GMR Power & Urban Infra Ltd Management Discussions

Forward-looking Statements

This document contains certain forward-looking statements based on the currently held beliefs and assumptions of the management of GMR Power and Urban Infra Limited ("GPUIL"), which are expressed in good faith, and in its opinion and judgment, are fairly reasonable. For this purpose, forward- looking statements mean statements, remarks or forecasts that address activities, events, conditions or developments that the Company expects or anticipates which may occur in the future. Because of the inherent risks and uncertainties in the social and economic scenarios, the actual events, results or performance can differ materially and substantially from those indicated by these statements. GMR Power and Urban Infra Limited disclaims any obligation to update these forward-looking statements to reflect future events or developments.

Introduction

The FY 2022-23 was an important year in the journey of GPUIL. While grappling with a number of headwinds, the overall direction of the Indian economy and the continued focus on energy transition globally, have helped strongly re-establish the opportunity available for GPUIL to participate in the renewables, electric vehicles, energy efficiency and allied areas value chain. Similarly, the strong thrust of Indian government on improving the transportation and logistics in the country bodes well for GPUIL and opens up ample opportunities to participate in this space.

The vaccination drives around the globe resulted in pandemic waves becoming shorter and less impactful. Further, World Health Organization (WHO) re-classified COVID as endemic from pandemic, thus indicating that while COVID may never go away completely, the intensity of the virus is expected to weaken.

While on one hand, the receding pandemic fears resulted in a strong post-COVID recovery, on the other hand, the geo-political scenario turned negative. The continuing Russian invasion of Ukraine coupled with weakened supply chains triggered high inflation globally. This resulted in Central banks across the world acting in unison to tighten liquidity mainly through increasing interest rates in order to rein in inflation. However, this sudden change in monetary policy stance from accommodative to tightening caught many off-guard. While it did lead to difficulties for many countries and corporates, it also triggered the collapse of a few regional banks in United States and a major bank in Europe.

China continued with its drastic "Zero COVID" policy long after other economies had opened up and only towards December 2022 did it start relaxing this policy. As a consequence, Chinas manufacturing sector continued to be disrupted with some companies closing down their China operations, which in turn resulted in a slowdown of Chinas economy and disruption of global supply chains.

Global economic scenario

While post-pandemic recovery in CY2021 witnessed a GDP growth of 6% on a low base in CY2020, Global GDP growth rate normalized to 3.4% for CY2022. At the same time, Global inflation rose from 4.7% in 2021 to 8.7% in 2022. Rise in inflation was fuelled by various factors including the release of pent-up demand post pandemic and; supply chain disruptions due to after effects of pandemic and US-China economic war. Excessive monetary easing by various countries post pandemic intensified the impact. Finally, the Russia Ukraine conflict exacerbated the inflation issue due to disruptions in natural gas, wheat and fertilizer supply.

In order to fight rising inflation, central banks around the world reversed their policies from monetary easing and started tightening liquidity. Given such developments, while inflation levels have recently started to soften, an adverse impact on global growth is to be expected. IMF has revised downward the global GDP growth forecast for CY2023 to 2.8%.

United States recorded an inflation rate of ~8.3% during CY2022. To counter the same, US Federal Reserve have hiked interest rates to 5.00% – 5.25% from 0.25% during COVID. Such an unprecedented rise in interest rates has been designed to slow down economic growth. However, despite the actions by the Central Banks, inflation has proved to be rather sticky, and economic activity, particularly in USA, has not slowed adequately in line with Federal Reserve estimates. However, it also resulted in the collapse of three regional banks in United States including First Republic Bank, Silicon Valley Bank and Signature Bank. United States recorded a GDP growth of 2.1% during 2022, which is expected to further slowdown to ~1.6% in 2023. Europe seems to be among the worst impacted by the Russia Ukraine conflict. Initial expectations did not envisage a prolonged war, but the continuing conflict created scarcity of many products and disrupted the still recovering supply chains. Europe, in particular, was deeply impacted on account of its strong dependence on natural gas and food supplies from Russia and Ukraine. The European Central Bank has also been hiking interest rates to counter rising inflation, which has compounded the negative impact on economic activities, Interest rate as declared by ECB now stands at 4%. Euro area GDP growth for 2022 was recorded at 3.5%, while as a result of above-mentioned factors, the same is projected at 0.8% for 2023. Germany is expected to record a degrowth of 0.1% during 2023.

China recorded a GDP growth of 3% during 2022, mainly because of its very delayed relaxation of its zero COVID policy. Given the gradual economic recovery and easing supply chain disruptions, Chinas GDP is expected to grow at 5.2% during 2023. However, this growth forecast may undergo a downward revision given weak recent macroeconomic indicators coming out of China, including stagnation in investments, shrinking trade numbers, falling prices etc.

Indian economic scenario

Among all the global economic and geo-political turmoil, India has remained a bright spot in the world economy. India ended FY2022-23 on a strong footing with a GDP growth of 7.2%, despite headwinds from ongoing Russia-Ukraine conflict, high levels of inflation and rate hikes by RBI.

FY2022-23 began in the backdrop of the challenges posed by the rising inflation brought on by the Russia-Ukraine conflict. Globally, pricing for crude oil, natural gas, food and fertilizers rose substantially. While India has traditionally been playing a balancing act in line with its policy of non-alignment, it has not been immune to negative economic consequences of such conflicts. India was particularly hit due to high crude oil prices. However, the government proactively mitigated this challenge by sourcing crude oil supplies from Russia at a significant discount to prevailing crude oil prices.

Despite the mitigation measures taken by the government, India still had to suffer an initial inflation shock, which took the inflation to a level of 7% to 8%. To counter such high levels of inflation, Reserve Bank of India sprang into action and started increasing interest rates from May 2022 and ended FY 2022-23 with the repo rate at 6.5%, a 250 bps rise during the year. Fruits of these actions are now becoming visible with inflation starting to soften.

Simultaneously, in order to mitigate negative impact on economic growth from rate hikes, Government of India continued to enhance spending, subsidies via infrastructure investments, performance linked incentive scheme, etc. To push growth in the economy and revive private capex. The Governments capex spending target was increased by around 33% to Rs. 7.5 lakh crore for FY 2022-23, with major emphasis on infrastructure and technology.

During the first half of FY 2022-23, Indias forex reserves fell from USD 600 Bn to USD 530 Bn mainly due to high crude oil prices and foreign investors pulling out money from India equity markets amid interest rate hikes. However, during the second half investor confidence seemed to have been restored and coupled with falling crude oil prices, Indias forex reserves zoomed again to USD 590 Bn mark.

Performance of the Indian Rupee also remained somewhat satisfactory, depreciating from around Rs. 76 to around Rs. 82 per USD in 1^st half of FY 2022-23, largely due to effects of Russia-Ukraine war but remaining within the range of Rs. 80-82 per USD in the 2^nd half of FY 2022-23. Despite this currency depreciation, the Indian Rupee remained among the best performing currencies in the world. Inflation numbers remained high during the year and only started softening during the second half as a result of normalization of commodity prices and high interest rates. WPI inflation came down from a high of 13.88% during June 2022 to around 3.5% in June 2023. Similarly, CPI inflation came down from as high as 7.8% in May 2022 to 4.25% in June 2023.

GST collections continued to grow throughout the year indicating good economic activity. Monthly GST collections improved from

Rs. 1.41 Trillion in May 2022 to Rs. 1.87 Trillion in April 2023. Other indicators like Manufacturing PMI and Services PMI also saw marked improvement throughout the year indicating robust economic and investment climate in India.

Way forward

As the world moves ahead of the pandemic, the geo-political context is characterized by a more multi-polar world, where countries are driven more by their individual requirements rather than through their traditional strategic partnerships. The Russian-Ukraine conflict is a consequence of the brinkmanship between Russian and NATO and no easy solution appears to be in sight. In addition, Chinas ambitions have also created friction with the US and other major economies in the Asia Pacific region. The US-China economic war on Technology and Chip related issues have further exacerbated an already fragile supply chain. Chinas BRI initiative has left a number of developing countries, already struggling to recover from the pandemic, on the verge of bankruptcy.

With rising oil prices, the Middle East has once again emerged with capital surpluses, ready to play a greater role moving ahead. Both United Arab Emirates and Saudi Arabia have significant plans to grow infrastructure and strengthen their economies.

India has emerged stronger during this period. As India was able to roll out vaccines to cover a large part of the population, and through its ability to keep the domestic economy going after the initial COVID period, it was in a strong position to grow in the post pandemic era. In this emerging post pandemic multi-polar context, many global corporations are wary of continuing to depend substantially on China for their sourcing and manufacturing requirements. Over the past few years, India has rolled out various taxation incentives and specific Production-Linked-Incentive (PLI) Schemes for manufacturing in specified sectors. With the strong domestic market poised for strong growth as India per capital increases, combined with the young demography and trained technical manpower available in India, these additional incentives have been a key reason for many global corporations to consider India as a manufacturing destination. Given the complexity of decision making and gestation period for manufacturing investments, these investments are likely to be rolled out over the medium term.

As such, the recent accelerated pace of economic reforms of the last few years in the domains of fiscal, digital and physical infrastructure, has positioned India for higher and sustainable growth. This, together with the largest, broadest and deepest labor pool, with a relatively inelastic labour market, provides a long runway for improving productivity at a pace faster than growth in wages. This enhances the global competitiveness of enterprises doing business in India. The digital public infrastructure and its adoption by people, provides India a unique competitive advantage of not only reducing the cost of doing business, but also formalizes the economy and supports financial inclusion and creates new business opportunities.

The spurt of new-age companies across technology and other sectors on the back of rapid digitalization and strong capital availability would be instrumental in delivering differential growth to the Indian economy.

Acceleration in infrastructure investment, especially transportation and logistics, is directly boosting growth while steadily improving competitiveness for enterprises. After massive upgrades in roadways, the focus is now on rail, air, water transport along with the ‘Gati Shakti initiative which is aimed to improve intermodal visibility and synergies. Investment in physical infrastructure is being supplemented by IT-based ease-of-doing-business initiatives such as the National Logistics Policy which aims to increase the speed and lower the cost of movement.

The National Infrastructure Pipeline (NIP) of US$1.4t underpins the large infrastructure investment opportunity in India, duly supported with tax concessions for Sovereign Wealth and Pension Funds and an enabling market for Infrastructure Investment Trusts (InViTs) to monetize developed infrastructure assets and free up capital. Improving the ease-of-doing-business parameters and reducing the regulatory and compliance burdens for enterprises in India, would be key to enhancing competitiveness.

Infrastructure initiatives announced

The financial budget for FY 2023-24 aimed to serve as a blueprint for future growth and building an inclusive and empowered economy. The budget prioritized growth in infrastructure and investment, last mile connectivity, green growth and financial sector growth among other targets.

In a major boost to infrastructure and economy, the budget entails a 33% growth in capital expenditure outlay at Rs. 10 lakh crore. Among the major expenditure allocations are: Capital expenditure of Rs. 2.40 lakh crore allocated to Railways -

- To decongest railways and make it future ready;

- To lay 1 lakh kms of additional tracks in next 25 years as more goods movement shifts from roads to railways;

- Rollout of 75 Vande Bharat trains by August 2023,

- Upgradation of tracks to meet the 160 kms speed potential;

- Allocation of funds for the manufacture of 35 hydrogen fuel-efficient trains;

- Introduction of 4,500 new coaches, 5,000 LHB coaches, and 58,000 wagons.

Roads and Highway infrastructure – Increase in budgetary allocation to MoRTH by 36% to Rs. 2.7 lakh crore to help meeting its target to develop 25,000 km highways.

Power sector - Increase the total investment by eight state-owned power companies by about 15% to Rs. 60,805 crore.

Further, in order to spur growth in priority sectors, the Union Budget 2023-24 earmarked Rs. 8,083 crore for Production-Linked Incentive (PLI) schemes, a major allocation going towards large-scale electronics manufacturing, pharmaceuticals, automotive and automotive components, and food processing.

The Union Budget 2023-24 also highlighted ‘Green Growth among the key priorities in the economic agenda. With a clear intent to boost investment in the green energy space, the budget provides a capital outlay of Rs. 35,000 crore for energy transition. Rs. 19,744 crore has been set aside for National Green Hydrogen Mission with a target to produce 5 MMT of Green Hydrogen annually by 2030. Setting up of 59 solar parks with a capacity of 40 GW have been approved. Offshore wind capacity additions target of 30 GW by 2030 has been set. Further, funding viability for 4 GWh battery storage, and future investment to improve grid transmission for better inter-state RE evacuation have been targeted. Also, a Green Credit Program is to be notified under the Environment (Protection) Act to incentivize and mobilize additional resources for environmentally sustainable and responsive actions. These steps are aimed to create a sustainable energy mix and the required energy infrastructure framework attracting further investments.

Additionally, in a bid to boost the MSME sector, a revamped credit guarantee scheme has taken effect through infusion of Rs. 9,000 crore in the corpus. This scheme is expected to enable additional collateral-free guaranteed credit of Rs. 2 lakh crore and reduce the cost of the credit by about 1%.

Despite above mentioned major capital allocation, the government intends to improve fiscal discipline. In this direction, the fiscal deficit target for FY 2023-24 has been set at 5.9%, a 50bps reduction over past year target.

Impact on sectors in which GPUIL operates

As the effect of pandemic receded, the infrastructure sector in India performed well last year. Installed renewable energy capacity increased to ~125 GW, an increase of ~15 GW. Further, in order to meet its target of installing 500 GW renewable capacity by 2030, in line with its commitments at COP26, India intends to issue tenders of 50 GW of renewable power each year.

Green Hydrogen investments in India have also picked up considerably in the past year with plans to install both electrolyzers manufacturing capacities and green hydrogen plants. With the National Green Hydrogen mission kicking off this year, Green Hydrogen demand is set to get a boost with procurement mandates for various industries along with natural transition of the fertilizer, chemicals, process, and refinery space towards green products. With the scale of refineries, steel and cement capacities, India has ample captive Green Hydrogen market. Further, given Indias huge renewable energy potential, India is looking to become a large-scale supplier of Green Hydrogen to Europe and Japan.

Electric Vehicles is another space where India has done considerable progress this year in its quest for meeting the energy transition targets. Nearly 7.3 lakh electric two wheelers were sold in FY 2022-23, 3 times of FY 2021-22 sales. Further, Economic Survey 2023 predicts that Indias electric vehicle market will grow at 49% CAGR till 2030 to 1 crore annual sales. This growth has been due to acknowledgment of climate change as a serious threat, significant economic benefits of owning electric vehicles compared to conventional fuel vehicles and regulatory support for EVs. The government is also supporting the industry through tax exemptions on import of capital goods and machinery required for manufacturing of lithium-ion (Li-ion) cells for batteries for EVs. Due to these factors, major international electric vehicle companies are looking to manufacture electric vehicles and batteries in India.

Green energy financing is crucial for India to achieve its energy transition goals. India came up with Sovereign Green Bond Framework last year, which envisages funding projects in nine categories to fulfil various environmental objectives such as climate mitigation, adaptation, resource conservation and biodiversity conservation. It aims to diversify the investor base and lowering the cost of green finance in India. India raised its first Sovereign Green Bonds totalling USD 2 billion (issued in Rs. denomination) this year, indicating strong appetite and confidence amongst investors. This will help foster the growth of the domestic sustainability-focused fixed-income asset management industry, which can then support further issuances by the sovereign and other domestic corporations.

In India, Road sector has also witnessed robust growth post pandemic. More than 10,000 kms of roads were constructed in FY 2022-23 and it is planned to be ramped up to 12,500 km in FY 2023-24. Apart from other financing options, InVITs have emerged as a popular fund raising alternative. This has been tapped by major road players including NHAI.

Key developments at GPUIL

Over the past few years, we have consolidated our position, focused on addressing, rationalization and management of corporate debt and stressed assets while building a platform for growth for the future. We have taken many significant steps in implementing our stated strategy to strengthen the balance sheet through improved cash flows from increased profitability, debt reduction through asset monetization, value unlocking and prudent working capital management while creating avenues for growth.

In this direction, last year in a bid to create value for investors and attracting sector focused investor capital, GMR Airports Infrastructure Limited (Formerly GMR Infrastructure Limited) ("GIL") had completed its restructuring initiative, under which, the group underwent a vertical de-merger of its airport and non-airport businesses. Post the de-merger, GIL emerged as Indias only pure-play listed airport company. GILs non-airports business have been shifted to the Company, with a mirror shareholding of GIL. The restructuring has resulted in simplification of corporate holding structure and enable airport and non-airport businesses to chart their respective growth plans independently.

As part of an ongoing restructuring exercise at GIL, a plan has been developed to address the contingent liabilities of GIL, which includes certain liabilities of GPUIL. GIL in this direction has raised an FCCB to address these requirements. Accordingly, GPUIL has taken arms length support from GIL to address a substantial part of its liabilities. Further, as part of the restructuring exercise, it is envisaged that the FCCBs held by Kuwait Investment Authority(KIA) will be simultaneously converted into equity at both GIL and GPUIL in due course. These steps and measures will strengthen the balance sheet of GPUIL to a great extent, and allow it to focus on growth opportunities.

Further, in order to deleverage the balance sheet and create shareholder value, the Group divested its 30% equity stake in PT GEMS in Indonesia to PT Radhika Jananta Raya, a subsidiary of PT ABM Investama Tbk ("ABM"), following a competitive bidding process. GMR Coal Resources Pte Ltd ("GCRPL"), a subsidiary of GPUIL, received USD 420 Mn along with deferred consideration based on mutually agreed milestones.

With regards to the energy vertical, the Group had commissioned the 180 MW Bajoli Holi hydro plant. The plant has tied up almost 100% of its power through long term PPAs with Delhi International Airport Limited (DIAL) and Uttar Pradesh Power Corporation Limited (UPPCL). Further, the 400kV transmission line from Lahal to Chamera sub-stations have been fully commissioned and as a consequence, all the power generated from the project will be evacuate during the peak summer season. GMR Kamalanga Energy Limited entered into a medium term PPA with M/s TANGEDCO to supply 102 MW, thus ensuring that almost entire capacity of Kamalanga plant is tied up. As part of Energy 2.0, GMR has won a smart metering project in Uttar Pradesh through competitive bidding. The project, valued at ~ Rs. 7500 Crs, entails the installation of ~ 76 lakhs smart meters across the State of Uttar Pradesh.

EV charging infrastructure is another growth opportunity, which synergizes well with the airport portfolio of the GMR Group. We have partnered with cab operators and aggregators to put up charging infrastructure at airports being operated by GIL and are looking to expand this business segment further.

In our EPC business, we have achieved a major milestone with the completion of 417 km long Dedicated Freight Corridor package awarded to us in the state of Uttar Pradesh. In our Highways vertical, we have received some favourable outcomes in legal proceedings, which will be positive for the liquidity profile of the business.

Energy Sector Outlook and Future Plan Indian Economy - Power Sector Scenario

At the end of year, total installed capacity in India stood at 416 GW. Conventional energy (from thermal) sources accounted for 237 GW or 57% of the total capacity while renewable energy sources accounted for 125 GW and the rest comprised capacity from nuclear and hydro (>50 GW) based power plants.

Following were the highlights of the Power sector performance in India during FY 2022-23:

• FY 2022-23 saw a substantial increase in generation by 8.9% over the previous year – 1625 BU generated in FY 2022-23 as compared to 1492 BU in FY 2021-22.

• Generation from thermal sources increased by 8.2% to 1,206 BU in FY 2022-23 compared to 1,115 BU in FY 2021-22.

• Generation from renewable sources increased by 19% to 204 BU in FY 2022-23 compared to 171 BU in FY 2021-22. Further, installed capacity from renewable energy sources increased by 13.6% to 125 GW in FY 2022-23 from 110 GW in FY 2021-22.

• FY 2022-23 saw a 35% jump in merchant tariffs as compared to FY 2021-22 from Rs. 4.39/kWh to Rs. 5.94/kWh

• Coal India Limited (CIL) continued its SHAKTI auctions of last year and offered linkage coal to power plants having no LoA and no PPAs under SHAKTI Scheme of MoC.

• Coal production by CIL increased by 12.94% with production of 703 MT as against 623 MT last year.

Our focus over last year has been on stabilizing our existing assets, achieving operational excellence and improving profitability. On the regulatory front, we were able to continue to get positive results for our efforts on regulatory orders in APTEL and CERC. Our focus continued to be on the recovery of regulatory receivables during FY 2022-23 and we have succeeded to a significant level.

Through Industry Associations, we have been working on various policy measures to support the recovery of the Sector. These include usage of linkage coal for sale of power in short term markets, relaxation in FGD timelines, revival of stranded gas based projects etc. While the Government has made progress on some fronts, the industry continues to seek further support from the Government on the rest.

Going forward, our strategy in the Energy sector is to tap into new age smart and cleantech energy opportunities while focusing on improving operational efficiencies of existing assets, with focused efforts towards ensuring realization of benefits under the regulatory measures announced. While monetization/divestment of assets on selective basis would be explored but we will also build new avenues to pursue growth opportunities in this sector through asset light business models and/ or through partnership model. In order to achieve this objective, we have embarked on a new journey to explore growth opportunities and arrive at new variant of Energy segment i.e. Energy 2.0.

A brief of Energy 2.0 initiative

Vision: We aim to be a top-tier cognitive intuitive clean energy company of the future.

The route envisioned to operationalize the above key pillars is through the following overarching principles:

• High focus on innovative, asset-light, platform-based, and technology-oriented business models.

• Deploy efficient capital structure and access green financing.

• Enter strategic partnerships with global reputed majors and institutes of excellence.

• Invest in emerging start-ups in the cleantech ecosystem where there are potential synergies.

• Build on our groups strengths and leverage infrastructure assets and businesses of the group as a launch pad for new offerings.

Strategy: The key pillars of our strategy going forward are:

• Create new value through exciting opportunities in the adjacent areas of our current businesses by embracing technology-led solutions o Selectively foraying into businesses directly with the end consumers, enhancing value through differentiated service offerings using new-age technology solutions as also developing and realizing the potential for adjacent businesses.

• Nurture & develop new opportunities in the green ecosystem with a high focus on hydro and innovative platform-based solutions in solar, wind power generation, and electric mobility. o Continue focus on hydropower development and explore additional innovative value enhancement opportunities, including hybrid power solutions o Generating value from ‘Green ecosystem through new age distributed energy business segments including areas such as electric mobility and storage solutions o Creating sustainable value by focussing on identified strategic areas

- Offering bundled green solutions to commercial end consumers

- Offering bundled green solutions to residential end consumers

- Exploring innovative and sustainable ways of increasing renewable generation and adoption o Continue emphasis on being ESG compliant responsible corporate citizen with an enhanced focus on resource neutrality including carbon neutrality, going forward.

Build green ecosystem: The green ecosystem in India is expected to scale rapidly over the next few years. Government of India is targeting 500GW Renewable Energy power by 2030. The recent budget has reemphasised governments focus on new age, clean and technology-oriented green ecosystem. As climate-conscious corporate citizens and prudent business house, we also see significant value potential in this sector and wish to unlock value for our shareholders through undertaking new age distributed energy business models including in areas such as electric mobility and storage. We are–

- Leveraging unique relationships with early adopters- airports, highways, and industrial parks under the GMR Umbrella to generate value from electric mobility and new-age storage and charging solutions.

- Capitalizing on these opportunities by developing a platform for green ecosystem play and striking strategic, financial partnerships to build and rapidly scale our green business.

Platform Play: Energy ecosystem is at the cusp of technological disruption as emerging technologies and innovative business models transform the overall energy landscape. These technologies have fuelled multiple innovation imperatives across value chain as evident from the dramatic increase in cleantech VC activity. Multiple energy technology startups have attained unicorn status over the last decade indicating significant potential for India. We are–

- Building a portfolio of innovative, capital-light, platform-based businesses.

- Actively investing in emerging startups in cleantech ecosystem to offer digital solutions for operations improvement, performance monitoring, energy efficiency management, among others.

- Exploring partnership opportunities with global technology players to build and scale these platforms.

- Attract financial partners to be part of our journey and set ourselves up for impact investors to solidify our social impact in the countrys development.

Build on our strengths We are actively working on building the foundation for ‘GMR Energy 2.0 and look to achieve a competitive advantage by–-

- Leveraging our entrepreneurial DNA, ability to navigate complex regulatory landscapes, and small yet significant green portfolio (hydro, solar and wind).

- Deepening and strengthening our leadership team to build, run and manage future core businesses.

- Continuing our proven strategy of forging successful strategic partnerships with global players and expanding this competency further to include new technological companies and start-ups.

- Mobilizing forces to secure equity investments and tapping into innovative financing mechanisms to fund upcoming projects and assessing potential inorganic routes to fuel this expansion.

Achievements

- GMR has been awarded Letter of Intent (LOI) for the implementation of a smart metering project in Uttar Pradesh. These LOIs were issued following a tender floated by

Dakshinanchal Vidyut Vitaran Nigam Ltd (DVVNL) and Purvanchal Vidyut Vitaran Nigam Ltd (PuVVNL) for various areas in Uttar Pradesh. GMR has emerged as the winner in three packages, with one in DVVNL and two in PuVVNL. The project, valued at around Rs. 7,500 crore, entails the installation of around 76 lakhs smart meters across parts of Uttar Pradesh.

- GMR has installed EV chargers in strategic locations at group related assets. GMR has continuously established B2B partnerships in the E-Mobility business with leading brands such as UBER, Meru and more. The company has signed an MoU with UBER for long term strategic partnership in EV charging ecosystem.

- GMR has set up a Centre of Excellence (CoE) at IIT Delhi. The CoE will focus on research on new energy sector like Solar PV manufacturing, Energy Efficiency, Green Hydrogen etc. This partnership can provide us with a range of benefits, including access to talent, innovation, and resources, as well as increased brand awareness and reputation.

- GMR has signed an MoU with the Uttar Pradesh Government for a total outlay of Rs. 45,000 crore by 2028. This partnership will enable GMR to invest in several sectors, such as solar, energy efficiency, EV charging infrastructure, Green Hydrogen plants, data centres, and more.

The world is entering a new energy paradigm that will run on fossil-fuel alternatives and India is at the forefront of this transition. ‘Clean Energy is Indias new tryst with destiny – as our power sector opens a vibrant new chapter, seeking to fulfil both global climate commitments and to accelerate Indias own economic development. In sync with the national energy ambition, GMR Energy, a subsidiary of GPUIL, is determined to script its new energy charter to strengthen its position in the new energy era.

GMR Energy is aligned with Indias energy aspirations and is committed to leverage its entrepreneurial DNA, significant resources, ability to forge and execute partnerships and proven expertise to build the India of a new energy era.

Over the coming year, we expect to firm up our strategic choices to move along the path as outlined above.

Transportation and Urban Infrastructure Sector Outlook and Future Plan Transportation Railways

The Group made a big leap into Railway EPC Projects in 2015, when the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) awarded two packages (Contract Package # 201 & 202) on the Eastern

Dedicated Freight Corridor (EDFC) in the State of Uttar Pradesh between the 417 Km Section between New Bhaupur and New Deen Dayal Upadhyaya junction has been commissioned. Presently 25 pairs of IR goods trains are running on the EDFC Track.

Subsequently, two more packages (Contract Package # 301 & 302) on the Eastern Dedicated Freight Corridor (EDFC) were awarded in 2016 worth Rs. 2,281 crore in States of Punjab-Haryana-Uttar Pradesh (Ludhiana –Khurja – Dadri). This Section is under advance stage of completion.

Your Company will be exploring new projects under DFCCIL/IR in PPP /EPC mode that are expected to come up during FY 2023-24 and beyond. Company has trained manpower with knowledge & experience in undertaking Railway Projects. In addition, Company has heavy plant and machinery and fleet of track machines including fully mechanized track laying machines, that can be effectively utilized in future projects as well.

Apart from construction of railway tracks, Government has opened up private participation in Operation & Maintenance (O&M) of Railway Tracks. Your Company has requisite track machines and skilled manpower to undertake O&M works and will explore these opportunities that align with the overall Group strategy.

Highways

The Road and Highways sector is the one segment that has consistently been weathering the broader economys travails and even the pandemic shock. It has been able to recover from Covid-19 at a much faster rate than expected. To further accelerate the development of road infrastructure and enable seamless connectivity across country while reducing overall logistics costs at the same time, the Government of India (GoI) has lined up an investment of Rs. 2.7 lakh crore for the Road and Highway sector in the Union Budget for FY 2023-24, increasing it by 25% more compared to revised estimates of FY 2022-23.

This is in line with the ambitious target for expanding the National Highways network by 16,000 km in FY2023-24 at an all-time high pace of over 45 km per day compared with around 30 km/day achieved in FY 2022-23.

While models such as hybrid annuity, EPC and toll-operate transfer have supported the Governments ambitious plans, initiatives such as PM Gati Shakti Yojana and Bharatmala Pariyojana will play a key role in the growth of road and highway infrastructure sector going forward.

The Highway sector continues to be one of the most dynamic sectors in the country. During FY 2022-23, NHAI awarded record number of projects in Hybrid Annuity Model (HAM) & EPC mode and significant number of projects are expected in HAM, EPC and BOT during FY 2023-24. Your Company will analyze all possible opportunities and bid for projects that correspond to the overall strategy of the Group.

Urban Infrastructure

GPUILs subsidiary GMR Krishnagiri SIR Ltd (GKSIR) is in a Joint Venture agreement with Tamil Nadu Industrial Development Corporation (TIDCO) and has been making all the efforts to attract investors. GKSIR has already sold about 504 Acres in Phase 1 to M/s. Tata Electronics Pvt Ltd (TEPL). TEPL has established a greenfield mobile phone component manufacturing facility with a projected investment of

Rs. 4,500 crore and with employment potential of 18,000 persons and commercial production has already started. GKSIR is in discussion with various clients to sell majority of its lands and evaluating development of a land parcel in Phase 2. GPUILs other subsidiaries have also sold about 213 Acres in Krishnagiri District to TN State Government agency (SIPCOT) for development of industrial infrastructure in the region and an extent of around 68 Acres is in the process of acquisition by SIPCOT. Also, an extent of 93 Acres of GKSIR land has been notified by SIPCOT for acquisition to develop a new industrial cluster.

Environment Protection and Sustainability

As the Company operates in an increasingly resource-constrained world, being environmentally conscious and efficient are key to our operations. The Company has a Corporate Environment, Health, Safety and Quality (EHSQ) Policy to articulate, guide, and adopt an integrated approach towards implementing EHSQ objectives and the Company remains committed towards the said policy. These established systems certified by reputed certifying agencies have helped to monitor and manage our operations systematically, safely and in environment friendly manner. The Company continues to abide by regulations concerning the environment by allocating substantial investments and resources on a continuous basis to adopt and implement pollution control measures. Our continuous endeavor to go beyond compliance and conserve natural resources helps to march towards attaining excellence in environmental management and efficient and sustainable operations as well. The details of Environment, Health and Safety (EHS) initiatives are provided in the Business Responsibility and Sustainability Report forming part of Annual Report.

Discussion and analysis of financial conditions and operational performance

The consolidated financial position as at March 31, 2023 and performance of the Company and its subsidiaries, joint ventures and associates during the financial year ended on that date are discussed hereunder:

1. ASSETS- NON-CURRENT ASSETS

1.1. Property plant and equipment (PPE)

PPE has decreased from Rs. 300.41 crore as at March 31, 2022 to Rs. 284.28 crore as at March 31, 2023 primarily due to depreciation charge during the year.

1.2. Right of use asset

Right of use asset has increased from Rs. 5.36 crore as at March 31, 2022 to Rs. 10.62 crore as at March 31, 2023 due to ROU assets acquired during the year off-set with amortization during the year.

1.3. Investment property

Investment property has increased from Rs. 527.42 crore as at March 31, 2022 to Rs. 550.27 crore as at March 31, 2023 primarily due to capitalization of cost and interest during the year.

1.4. Other intangible assets

Other intangible assets has decreased from Rs. 2,180.03 crore as at March 31, 2022 to Rs. 2,066.88 crore as at March 31, 2023 primarily due to amortization during the year.

1.5. Investments accounted for using equity method

Investments accounted for using equity method has decreased from Rs. 4,322.41 crore as at March 31, 2022 to

Rs. 903.47 crore as at March 31, 2023 primarily due to sale of stake of associate during the year as explained in note no. 42(iii) of consolidated financial statements and Groups share of loss in joint venture and associates.

1.6. Other investments

Other investments have increased from Rs. 609.58 crore as at March 31, 2022 to Rs. 1,190.61 crore as at March 31, 2023 primarily due to investment in Non-convertable debentures and Preference Shares of Group entities.

1.7. Non-current trade receivables

Non-current trade receivables have increased from Rs. 0.88 crore as at March 31, 2022 to Rs. 153.30 crore as at March 31, 2023 mainly due to reclassification of Trade receivable from current to non-current.

1.8. Loans

Loans have decreased from Rs. 1,052.42 crore as at March 31, 2022 to Rs. 792.36 crore as at March 31, 2023 due to repayment of loans.

1.9. Other financial assets

Other financial assets have decreased from Rs. 1,015.61 crore as at March 31, 2022 to Rs. 830.63 crore as at March 31, 2023 mainly due to decrease in receivable from Service Concession Arrangements (SCA).

1.10. Other non-current assets

Other non-current assets have increased from Rs. 23.67 crore as at March 31, 2022 to Rs. 62.27 crore as at March

31, 2023 primarily due to increase in capital advances.

2. ASSETS – CURRENT ASSETS

2.1. Financial assets – Investments

Investments have decreased from Rs. 45.76 crore as at March 31, 2022 to Rs. 17.00 crore as at March 31, 2023 primarily on account of redemption of debentures and sale of investments.

2.2. Financial assets – Trade receivables

Trade receivables has decreased from Rs. 622.94 crore as at March 31, 2022 to Rs. 544.69 crore as at March 31, 2023 primarily on account of classification of receivable to non- current in energy business offset with increase in trade receivables in group entities in normal course of business.

2.3. Financial assets – Cash and cash equivalents

Cash and cash equivalents have increased from Rs. 455.17 crore as at March 31, 2022 to Rs. 965.53 crore as at March 31, 2023 on account of loan received from group companies.

2.4. Financial assets – Bank balances other than cash and cash equivalents

Bank balances other than cash and cash equivalents increased from Rs. 85.05 crore as at March 31, 2022 to Rs. 138.38 crore as at March 31, 2023 in normal course of business.

2.5 Loans

Loans have increased from Rs. 387.08 crore as at March 31, 2022 to Rs. 1,234.01 crore as at March 31, 2023 due to new loans given to Group Companies.

2.6. Other financial assets

Other financial assets have decreased from Rs. 1,749.10 crore as at March 31, 2022 to Rs. 1,639.33 crore as at March 31, 2023. This is primarily due to realisation of non-trade receivables and service concession receivables offset by increase in unbilled revenue and interest accrued on loans given.

2.7. Other current assets

Other current assets have decreased from Rs. 221.00 crore as at March 31, 2022 to Rs. 139.44 crore as at March 31, 2023 primarily due to decrease in other advances and deposit in normal course of business.

2.8. Assets classified as held for sale

Assets classified as held for sale decreased from Rs. 350.78 crore as at March 31, 2022 to Rs. 206.22 crore as at March 31, 2023 mainly due to sale of assets and investment properties which were classified as held for sale.

3. EQUITY

There is no movement in Equity share capital during FY 2022-23. Other equity has decreased from Rs. (2,466.24) crore as at March 31, 2022 to Rs. (2,923.16) crore as at March 31, 2023 primarily on account of extinguishment of equity component of loan, exchange difference on FCCB.

Loss of Non-controlling interests have increased from Rs. (68.09) crore as at March 31, 2022 to Rs. (120.12) crore as at March 31, 2023 mainly due to loss during the year.

4. NON-CURRENT LIABILITIES 4.1. Non-current borrowings

Non-current borrowings have decreased from Rs. 7,421.49 crore as at March 31, 2022 to Rs. 6,480.84 crore as at March 31, 2023, due to repayment of loans to banks and financial institutions.

4.2. Non-current trade payables

Non-current trade payables have increased from Rs. Nil as at March 31, 2022 to Rs. 151.79 crore as at March 31, 2023, mainly due to reclassification of Trade payable from current to non-current in energy business.

4.3. Other financial liabilities

Other financial liabilities have increased from Rs. 224.85 crore as at March 31, 2022 to Rs. 273.01 crore as at March 31, 2023, mainly due to increase in non-trade payables in the normal course of business.

4.4. Provisions

Provisions have increased from Rs. 49.56 crore as at March 31, 2022 to Rs. 68.85 crore as at March 31, 2023 mainly due to increase in provision for operation and maintenance in highway entities.

4.5. Other non-current Liabilities

Other non-current liabilities have increased from Rs. 17.42 crore as at March 31, 2022 to Rs. 18.94 crore as at March 31, 2023.

5. CURRENT LIABILITIES 5.1. Current borrowings

Current borrowings have decreased from Rs. 2,980.29 crore as at March 31, 2022 to Rs. 1,720.14 crore as at March 31, 2023 mainly due to repayment of working capital and related party loans.

5.2. Trade payables

Trade payables have increased from Rs. 2,449.02 crore as at March 31, 2022 to Rs. 2,603.51 crore as at March 31, 2023 mainly due to increase in concession fee payable to NHAI in highway entities and trade payable in construction business.

5.3. Other current financial liabilities

Other current financial liabilities have increased from Rs. 1,993.16 crore as at March 31, 2022 to Rs. 2,289.25 crore as at March 31, 2023. This is mainly due to increase in interest payable on debenture / loan offset with part payment of other liabilities.

5.4. Provisions

Provisions have decreased from Rs. 751.73 crore as at March 31, 2022 to Rs. 640.85 crore as at March 31, 2023 mainly due to reversal of excess provision for operation and maintenance highway entities.

5.5. Other current liabilities

Other current liabilities have increased from Rs. 200.80 crore as at March 31, 2022 to Rs. 246.55 crore as at March 31, 2023 mainly due to increase in advance from customers in normal course of business.

5.6. Liabilities directly associated with assets classified as held for sale

Liabilities directly associated with assets classified as held for sale decreased from Rs. 183.73 crore as at March 31, 2022 to Rs. 23.08 crore as at March 31, 2023 mainly due to payment of liabilities associated with assets classified as held for sale.

Overview of our results of operations

The following table sets forth information with respect to our revenues, expenditure, and profits (loss) on a consolidated basis:

		(Rs. in crore)
Particulars	March 31, 2023	March 31, 2022
Continuing operations
Income
Revenue from operations (including other operating income)	5,524.69	4,101.81
Other income	367.62	179.89
Total Income	5,892.31	4,281.70
Expenses
Revenue share paid / payable to concessionaire grantors	191.51	151.61
Operating and other administrative expenditure	4,940.38	3,454.71
Depreciation and amortization expenses	151.39	128.16
Finance costs	1,350.25	1,354.49
Total expenses	6,633.53	5,088.97
Loss before share of profit of investments as per accounting under equity method, exceptional items and tax from continuing operations	(741.22)	(807.27)
Share of profit of investments as per accounting under equity method	741.47	246.17
Profit/ (loss) before exceptional items and tax from continuing operations	0.25	(561.10)
Exceptional items	1,231.94	15.09
Profit/ (loss) before tax from continuing operations	1,232.19	(546.01)
Tax expenses	92.74	105.53
Profit/ (loss) after tax from continuing operations (i)	1,139.45	(651.54)
EBITDA from continuing operations	392.80	495.49
(Revenue from operations – Revenue share – operating and other admin expenses)
Discontinued operations
Loss from discontinued operations before tax expenses	(0.21)	(0.03)
Tax expenses	-	-
Loss after tax from discontinued operations (ii)	(0.21)	(0.03)
Total Profit/ (loss) after tax for the year (A) (i+ii)	1,139.24	(651.57)
Other comprehensive income for the year, net of tax (B)	180.39	5.62
Total comprehensive income for the year, net of tax (A+B)	1,319.63	(645.95)

Sales/Operating Revenue

The segment wise break-up of the Sales/Operating Revenue are as follows:

( Rs. in crore)

Particulars	March 31, 2023	March 31, 2022
Revenue from Operations:
Power segment	3,473.16	2,175.06
Road segment	655.04	531.94
EPC segment	1,082.68	1,179.05
Others segment	433.71	338.54
Inter segment revenue	(119.90)	(122.78)
Total Revenue from operations	5,524.69	4,101.81

Operating revenue from power segment

Revenue from our power segment mainly consists of energy and coal trading revenue from GMR Energy Trading Limited ("GETL") and GMR Infrastructure Singapore Pte Limited ("GISPL"). Other major operating energy entities including GMR Warora Energy Limited ("GWEL"), GMR Kamalanga Energy Limited ("GKEL"), GMR Bajoli Holi Hydro Power Private Limited "(GBHHPL") and GMR Gujarat Solar Power Limited ("GGSPL") are assessed as Joint ventures and accounted for based on equity accounting. The operating revenue from power segment has increased by 59.68% from Rs. 2,175.06 crore in FY 2021-22 to Rs. 3,473.16 crore in FY 2022-23 primarily due to increased operations in coal trading.

Operating revenue from road segment

Revenue from our road operations is derived from annuity payments received from NHAI for our annuity projects and toll charges collected from road users of the toll road projects.

The operating revenue from road segment has increased by 23.14% from Rs. 531.94 crore in FY 2021-22 to Rs. 655.04 crore in FY 2022-23 mainly due to increase in toll revenue.

Operating revenue from EPC segment

Revenue from our EPC segment is derived from the execution of engineering, procurement and construction works in connection with railways and road.

During the FY 2022-23, the EPC sector operating revenue has decreased by 8.17% from Rs. 1,179.05 crore in FY 2021-22 to Rs. 1,082.68 crore in FY 2022-23.

Operating revenue from other sectors

Revenue from our other sectors includes management services revenue, investment revenue and operating revenue of aviation businesses. During the FY 2022-23, other sectors have contributed Rs. 433.71 crore to the operating revenue as against Rs. 338.54 crore in FY 2021-22.

Expenditure

Revenue share paid/payable to concessionaire grantors

The revenue share paid/payable to various concessionaires has increased from Rs. 151.61 crore in FY 2021-22 to Rs. 191.51 crore in FY 2022-23 primarily on account of increase in toll revenue in highway entities.

Operating and administrative expenditure Sub-Contracting expenses

The Increase in sub-contracting expenses is mainly on account of increase in cost in ongoing DFCC Project as it is nearing completion.

Purchase of Traded goods

Increase in purchase of traded goods in the FY 2022-23 is primarily due to increase in cost of purchase in coal trading corresponding to increase in coal trading revenue.

Employee benefits expenses

The increase in employee benefit costs is mainly due to increase in head count due to increased operation in coal trading, toll revenue and annual increments.

Other expenses

Other expenses include:

• Consumption of stores and spares, electricity and water charges, manpower hire charges, rentals, repairs and maintenance, legal and professional charges, provision for doubtful advances, fair valuation on financial instruments through P&L, write off/ provision towards investments, travelling and conveyance, communication, foreign exchange differences and other miscellaneous expenses.

There is increase in other expenses in FY 2022-23 mainly due to increase in legal & professional expenses, airport service charges, electricity and water charges, repair and maintenance expenses, rates and taxes due to increase in operations.

Finance Cost

There is no significant movement in finance cost in FY 2022-23 compared to FY 2021-22.

Exceptional items

Exceptional items comprise of the impairment of investments in Joint venture and associates, reversal of impiarment of investment, gain on disposal of investment of associate, write back of liability and write off / provision against receivables / other assets.

Share of profit of investments as per accounting under equity method.

Increase in share of profit of joint ventures and associates mainly due to profit earned by PT GEMS in FY 2022-23.

Tax expenses

Tax expense mainly comprises of current tax expense and deferred tax expense / (credit). There is no significant movement in current tax and deferred tax in FY 2022-23 compared to FY 2021-22.

Significant changes in key financial ratios, along with detailed explanations

Key Financial ratios including reasons of variances (more than 25%) for the year ended March 31, 2023, on standalone basis, are disclosed in Note no 40 of Standalone financial statements.

Corporate social responsibility

GMR Varalakshmi Foundation (GMRVF) is the corporate social responsibility arm of the GMR Group. The Group has been undertaking CSR activities on a significant scale since 1991. GMRVF supports the companies under the Group in implementing their CSR mandates. GMRVFs purpose is to work in the fields of Education, Health and Empowerment such that its activities directly benefit mainly the communities in the immediate neighborhood of the Groups projects. Currently, GMRVF is working with selected communities in about 20 locations in India. The locations are spread across different states namely Himachal Pradesh, Maharashtra, Odisha, Tamil Nadu, Telangana, Punjab, Uttar Pradesh, and Uttarakhand. The detailed information on CSR activities of the Group is provided in Business Responsibility and Sustainability Report (BRSR) forming part of the Annual Report.

Recognitions for GMRVF in the year 2022-23 are as below.

• Received "Odisha CSR Excellence Award" for best CSR practices around GMR Kamalanga Energy Ltd.

• Received "Maharashtra CSR Award" for the CSR initiatives implemented around GMR Warora Energy Ltd.

• Received District Level Award for Best Community Service in and around GMR Chennai Outer Ring Road project area.

During the FY 2022-23, GMRVF implemented the CSR activities in the areas of Education, Health and Livelihoods in all its project areas. GWEL and GKEL have been certified under ISO 26000:2010 standard (ISO standard for CSR activities) by reputed agency Bureau Veritas for CSR processes and activities.

Risk Concerns and Threats Identification, assessment, profiling, treatment and monitoring the risks

Our Company aims to implement ERM (Enterprise Risk Management) through the entire value chain of each of our businesses in energy and road sectors, to be in line with emerging needs and global standards. The Company has a continuous process of strengthening its Enterprise Risk Management practices across the group. Typically, the risk management processes cover the lifecycle of the Development Business from Bidding, Development, Construction and Operational phases of each Business. Periodically, processes are reviewed and updated or strengthened as required.

The Companys Risk Management process is being expanded to add responsibilities towards ESG (Environment, Social and Governance) aspects of our business. The Risk Management Committee of GPUIL has also been overseeing and reviewing the frameworks and risks from both ERM and ESG perspectives.

Linkages: Strong linkage with Corporate Strategy and Risk Management functions has been designed to help the Company focus on key strategic risks. Detailed risk analysis is carried out during the formulation of the Companys Strategic Plan and Annual Operating Plan. List of top risks are reviewed as part of the Strategic Planning exercise. ERM team also shares the results of its exercise with the MAG to enable it to draw plans for risk-based audit.

Business Resilience: For organization to quickly adapt to disruptions while maintaining continuous business operations and safeguarding people, assets and overall brand equity, we have put in place, detailed Business Continuity Plans (BCP) and Disaster Recovery Plans (DRP) for key assets. These plans identify potential vulnerabilities and put in place appropriate processes and risk treatment plans to respond and minimize impact of disruptive events.

Commitments on Environment, Social and Governance (ESG)

Our Company understands that growth of our business and operations rely on two key factors: a commitment to sustainability and demonstrable efforts to reduce, eradicate or mitigate the impact of our operations on the environment and community.

Our ESG program is rooted in materiality: We have conducted ESG materiality assessment which has helped us organise and prioritise relevant ESG factors based on their level of impact on the business and on key stakeholders.

Reporting: The Leadership of all businesses regularly review their risk assessment and mitigation procedures and present to their respective Boards/ Committees. Further, a consolidated perspective is presented to the Risk Management Committee of the Board. Based on the above process, the management has taken cognizance of risks in the recent times and for which appropriate plans and actions are being taken, some of the areas of risks that we had identified for monitoring through the year for materiality and impact on our businesses are as follows:

1. Macroeconomic Risk factors:

FY2022-23 began in the backdrop of the challenges posed by the rising inflation brought on by the Russia-Ukraine conflict. Globally, pricing for crude oil, natural gas, food and fertilizers rose substantially. The Indian economy was particularly impacted by the high crude oil prices. However, the government proactively mitigated this challenge by sourcing crude oil supplies from Russia at a significant discount to prevailing crude oil prices.

India was also initially impacted with an inflation shock that resulted in CPI in the range of 7% to 8%. Actions by RBI to hike interest rates from May 2022 onwards helped bring inflation under control.

Governments continued spending in infrastructure, subsidies, and incentives provided traction to economic growth, and by the year end, economy had stabilized compared to start of FY2022-23.

As such, among all the global economic and geo-political turmoil, India has remained a bright spot in the world economy. India ended FY2022-23 on a strong footing with a GDP growth of 7% despite headwinds from ongoing Russia-Ukraine conflict, high level of inflation and rate hike by Reserve Bank of India (RBI).

The Power Sector witnessed strong revival of demand with increased generation of both thermal and renewable energy.

Coal production increased significantly and Coal India Limited continued to offer coal under the SHAKTI auction scheme. The Highways sector is the one segment that has consistently been weathering the broader economys travails and even the pandemic shock. It has been able to recover from Covid-19 at a much faster rate than expected.

To mitigate the impact of these macroeconomic risk factors, GPUIL relies on diversified portfolio of assets and projects in both energy and infrastructure sectors.

• We try to maximize realization under linkage coal, and use alternate sources (power trading) to meet PPA obligations.

• Since most of our power generated is tied up through long/ medium term PPAs, the risk of volatility in power prices is mitigated. Additionally, with some excess capacity available, we have been able to exploit merchant power opportunities available at higher tariffs.

• Out of our four highway assets, two are on Annuity model. Therefore, exposure of our road assets to macroeconomic risks is not significant.

2. Financing and Liquidity risks at GPUIL:

GPUIL, being a holding company with limited operating cash flows, has been constrained to service or refinance the corporate debt / outstanding FCCB.

Additionally, at the subsidiary level, there remains a liquidity risk to meet obligations including debt servicing/ repayment, due to the following reasons:

• Continued outstanding regulatory receivables from DISCOMs.

• Any adverse outcome of ongoing arbitrations/ litigations may have impact on our ability to repay debt.

• ESG pressures may increase the funding requirements (e.g. additional capex for FGD, working capital funding issues)

• Delay in land monetization further increases the holding cost of SEZ land

• Liquidity requirements for Energy 2.0 and other new business initiatives will need to be arranged.

The Company has subsequently received liquidity support from GIL and has been able to reduce a significant part of existing liabilities. Initiatives are underway to address balance corporate liabilities guaranteed by GIL. Further, GPUIL has a period of 6 years to repay such obligations to GIL, and a number of initiatives are underway to monetize assets to create liquidity for the same. GPUIL is focusing on capital raise, re-financing, debt-restructuring, asset monetization, obtaining regulatory receivables for energy sector, etc. to mitigate liquidity risks.

• As part of its asset monetization, the Company has been able to successfully divest its 30% stake in PT GEMS coal mine and is exploring the sale of other assets in the portfolio.

• Significant progress has been made on the recovery of regulatory receivables from Discoms.

• The Company has made significant progress in material arbitrations / litigations and expects positive outcomes on many of these to address liquidity issues. The Company was in receipt of arbitration awards on account of Chennai Outer Ring Road Project.

• Proactive steps are being taken to realize land monetization in the Krishnagiri SEZ.

• Completion of DFCC project will help in release of working capital facilities.

• GPUIL has made significant operational improvements resulting in improved profitability at subsidiary level.

• Given a growth in traffic on our toll highways, liquidity issue in our road assets are being progressively addressed.

• Plant PLFs have improved considerably due to better availability of coal and which resulted in considerable profitability improvement.

• Given that Bajoli Holi transmission line has been commissioned, plant is able to evacuate its power completely, thus enhancing the cash flow and debt servicing capacity.

Interest Rate Risk:

Inflation has been moving higher, fuelled especially by the Russia – Ukraine conflict. To fight inflation, Central banks have tightened liquidity in last year. US Federal reserve, BoE, Indias RBI etc. have hiked interest rates to curb inflation. Thus, given the substantial borrowings in energy and transportation businesses, we are exposed to rising interest rate risks. (RBI has already hiked repo rate by 250 bps in recent months).

To address these issues, GPUIL has put in place initiatives to increase operating cash flows and further reduce corporate debt at holding company to sustainable levels. Existing project entities are focused on improving operating cash flows and improve their ratings to access cheaper debt. Further, where necessary, the Company is exploring debt restructuring options. GPUIL has completed debt restructuring at GWEL at lower interest rate.

Credit Risk:

Our exposure to sale of electricity to DISCOMs may expose us to credit risk. Although historically, the credit risks from DISCOMs have been materially high, but in recent years, DISCOMs have been relatively regular in making payment for operational dues. However, in case of regulatory dues, DISCOMs have been mostly taking the litigation route and delaying the payments (covered under Regulatory Risks).

To address these risks, all receivables are being closely monitored and reviewed frequently by the top management. In order to encourage DISCOMs to clear their current operation dues, the Government notified the LPS Rules which substantially raised the DISCOMs cost for delaying payments to suppliers. DISCOMs are now clearing the non-regulatory dues regularly while clearing the regulatory dues only after the conclusion of legal process. The Company has made substantial progress in addressing long overdue regulatory receivables from Discoms.

3. Regulatory - Arbitration/ litigation risk

The Energy sector is under intense scrutiny for impact on climate and environment as also the communities that may have to face its consequences in some form. The pressure to uphold ESG targets and to implement new procedures in line with global trends poses hurdles in accessing cheaper capital for coal-based projects.

Further, changes and modifications in regulations related to tariffs and environmental protection under ESG mandate (like Flue Gas Desulfurization (FGD) and biomass pellet-blended coal continue to pose funding and cash-flow risks to GPUILs energy business.

Our Power Trading business may require additional capital infusion due to changes in regulations, which could affect our ability to conduct business.

As mitigation measures, the Group actively pursues:

• Tracking of all developments in the regulatory environment.

• Participation in sector-specific industry associations and chambers of commerce to work for resolution of issues that may impact our businesses.

• Where necessary, the Group has engaged in arbitration and/or litigation as appropriate, in order to protect its interest in this regard.

• For mitigating ESG-related risks, GPUIL is covered under integrated approach towards ESG at Group level.

• Our Energy 2.0 initiative aims to steer the Company towards clean energy businesses, thus making it increasingly ESG compliant.

Slow pace of resolution at the level of regulatory bodies/ forums also delay outcome of several unresolved regulatory matters. Our company faces several such unresolved matters for which we have ongoing arbitrations/ litigations in both the energy and transportation sectors.

• We have outstanding receivables/ arbitrations going on with various DISCOMs and other parties (coal pass-through, change in law, SEPCO, etc.)

• We also have arbitrations/ litigation in our transportation business:

• Our highways have ongoing litigation over application of contract terms for Change in Law (Hyderabad-Vijayawada, Ambala-Chandigarh, Pochanpalli)

• Our DFCC railway project is in arbitration for compensation due to delay in LA, CIL (mining ban, etc.) GPUIL relies on its robust in-house mechanism for dispute risk assessment, which provides the management with an early evaluation of the risks and costs associated with every potential arbitration / litigation, before the same is triggered.

Recently, the Company has received positive outcomes in ongoing arbitrations. On GWEL and GKEL claims against Discoms, significant amount of long pending regulatory receivables have been received. Further, in the case of CORR and Ambala –Chandigarh Highways, significant amounts have been received and extension of concession period achieved as applicable.

4. Investment risk:

Some of our Energy sector assets and urban infra projects may continue to face challenges as issues continue to be unresolved.

• Our gas-fired power plants, while being commissioned, are facing difficulties in commencement of power generation due to unavailability of gas supply.

• We are still awaiting renewal of PPA for 200MW for our Warora power plant, and there remains a risk of non-renewal of PPA after the current PPA expires.

• Continued uncertainties in outcome of arbitrations pose risk to our investments in road assets and railways projects. To mitigate investment risks,

• Our portfolio is periodically reviewed and necessary decisions like divestment are explored. In case of material disputes, arbitrations are initiated.

• We are actively working with the help of Industry Associations to seek help from the Government to arrive at an industry solution for all stranded gas projects in the country. in the meanwhile, we have carried out restructuring of stake in un-operational asset of GREL. We are further exploring other strategic options including sale of asset and additional restructuring solutions.

• As a strategy, our company is exploring bidding for long term/ medium term PPAs for GWEL. We will continue exploring opportunities to sell power on power exchange under short term contracts. Further, the power prices in short term market/ power exchanges have been on the higher side, thus mitigating the financial risk from PPA to some extent. In the meanwhile, the debt for GWEL has been restructured keeping in mind the cash-flows available to service debt.

• We have been able to tie-up medium term PPA of 102 MW capacity for GKEL with TANGEDCO.

• Company has initiatives to increase operating cash flows and further reduce corporate debt at holding company to sustainable levels.

5. Competition risk:

We now face competition on all aspects of our businesses:

• Competition from renewable energy projects. Due to large amount of capital chasing the renewable energy opportunities in India, the competition for our entry in this segment is high.

• Competition for coal based power. Due to overcapacity in the market, we are exposed to risk of non-renewal of PPAs for GWEL/ GKEL.

• Aggressive competition from big strategic competitors and financial players in Energy 2.0 growth areas such as Smart Metering/ Transportation projects.

• Competition from other modes of transport. Our toll roads which have commercial traffic as major contributor to toll revenues, face competition from an increasingly modern and efficient railway freight corridor.

• We have to compete with other players having access to low cost of capital resulting in highly competitive/ unviable bids, thus impacting our growth plans.

Our overall competencies and rich experience in transportation and energy sectors (including power trading) will enable us to maintain our competitive position in both sectors.

• We are constantly reviewing our business strategy based on assessment of growth perspective in the sectors that the company operates in.

• We are working towards arranging low-cost capital for us to be able to bid competitively.

• We are always scanning for the best opportunities available in the market and devise our business development strategy accordingly.

• Despite the aggressive competition, we have been able to win Smart Meter projects in state of Uttar Pradesh

• We are looking for opportunities with low competition. We have installed EV chargers at strategic locations at Group assets.

• We are establishing B2B partnerships in the E-Mobility business with leading brands such as UBER, Meru and others. The company has signed an MoU with UBER for long term strategic partnership in EV charging ecosystem.

6. Cyber Security Risk.

Although GPUILs businesses have not been affected by cyber-attacks yet, an increasing geopolitical hacktivism activity targeting Indian infrastructure has been noted. However, given the nature of operations at GPUILs assets we do not foresee any significant exposure to cybersecurity threats.

As mitigation, GPUIL has, as part of the group-wide centralized cyber security program, in place, covering people, process and technologies aspects of Cyber Protect, Detect, Respond & Recover capabilities. There is mechanism for 24x7 Next Generation Security Operations Centre monitoring all critical infrastructure for any suspicious activity. AI/ML-based End Point Detection is implemented across all computing devices. Periodic Vulnerability assessments and Penetration testing is conducted of the environment.

7. Matters related to Environment, Social and Governance (ESG)

A significant step in the direction of reducing our carbon footprint has been our exit from the coal mining industry through the sale of our 30% stake in PTGEMS.

Sustainability is core to the ethos at GPUIL, and has always been part of our journey, with strong focus at individual asset level. However, a need was felt to mainstream and drive it more holistically with focus on all the three aspects of ESG. As we embark on our ESG journey, we have followed a multi-pronged approach:

• Carry out ESG gap assessment, benchmarking, materiality survey, risk assessment,

• Develop ESG road map with short-term, medium-term and long-term targets

• Track and improve various ESG parameters

• Create ESG awareness among our stakeholders and enhance competency among employees

• Strengthen ESG reporting framework

Having carried out the above in four stages, we have completed our ESG assessment and implementation plan and identified the following areas of focus:

• Waste Management

As per Business responsibility and Sustainability Reporting (BRSR) requirements, disclosure of waste management strategies and other KPIs are mandatory.

Rating agencies and Lenders require disclosure on waste management practices. Accordingly, we have stated our commitment on waste management, waste reduction and have put conservation measures in place in line with our Environment Policy. We are committed to public disclosure of hazardous and non-hazardous waste generated, waste disposed, waste recycled and waste reused.

• Air Quality Management

Ministry of Environment, Forest and Climate Change (MoEFCC) & Central Pollution Control Board (CPCB), have laid down guidelines for air quality management, for which we have put in place, effective air quality abatement and management initiatives in place.

• Energy Management

As the country moves towards its target of net-zero carbon emissions by 2050, investors are focusing on energy transition plans of the company.

For this, our Highway assets have transitioned from high-power incandescent lamps for highway lighting to LED lights, which has helped us in reducing power consumption.

• Workforce Health And Safety

Our company recognizes the significance and criticality of work force safety. We understand that low standards at the workplace could lead to loss of reputation in the market. We also realize that a high rate of LTIs (Lost Time Injury) will bring an organization under scrutiny.

The Company regards commitment to high standards of work force safety as a priority, for which it shall pursue ISO 45001 certification. Teams dedicated for WHS provide, in accordance with standards, regular training to employees on organizational health and safety aspects. Internal and external audits are carried out regularly to ensure compliance and maintaining highest standards of work force health and safety.

• Emergency Response – Preparedness and Resilience

Our road assets and operating power plants can be exposed to emergency situations, due to external factors like accidents, extreme weather conditions, earthquakes, etc. The company has a robust emergency response mechanism covered under Disaster Recovery Plan (DRP) and its Business Continuity Plan (BCP) ensures that core business processes regain their original state in shortest possible time without prolonged disruption.

As stipulated under Regulation 34(2)(f) of SEBI LODR read with Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562 dated May 10, 2021 issued by the Securities and Exchange Board of India (SEBI), the Business Responsibility & Sustainability Report (BRSR) for the Financial Year 2022-23, describing the initiatives taken by the Company from an environmental, social and governance perspective is attached as part of the Annual Report.

Internal control systems and their adequacy

The Companys internal financial control framework has been established in accordance with the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework to ensure adequacy of design and operating effectiveness of operational, financial and compliance controls. The effectiveness of the internal controls is regularly reviewed and monitored by Management Assurance Group (MAG) during audits.

The Company has put adequate policies and procedures in place, which play a pivotal role in deployment and monitoring of the internal controls. These controls and processes have been embedded and integrated with SAP (or other ERP systems, as the case may be) and/ or other allied IT applications, which have been implemented across all the Group companies.

MAG assesses opportunities for improvement in all business processes, policies, systems and controls, provides its recommendations, which add value, and strengthens organizations internal control environment.

Deviations, if any, are addressed through systemic implementation of corrective and preventive action as appropriately taken by the respective functions. Proactive action is initiated to ensure compliance with upcoming regulations through deployment of cross-functional teams. Emphasis is always placed on automation of controls within the process to minimize deviations and exceptions.

Respective Business/Company CEOs are responsible for ensuring compliance with laid down policies and procedures. It helps the organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

MAG is responsible for undertaking internal audits across the group and they are assisted by outsourced audit firms. The internal audit scope covers inter alia, all businesses and corporate functions, as per the annual audit plan reviewed and approved by the Audit Committee in the beginning of every financial year. In every quarterly Audit Committee Meeting, key audit issues along with action taken report on previous issues are being presented.

Group Head MAG provides an assurance to the Audit Committee confirming compliance to prescribed processes as enumerated in MAG Manual while carrying out audits, reporting audit observations, monitoring and implementation of the agreed upon action plan for closure.

Developments in Human Resources and Organization Development at GPUIL

Human Resources (HR) being one of the key strategy partners, contributed comprehensively to the Organizational Development over the years. Following are some of the initiatives taken up by HR in the year gone-by:

• Frugality initiatives: in FY 2022-23 HR optimized ~ Rs. 20.52 crore (Rs. 16.85 crore in Energy sector & Rs. 3.67 crore in T&UI) in Planned Vs Actual Budget through various initiatives such as Organization Design refresh, filling vacancies through IJPs, in-house assessments (instead of engaging external consultants), etc. Several optimization initiatives are in the pipeline and HR stands firm to grab every opportunity for optimization.

• Talent & Succession Pipeline and Career Progression: While Succession Planning and Talent Management has always been the key focus of HR, we continuously keep on improving our talent pipeline in the group. We have given career progression to 136 employees (109 in Energy sector & 27 in T&UI) through promotions. However, considering our requirements and the demand of Engineers in the market we have strengthened our entry level pipeline of Engineers (in O&M) through GET recruitments.

• Great resignation & Retention mechanisms: having a pro-active approach, GMR started its retention measures much earlier than the industry counterparts. As soon as the great resignation wave started taking shape, we were able to implement several employee engagement & retention measures such as internal talent movement, non-compete, enhanced role-based compensation & salary corrections for a selected few – critical employee groups. Voluntary attritions: o Energy: Less than 11% which was below Industry average o T&UI: 14%, which was majorly due to timely completion of projects in this sector.

• Digital Attendance Capturing: Mobile enabled Geo-Location tagging & Facial recognition-based attendance capturing system was integrated in MyGMR mobile application.

• Inculcating Value Culture: with a perpetual focus on its Values & Belief, GMR Energy in FY 2022-23 covered 600+ employees in Value-Culture trainings. We at GMR also leverage the power of prayers – every Monday all senior leaders across the group gather for a 15-minute guided prayer cum motivational session (virtually). Apart from value-based culture we focused on the wellbeing of employees by organizing 440 health & wellness sessions from Corporate along with various other initiatives driven by individual assets. In T&UI we did 117 training programs having 1370 manhours for employees to promote values-based culture.

• Learning & Development (including Spirituality): in FY2022- 23 Corporate HR alone (excluding individual programs from business units) conducted more than 129 training programs on unique themes having 12352 man-hours of training. During the year we covered 486 unique participants in these sessions with a participation satisfaction score of 4.5 out of 5. To improve upon fundamental skills of our people GMR in FY 2022-23 engaged with 15 eminent institutions such as IIT-D, IIT-K, UCLA, NASSCOM, Korn Ferry, NPTEL, etc.