HEC Infra Projects Ltd Management Discussions

OVERVIEW OF GLOBAL ECONOMY:

The global economy demonstrated resilience during 2025 despite persistent geopolitical tensions, trade policy uncertainties, and inflationary pressures. According to the IMF, global growth is projected at approximately 2.8% in 2025 and 3.0% in 2026. Economic activity remains uneven across regions, with advanced economies experiencing moderate growth while emerging markets continue to drive global expansion.

Trade fragmentation, geopolitical conflicts, climate-related disruptions, and elevated borrowing costs continue to influence investment decisions worldwide. At the same time, governments and businesses are increasingly investing in energy transition, digital infrastructure, resilient supply chains, and sustainable development initiatives. These trends are creating significant opportunities for Engineering, Procurement and Construction (EPC) companies globally, particularly in power transmission, renewable energy, urban infrastructure, and industrial development sectors.

Emerging markets and developing economies (EMDEs) are expected to grow faster, at around 3.7%, though with significant regional disparities. Emerging and developing economies are now the primary frontier for EPC growth, especially in renewables and clean industries.

EPC activity is shifting toward emerging and developing markets due to population growth, urbanization, and energy demand. Sustained global recovery will depend critically on restoring trade cooperation, maintaining prudent monetary and fiscal frameworks, and investing in productivity enhancing sectors such as technology, energy, and education.

OVERVIEW OF INDIAN ECONOMY:

India continues to remain one of the fastest-growing major economies globally. Despite external challenges and global market volatility, the countrys macroeconomic fundamentals remain robust, supported by strong domestic consumption, increasing infrastructure investments, favourable demographics, and policy reforms.

The Reserve Bank of India (RBI) has projected Indias GDP growth at approximately 6.5% for FY 2025-26. Government focus on infrastructure development, energy security, urban transformation, renewable energy expansion, and manufacturing growth under initiatives such as "Viksit Bharat 2047”, PM Gati Shakti, Smart Cities Mission, and National Infrastructure Pipeline continues to create substantial opportunities for infrastructure and EPC companies.

Indias Engineering, Procurement and Construction (EPC) market is witnessing strong momentum driven by increasing public and private sector capital expenditure, rapid urbanization, renewable energy integration, and modernization of power transmission and distribution networks.

The challenges persist in areas such as sustaining manufacturing growth, accelerating private investment, and boosting employment opportunities for youth and semi-skilled workers. Strong foreign exchange reserves and continued digital transformation further enhance the economy’s capacity to weather external shocks and maintain forward momentum.

OUTLOOK:

Indias Engineering, Procurement and Construction (EPC) sector continues to demonstrate strong growth momentum, supported by sustained government investment in infrastructure, increasing private sector participation, rapid urbanization, and the countrys transition toward sustainable and renewable energy solutions. The Union Governments continued emphasis on infrastructure development through initiatives such as PM Gati Shakti, National Infrastructure Pipeline (NIP), Smart Cities Mission, Jal Jeevan Mission, and renewable energy expansion is expected to generate significant opportunities across the EPC value chain.

The sector is anticipated to maintain healthy growth during FY 2025-26, driven by robust investments in power transmission and distribution, water infrastructure, transportation networks, urban development, industrial projects, and renewable energy installations. Government capital expenditure remains a key growth catalyst, while improving private investment sentiment is expected to further support project awards and execution activities.

The power transmission and distribution segment is witnessing increasing investments due to rising energy demand, grid modernization initiatives, renewable energy integration, and expansion of transmission networks. Similarly, investments in water supply, wastewater management, urban infrastructure, and smart city projects continue to create substantial opportunities for EPC companies with diversified capabilities.

The renewable energy sector remains one of the most promising growth drivers, supported by Indias ambitious clean energy targets and increasing adoption of solar and energy storage solutions. The demand for integrated EPC services in solar power projects, substations, electrical infrastructure, and energy management systems is expected to remain strong in the coming years.

The Reserve Bank of India (RBI) is expected to maintain a balanced monetary policy approach aimed at supporting economic growth while ensuring inflation remains within the targeted range. Stable inflation, improving liquidity conditions, and continued policy support are expected to strengthen the overall business environment and encourage capital investment.

For HEC Infra Projects Limited, the outlook remains positive. The Companys established expertise in transmission projects, substations, underground cabling, water pumping stations, solar EPC projects, lighting infrastructure, and ELV systems positions it well to capitalize on emerging opportunities across the infrastructure sector. The Company remains focused on expanding its order book, improving operational efficiencies, strengthening execution capabilities, and enhancing stakeholder value.

While challenges such as raw material price volatility, project execution risks, regulatory changes, and geopolitical uncertainties may persist, the Companys strong technical capabilities, experienced management team, disciplined project execution framework, and customer-centric approach provide confidence in its ability to navigate these challenges effectively.

OVERVIEW OF EPC ELECTRO-MECHANICAL SECTOR:

The EPC sector is considered the second largest segment in the Indian Economy, which is playing a big role in introducing more employment opportunities in the nation. EPC companies and India’s smart city mission are connected to help the nation reap outstanding benefits. India is putting up a very fast-paced call for boosting urbanization and taking it to the next level through the introduction of smart cities.

The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing cost, technology, and innovation. The above, coupled with favorable regulatory policies and growth in the manufacturing sector, has enabled several foreign players to invest in India.

The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100% FDI. With the aim to boost the manufacturing sector, the Government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles. With Indias focus on urban infrastructure, smart cities, green buildings, and industrial corridors, the electromechanical EPC segment is poised for strong growth.

ENGINEERING SERVICES:

HEC is a leading EPC player in the field of Electro-Mechanical, Solar Projects, Lighting and ELV System. It offers integrated solutions and end-to-end services ranging from design, supply, installation and commissioning of overhead transmission lines, substations, underground cable lying, Switchyard, Water pumping stations, Lighting systems, Industrial and commercial electrification, solar PV plants, battery energy storage system and mini / micro grid solar projects.

• TRANSMISSION PROJECTS:

HEC has providing EPC solution in providing transmission Projects and has core strength of handling engineering solutions in EPC projects from procurement to construction services. The areas of service in Transmission project are of Switchyard, Overhead Transmission Line, and cable laying. The Company’s substation business focuses on providing turnkey solutions for high voltage air insulated substations for utilities and power plants, EHV cable & communication backbone networks and complete electrical & instrumentation solutions for various infrastructure projects. The Company has a wide experience for execution of projects on Turnkey basis for Switchyard up to 220 KV, Overhead transmission line up to 220 KV, and underground cable laying up to 66 KV, Air insulated substations up to 220KV and SCADA systems.

During the year company has received Transmission work including layering, erection, testing and commissioning from Gujarat energy transmission corporation Limited, Vadodara, Haryana Vidyut Prasaran Nigam Limited, Tata Solar Power Ltd, Solar Craft Power India 5 Pvt Ltd, Advait Greenergy Pvt Ltd, Dakshin Gujarat Vij Company Ltd, Engineering Projects India Ltd, Advait Energy Transitions Ltd, Prozeal Green Energy Limited, Rail Vikas Nigam Ltd, Brixo Industries.

• WATER PUMPING STATIONS:

HEC has the ability to provide turnkey projects to clients who are seeking single company approach to project design and implementation. Our vast knowledge and experience in the water pumping station link us to the best resourced companies in the world capable of implementing complete package projects. The Company executes various projects on turnkey basis involving mechanical, electrical instrumentations in government, private and industrial pumping schemes. The Company has in house manufacturing (by way of manufacturing by sister concern companies) of HT panels, LT panels and Distribution Boards (DB) which gives added advantage to end clients. We have executed pumping projects which includes HT Motors up to 6.6 KV along with PLC, SCADA & Automation systems.

During the year the company has received and executed Electro-Mechanical & instrumentation works along with Operation and Comprehensive repair & Maintenance work for Ahmedabad Municipal Corporation and also that of Augmentation work for Supply of HT panel and transformer of different size for various sewage & storm water pumping station and also that of dismantling of existing old HT panel & transformer of AMC.

• SOLAR:

HEC provides end to end solution EPC (Engineering procurement and construction) in PV solar plants. Installation of medium/large scale grid solar power plants. The Company provides services starting from designing stage till Operations and Maintenance of Projects, guiding customers in government policy issues, land procurement issues, provide the project reports for and approvals for solar plants. HEC also provides roof top solar solutions in Solar PV solution with and without battery backup. We also provide solutions for specific requirements for any type of roof top such as flat concrete rooftop, metallic rooftop, inclined and tiled rooftop.

During the year company has received Solar Work including layering, erection, testing and Commissioning of Solar Power Plant for Siemens Financial Services Ltd Project of Mangalam World Wide Ltd.

• LIGHTING:

The Company provides EPC for both indoor and outdoor lighting solutions. Airports, hotels, industrial plants, Hospitals etc. are the sectors in which the company has provided the lighting solutions. The Company has an EPC team which is highly efficient and capable for indoor and outdoor jobs, especially in the field of outdoor lighting. We provide all types of outdoor lighting options including Solar Lighting, Smart Street Lighting, Industrial Plant Lighting, River Front Lighting, Highway Lighting, etc. During the year under review,

During the year under review, the company has received and executed work for construction of elevated metro station which includes supply, installation, testing and commissioning project of lighting for Ahmedabad Municipal Corporation Street Light Project for Ahmedabad Region.

• ELV (EXTRA LOW VOLTAGE) SYSTEMS:

The Company provides ELV Systems to complete the building under EPC Contracts. We have a vast experience in Supply and install complete electrical infrastructure and systems to the highest standard-right down to the system which operates on extra low voltage (ELV) such as CCTV, Access Control, Fire Detection/ alarm, Data Networks, EPBAX, Background Music System and Voice Evacuation System, HVAC work, Building Management System and TV Distribution. During the year, the company received and executed project of Various projects of Narmada Water Resources for CCTV and Other ELV Work for Dams like Panam Dam, Ukai Dam and Kadana Dam.

RISK AND CONCERN:

The Company recognizes that risk is inherent in every business activity. Effectively managing these risks is key to achieving our strategic objectives and the long-term sustainable growth of the business. At industries, risk management encompasses an organized and coherent process of identifying, assessing and managing the existing and potential risks in a planned manner. The Company has framed a comprehensive Risk Management Policy which inter-alia lays down detailed process and policies in the various facets of the risk management function.

The management strives hard to balance business risks and opportunities and analyses potentially negative or positive outcomes. The risk management function is integral to the company and its objectives includes ensuring that critical risk is identified continuously, monitored and managed effectively in order to protect the companys business.

However, the changes in the tax laws, Government policies and regulatory requirement might affect the companys business. Uncontrolled variation in price of input materials could impact the companys profitability to the extent that the same are not absorbed by the market through price increase and / or could have a negative impact on the demand in the market.

The company has addressed these realities through a selection of projects around an engagement with large and liquid customers, profitable hurdle rate, talent retention, timely completion of projects, sustained engagement with customers and an experienced talent pool.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company implemented suitable controls to ensure its operational, compliance and reporting objectives. The Company has adequate policies and procedures in place for its current size as well as the future growing needs. These policies and procedures play a pivotal role in the deployment of the internal controls. They are regularly reviewed to ensure both relevance and comprehensiveness and compliance is in grained into the management review process.

The Board has adopted policies and procedures for ensuring that all transactions are authorized, recorded and correctly reported, all assets are safeguarded and protected against loss from unauthorized use or disposition, reducing wastage and maintenance of proper accounting records for ensuring accuracy and reliability of its financial information. The Board has constituted an Audit Committee which meets periodically to review the financial performance and the accuracy of financial records and accordingly appropriate actions are taken by the management. The significant findings, along with management response and status of action plans are also periodically shared with and reviewed by the Audit Committee.

Adequacy of controls of the key processes is also being reviewed by the Internal Audit team. Suggestions to further strengthen the process are shared with the process owners and changes are suitably made. Significant findings, along with management response and status of action plans are also periodically shared with and reviewed by the Audit Committee. It ensures adequate internal financial control exist in design and operation financial disclosures. When found necessary, the Committee also gives suggestions on this matter. The audit committee regularly evaluates the execution of the Audit plan, the relevance and impact of the internal audit systems, oversees the implementation of internal audit recommendations including those which help reinforce the company’s risk management policies and systems.

FINANCIAL PERFORMANCE: (Rs. in Lakhs)

Particulars	March 31,2026	March 31,2025
Revenue from Operations	17649.11	11209.91
Other Income	153.99	105.31
Total Revenue	17803.10	11315.22
Profit before Interest, Depreciation , Extraordinary items & tax expense	2169.52	1500.09
Less: Interest	393.52	315.86
Depreciation	14.70	14.02
Extraordinary Items	0	0
Profit before Exceptional item & tax	1761.30	1170.21
Exceptional Item	00	00
Profit before Tax	1761.30	1170.21
Current Tax	437.87	299.46
Deferred Tax	4.81	1.26
Taxation in respect of earlier year	58.45	(54.86)
Net Profit after tax	1260.18	924.35
Other comprehensive income	0	0
EPS: Basic	11.63	9.08
Diluted	11.63	9.08

KEY FINANCIAL RATIOS:

Details of significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and any changes in return on net worth of the Company (on standalone basis) are given below:

Particulars	March 31,2026	March 31,2025	Variance
Debt service coverage ratio(in times)	1.51	3.18	-52.44%
Current ratio	1.51	1.41	7.16%
Return on equity ratio(%)	21.20	21.01	0.92%
Inventory turnover ratio(in times)	NA	NA	NA
Trade receivables turnover ratio(in times)	4.67	3.51	32.95
Trade payables turnover ratio(in times)	12.68	8.11	56.32
Net capital turnover ratio(in times)	5.00	4.96	0.79
Net profit ratio(in %)	7.14	8.25	-13.41
Return on capital employed(%)	19.53	16.28	19.98

OPPORTUNITY:

Rs. Strategic Joint Venture strengthening business

Rs. Entering in to a new project

Rs. Favorable contract terms

Rs. Reliable Investors

Rs. Favorable financing method according to the advance rate and payment dynamics

Rs. Developing a Functional and coordinated Project team

Rs. Government initiatives

Rs. Focus on sustainable infrastructure

THREAT:

Rs. Economic Uncertainty

Rs. Rise in cost of material, cost of transportation may affect the margin

Rs. Changes in Government Policies

Rs. Intense competition may reduce profitability

Rs. Act of God

Rs. Client Dissatisfaction

Rs. Customer’s inability to pay

Rs. Skilled labor shortage

HUMAN CAPITAL:

Our Company believes that the human capital is key to bring in progress. The Company believes in maintain cordial relation with its employees which is one of the key pillars of the Companys business. The Companys HR policies and practices are built on core values of Integrity, Passion, Speed, and Commitment. The Companys focus is on recruitment of good talent and retention of the talent pool. The Company is hopeful and confident of achieving the same to be able to deliver results and value for our shareholders. Our company is having on roll 77 employees as on March 31,2026. Company maintains smooth relations with whole of the workforce and incentives are provided from time to time to ensure that employees remain devoted to the organization for a long term.

SEGMENT GROWTH DRIVERS:

The major and material activities of the company are restricted to only one segment i.e., EPC Engineering Designing & Construction, hence the secondary segment disclosures are not applicable.

DISCLOSURE OF ACCOUNTING TREATMENT:

The Company adopted Indian accounting standard (“Ind as”) prescribed under section 133 of the companies act, 2013 read with relevant rules issued there under and in terms of Regulation 33 of the SEBI (LODR) Regulations, 2015 and the Companies (Indian accounting Standards) (Amendment) Rules, 2016. Beginning April 1, 2021, the company has for the first time adopted IND AS with the transition date of April 1, 2020.

CAUTIONARY STATEMENT:

Certain statements in the reports of the Board of Directors and Management’s Discussions and Analysis may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results may vary from those expressed or implied depending upon economic conditions, Government policies and other incidental factors. Taxation laws, economic development, cost of raw materials, natural calamity, currency rate, interest and power cost are the few extraneous variables that influence the Company’s operations and company does not have any direct control. There is no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Past performance should not be considered indicative of future outcomes. The Company does not commit to announcing any corrections if these ‘forward-looking’ statements prove to be materially inaccurate in the future, nor does it undertake to update any ‘forward-looking’ statements made from time to time on its behalf.