in 2018-19.
The global macroeconomic landscape is currently chartering a rough and uncertain terrain characterized by weak growth of world output. These conditions reflect extreme risk-aversion behavior of global investors, thus putting many, and in particular, commodities exporting economies under considerable stress. Even in these trying and uncertain circumstances, Indias growth story has largely remained positive on the strength of domestic absorption.
Its macroeconomic parameters like inflation, fiscal deficit and current account balance have exhibited distinct signs of improvement. Wholesale price inflation has been in negative territory for more than a year and the all-important consumer prices inflation has declined to nearly half of what it was a few years ago.
The government is doing utmost efforts for infrastructure development and may continue with the record high spent on infrastructure till 2018 as per Twelfth Five Year Plan. Indias rate of urbanisation is high and the ambitious 100 smart cities project is about to take off that will require a number of infrastructure planning and development efforts.
With politically stable government at the Centre, it is widely believed that the entire economy will turn around in the near future to come.
Increasing urbanization opportunities as well as challenges related to urban infrastructure are also increasing. In this context, the government has taken various steps to improve urban infrastructure. The Smart Cities Mission, a flagship programme is discussed for urban development. A number of initiatives have been taken to encourage public transport, for example Bus Rapid Transit Systems (BRTS) approved for 11 cities under the Jawaharlal Nehru National Urban Renewal Mission, to equip buses with Intelligent Transport System (ITS) and Metro Rail Projects.
Recent Initiatives for Development of the Infrastructure Sector in India:
The objective of making India a global hub of manufacturing, design and innovation, the Make in India initiative, which is based on four pillars --new processes, new infrastructure, new sectors and new mindset—has been taken by the government. The initiative is set to boost entrepreneurship, not only in manufacturing but in relevant infrastructure and service sectors as well.
SECTORIAL DEVELOPMENTS Roads
In the Union Budget 2017-18, the Government of India has allotted Rs 64,000 crore (US$ 9.55 billion) to NHAI for roads and highways and Rs 27,000 crore (US$ 4.03 billion) for PMGSY.
Some of the recent developments are as follows
• The Cabinet Committee on Economic Affairs, Government of India, has approved the development of 19 kms long four laning from Pandoh Bypass end to Takoli section of National Highway (NH) -21 in Himachal Pradesh, which is estimated to cost Rs 2,775.93 crore (US$ 430.27 million).
• The Road Transport & Highways Ministry has invested around Rs 3.17 trillion (US$ 47.55 billion), while the Shipping Ministry has invested around Rs 80,000 crore (US$ 12.0 billion) in the past two and a half years for building world class highways and shipping infrastructure in the country.
Indian Railways (IR) is faced with a number of challenges. For speedy capacity creation, IR recognizes the importance of enhancing project execution capabilities. Considering the enormity of the resources
required for plan investment in rail infrastructure, and given the limitation of public resources, efforts are on by IR to generate sufficient internal surplus, and tap innovative methods of financing, to meet these needs. The focus is on prioritizing investments in important areas like dedicated freight corridors, high speed rail, high capacity rolling stock, last mile rail linkages and port connectivity, and attracting private and FDI investments to supplement available resources.
Various measures to improve passenger amenities, infrastructure and services, and initiatives under Make in India, freight initiative, resource mobilization initiative and green initiatives, etc. have been taken
With increasing urbanization, opportunities as well as challenges related to urban infrastructure are also increasing. In this context, the government has taken various steps to improve urban infrastructure. A number of initiatives have been taken to encourage public transport, for example Bus Rapid Transit Systems (BRTS) approved for 11 cities under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), to equip buses with Intelligent Transport System (ITS) and Metro Rail Projects.
New Initiatives taken for better urban development are given below:
• Swachh Bharat Mission (SBM)
• National Heritage City Development and Augmentation Yojana (HRIDAY)
• Atal Mission for Rejuvenation and Urban Transformation (AMRUT)
The Government of India has launched a mission on Smart Cities, with the collaboration of states and UTs for implementation of the flagship programme for urban development. The purpose of the Smart Cities Mission is to drive economic growth and improve the quality of life of people by enabling local area development and harnessing technology, especially technology that leads to smart outcomes.
The Smart Cities Mission targets promoting cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of smart solutions. The focus is on sustainable and inclusive development and the idea is to look at compact areas and create a replicable model which will act like a lighthouse to other aspiring cities. The core infrastructure development in a smart city includes adequate water supply; assured electricity supply; sanitation, including solid waste management; efficient urban mobility and public transport; affordable housing, especially for the poor; robust IT connectivity and digitalization; good governance, especially e-Governance and citizen participation; sustainable environment; safety and security of citizens, particularly women, children and the elderly; and health and education.
The civil aviation industry in India is experiencing a new era of expansion, driven by factors such as increasing private participation under Public Private Partnership (PPP), development of Greenfield airports, restructuring and modernization of airports, FDI in domestic airlines, increase in number of Low Cost Carriers (LCCs) and emphasis on regional connectivity, coupled with cutting edge information technology interventions.
Major initiatives have been taken to augment airport infrastructure:
(a) Commissioning of the Greenfield Kazi Nazrul Islam Airport at Andal in West Bengal;
(b) Signing of MoU for engaging Changi airport, Singapore, for executing Operations and Maintenance (O&M) contracts at Ahmedabad and Jaipur airports;
(c) in-principle approval for setting up of a Greenfield airport at Dholera in Gujarat;
(d) site clearance for setting up of greenfield airports at four locations, namely Bhiwadi (Alwar) in Rajasthan and Bhogapuram, Dagadarthi and Oravakallu in Andhra Pradesh;
(e) greenfield airports at Mopa in Goa, Navi Mumbai ,Shirdi and Sindhudurg in Maharashtra, Shimoga, Hasan and Bijapur in Karnataka, Kannur in Kerala, Pakyong in Sikkim, Holongi (Itanagar) in Arunachal Pradesh, Datia in Madhya Pradesh, Kushinagar in Uttar Pradesh and Karaikkal in Puducherry are at various stages of planning/ execution;
(f) development of small airports in tier-II and tier-III cities, namely Hubli and Belgaum in Karnataka, Kishangarh in Rajasthan, Jarsuguda in Odisha and Tezu in Arunachal Pradesh is progressing.
In view of the growing need of the Indian economy, the government has embarked upon a massive programme to provide uninterrupted continuous access to power supply in the country. Several steps have been taken for increasing power generation, strengthening of transmission and distribution, separation of feeder and metering of power to consumers. In order to restructure the sector, various amendments are being brought in the Electricity Act, and tariff policy in collaboration with states.
Government has approved the establishment of a National Smart Grid Mission (NSGM) in the power sector to plan and monitor implementation of policies and programmes related to smart grid activities in India.
SEGMENT WISE PERFORMANCE
The Company operates in major infrastructure segments. It regards Business Segments as primary segments. The Business Segments are in line with AS-17. Segment Wise Performance of the company is provided in detail under the head Notes to Account forming part of Balance Sheet of the company.
RISK, CONCERNS AND THREATS
Infrastructure projects take a long time to plan and implement. Delays in the execution of projects not only lead to shortfalls in achieving targets but widen the availability gaps. Time overruns in the implementation of projects continue to be one of the main reasons for underachievement in many infrastructure sectors. Delays in land acquisition, municipal permission, supply of materials, award of work, operational issues, etc. continued to drag down implementation of these projects. A large number of major central- sector projects are delayed with respect to their latest scheduled dates of completion.
Our exposure to BOT Projects, particularly in the area of Road and Transportation wherein revenues from toll-based projects are a function of actual traffic volume, has increasingly led to additional risks associated with such projects, including traffic volume risks, availability risks and financial closure risks. Adverse deviations between actual traffic volumes from projected volumes, delays in completion of related projects components or failure to achieve a financial closure could result in significant loss of revenue.
Policy hurdles such as delay in awarding projects, environmental clearances, land acquisition and lack of cheaper financing options still continue to be pertinent to the sector. Particularly, the fund crunch issue is a major challenge for the industry.
However, while the infrastructure sector continues to operate in a difficult framework in India, we are optimistic about reviving growth in the infrastructure sector. With the government proactive policies and announcements to support the private sector involvement in Indian infrastructure, the future looks promising for EPC companies in year 2015. Infrastructure is picking up in India and these moves will certainly pave the way to recovery for the infrastructure sector. Finally, over the years, India has shown that it has a momentum and dynamic of its own and is less impacted by the economies of developed countries than would ordinarily have been imagined.
INTERNAL CONTROL SYSTEMS
Company has a proper and adequate internal control procedures & systems commensurate with the nature and size of its business. The Companys internal control system primarily covers aspects such as:
1. Operating parameters and various factors relating to production.
2. Efficient use and protection of resources.
3. Accuracy and Promptness of financial reporting.
4. Compliance of laws and regulations.
5. An effective MIS & ERP system.
Company has a well-defined organizational structure, well documented policies, guidelines and clearly defined authority levels. RISK MANAGEMENT
The assets of your Company are adequately secured/ covered under appropriate policies and your management reviews it from time to time. Your Company has on 12th November, 2014 constituted a Risk Management Committee and adopted Risk Management Policy is making its best endeavors in identifying elements of risks and in development & implementation of the policy.
|Year Ended 31st March, 2017
|Year Ended 31st March, 2016
|Profit (Loss) before depreciation & tax
|Profit (Loss) before tax & Extra Ordinary Items
|Profit(Loss) before tax Provision for tax
|- Current Tax
|- Deferred Tax
|- MAT Credit/Fringe Benefit Tax
|- Tax adjustment for earlier years
|Profit (Loss)after tax
|Proposed Dividend together with Tax thereon
|Transfer to General Reserve
|Transfer to Debenture Redemption Reserve
|Surplus (Deficit) carried to Balance Sheet
The turnover of the Company for the year ended 31st March, 2017, was Rs. 1,22,358.69 lacs as compared to Rs. 1,21,996.95 lacs in the previous year.
Loss before depreciation and taxation was Rs. 1,10,060.19 lacs and after providing Rs. 19,443.09 lacs towards depreciation, the net loss amounts to Rs. 1,29,503.28 lacs.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES
During the year, the company has focused to integrate the needs and aspirations of the employees into strategic objectives and mission of the Organization; and to proactively deal with the issues as movement to develop Organizational capabilities to manage change and Challenge.
The HR philosophy based on its belief in limitless potential of human beings, trust in their basic integrity and respect for their dignity led to creation of work climate in the company where employees experience a sense of involvement and belongingness; where employees find fulfillment in work and seek newer horizons for self-development and organizational growth.
There has been complete Industrial peace and harmony across the Organization during the year.
In order to cope up with manpower requirement on account of diversification and expansion of business activities, the company has further strengthened its Engineering, Marketing, Commercial and Operational cadres.
The process of human resource management which has moved from strength to strength over the years has been further augmented, inter alia, through following initiatives:-
1. In order to keep the employees of the company abreast of latest knowledge in their respective field of specialization, the company had deputed a good number of employees, both to external and In house training programs; and professional Seminars.
2. Quality management systems (QMS) have been steered across the Organization in order to strengthen initiative and commitment of the employees in continuous improvement. Number of seminars and conferences have been organized to generate quality awareness and commitment amongst every employee segment. In collaboration with prestigious clients like Delhi Metro Rail Corporation (DMRC) a good number of client specific/ Job specific Quality conformance programs have also been organized.
3. The induction of fresh graduate engineers in multi-disciplines under the scheme named as UDAAN", launched in the year 2011 proved as an asset in meeting out the growing requirements of specialized manpower and also in providing for replacements against normal attritions. Through this scheme, a large number of fresh Engineering talents have been hired from the best Engineering Institutions of the Country, thereby strengthening the pool of highly skilled, specialized and motivated man power of the company.
4. In order to achieve and maintain lean and cost effective organization structure at all the levels of the company operations, system of periodical review adopted continues to be applied in the organization under the direct supervision of the Chairman and Managing Director.
Statements in the Management Discussions and Analysis describing the Companys objectives, projections, estimates, expectations are" forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations includes economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax, corporate and other laws and other incidental factors.