Hindustan Construction Company Ltd Management Discussions

INTRODUCTION

Hindustan Construction Company Limited ("HCC" or "the Company") is among Indias oldest and most experienced engineering and construction companies, with a proven track record in executing complex infrastructure projects across the transportation, hydropower, nuclear, marine, water and industrial sectors. FY 2025–26 marked HCCs centenary year, a milestone that reflects one hundred years of engineering excellence, innovation and contribution to Indias infrastructure development. As the Company enters its second century, it does so with a greater sense of responsibility. With deep capabilities in tunnelling, underground works, bridges, dams, hydroelectric structures and difficult-terrain construction, and an integral commitment to quality, safety and sustainable next practices, HCC continues to occupy a differentiated position in Indias infrastructure ecosystem.

MACROECONOMIC REVIEW

India remained the worlds fastest-growing major economy during FY2025–26, with real GDP growth estimated at approximately 7.4%. Growth continued to be driven by resilient domestic consumption, sustained public capital expenditure and a steady recovery in private investment. Inflation moderated within the Reserve Bank of Indias target range, the banking system remained well capitalised, and credit growth continued to support investment activity.

India also became the worlds fourth-largest economy during the year, underscoring its growing economic significance. Despite an uncertain global backdrop marked by geopolitical tensions, trade fragmentation and supply chain realignment, the countrys macroeconomic fundamentals remained resilient, supported by prudent fiscal management and continued infrastructure-led development.

Indias Infrastructure Investment Cycle

Infrastructure remains central to Indias long-term growth strategy. Public capital expenditure has risen consistently over recent years, with the Union Budget 2026–27 providing Rs 12.2 lakh crore for capital investment, complemented by initiatives such as PM Gati Shakti, the National Infrastructure Pipeline and sector-specific programmes across transport, energy, urban infrastructure and water. Together, these programmes continue to generate opportunities across transportation, tunnels, bridges, hydropower, pumped storage, metro systems, ports and water infrastructure.

SECTOR OUTLOOK

Roads and Highways

Indias roads and highways programme remains one of the worlds largest infrastructure development initiatives. With over

6.3 million kilometres of roads, India has the worlds second-largest road network. Over the past decade, the National Highway network has expanded by nearly 60%, from 91,287 km in 2013–14 to approximately 146,200 km as of March 2025.

The focus has progressively shifted from expanding connectivity to developing higher-quality infrastructure through access-controlled expressways, economic corridors, logistics corridors and improved last-mile connectivity. Operational expressways have expanded from just 93 km in 2014 to over 3,000 km in 2025, while the length of four-lane and above National Highways has more than doubled during the same period.

Under Bharatmala Pariyojana Phase-I, highway projects covering 34,800 km were approved, of which 26,425 km had been awarded and 21,783 km completed by December 2025. Together with continued investments in border roads, coastal connectivity and multimodal logistics corridors, these programmes are expected to sustain demand for technically complex infrastructure, including bridges, tunnels, viaducts and difficult-terrain engineering.

Urban Infrastructure

Rapid urbanisation continues to reshape Indias infrastructure priorities. With nearly 40% of Indias population expected to live in urban areas by 2036, investments in urban mobility, water systems and public infrastructure are accelerating. Metro rail has emerged as one of the countrys most significant urban infrastructure success stories. Indias operational metro network has expanded from 248 km in 2014 to approximately 1,095 km by 2025, while the number of cities served has increased from five to twenty-six, making India one of the worlds fastest-growing metro markets.

Government support has remained strong, with annual budgetary allocations for metro rail increasing from Rs 5,798 crore in FY2013–14 to Rs 29,550 crore in FY2025–26. Continued investment in metro systems, multimodal transport integration and transit-oriented development is expected to sustain opportunities across underground stations, tunnelling, elevated corridors and complex urban infrastructure.

Energy:

Indias energy sector is undergoing one of its most significant structural transformations, driven by the dual objectives of energy security and decarbonisation. The country has committed to achieving 500 GW of non-fossil fuel generation capacity by 2030 and net-zero emissions by 2070.

As of January 2026, Indias installed power generation capacity stood at approximately 520.5 GW, of which 272 GW, or more than 52%, comprised non-fossil fuel sources. Renewable energy continues to expand rapidly, with installed solar capacity surpassing 150 GW following a record addition of 44.6 GW during FY2025–26.

As renewable penetration increases, investment in transmission, energy storage and grid-balancing infrastructure is becoming increasingly important. Pumped storage hydropower is expected to play a pivotal role in ensuring grid stability, with the Central Electricity Authority identifying potential exceeding 200 GW across the country. This represents one of Indias most significant emerging infrastructure opportunities over the coming decade.

Nuclear Infrastructure

Nuclear energy is also expected to assume a larger role in Indias long-term energy mix. The Government has announced an ambitious target of 100 GW of nuclear capacity by 2047, compared with approximately 8.2 GW currently in operation, creating long-term opportunities for specialised civil engineering, nuclear-grade structures and high-specification construction.

Railways

Indian Railways continues to execute one of the largest railway modernisation programmes globally. Planned capital expenditure of approximately Rs 2.93 lakh crore for FY2026–27 is directed towards network expansion, dedicated freight corridors, station redevelopment, signalling, electrification and safety enhancement.

The National Rail Plan 2030 seeks to increase rails share of freight transportation from around 27% to 45%, significantly improving logistics efficiency while reducing carbon emissions. Continued investment in bridges, tunnels, multimodal logistics parks, dedicated freight corridors and high-capacity rail infrastructure is expected to support sustained demand for technically complex civil engineering projects.

Ports

Indias ports sector continues to expand alongside rising trade volumes, manufacturing growth and increasing integration with global supply chains. During FY2025–26, major ports handled a record 915 million tonnes of cargo, representing growth of more than 7% over the previous year.

The Sagarmala Programme continues to drive port-led development, with 845 projects valued at approximately Rs 6.06 lakh crore, of which 315 projects had been completed by 2026. Alongside dedicated freight corridors and multimodal logistics initiatives, these investments are strengthening Indias logistics ecosystem and generating opportunities across marine structures, breakwaters, berths, port connectivity, coastal infrastructure and industrial development.

Water and Irrigation

Water infrastructure is becoming increasingly important as India addresses the combined challenges of urbanisation, agricultural productivity, industrial growth and climate resilience. Government investment continues across irrigation, dams, water conveyance systems, flood management and urban water infrastructure.

The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), with an approved outlay of Rs 93,068 crore for the 2021–26 period, remains a key programme supporting irrigation expansion, water-use efficiency and sustainable water management. At the same time, increasing investments in river-linking projects, urban water supply, wastewater treatment and climate-resilient infrastructure are expected to support long-term demand for dams, tunnels, underground water conveyance systems and other complex hydraulic engineering works.

HCC STRATEGIC DEVELOPMENTS

HCCs long-term priorities build on its demonstrated capability in executing complex infrastructure projects. As HCC enters its second century, it is reinforcing its future readiness through adoption of advanced construction practices, expansion into new segments such as urban mobility and industrial buildings, while investing in machination and digital tools that help drive innovation and increase productivity. Financially, the Company remains focused on maintaining a healthy balance sheet alongside strong risk management, as it readies itself for future growth.

Engineering Leadership and Order Book Growth

Engineering, procurement and construction (EPC) continues to be the core of HCCs business, reflecting its engineering leadership and extensive experience in executing technically complex infrastructure projects. India remains the Companys primary market, where it continues to leverage its establishment and track record across each Indian state. Concurrently, HCC continues to evaluate opportunities in international markets, including Bhutan, Nepal and the Middle East.

The Companys order book strengthened modestly during the year from Rs 11,188 crore to Rs 12,971 crore. During the year, HCC secured new orders worth approximately Rs 8,828 crore (Companys share was Rs 5,636 crore in joint venture). The Company also maintained a strong execution pipeline, with bids under evaluation of over Rs 35,000 crore and an overall pipeline exceeding Rs 50,000 crore, indicating highly visible and large opportunities across transportation, hydro and urban infrastructure.

While government projects continue to dominate the order book, HCC is increasingly engaging with private sector developers, particularly in pumped storage hydro projects and industrial projects. The Company follows strong risk management practice while pricing its tenders, focusing on pedigreed clients and projects with balanced contractual terms, thereby maintaining a high order book quality.

Industry & Global Engagements

HCC leadership is actively engaged in global and national infrastructure dialogue. The Company contributes to the World Economic Forums Global Commission on Nature-Positive Cities and the Engineering & Construction Strategy Officers Group. In India, HCC leadership is active in industry initiatives led by the Confederation of Indian Industry (CII) and the Construction Federation of India (CFI).

Capital Raising

During the year, HCC strengthened its capital base through a Promoter Group led Rs 1,000 crore rights issue, which was subscribed 200%, reflecting strong investor confidence in the Companys strategic direction. The capital raised has helped the Company significantly deleverage its balance sheet as well as improved liquidity for future growth.

Balance Sheet Transformation

HCC continues to clinically execute its deleveraging strategy aimed at improving its bottom line, bettering its credit rating and boosting free cash for growth. During FY2025–26, the Company achieved debt prepayments of approximately Rs 1,500 crore, resulting in a 38% YoY reduction in debt to Rs 1,995 crore, supported largely by capital raising initiatives, and internal accruals (the full impact of these prepayments is not reflected in FY26; pro forma annual interest cost savings of approximately Rs 112 crore are expected to accrue in FY27).

The Company is planning additional prepayment of its debt through claim settlements, arbitration proceeds and asset monetisation, which are expected to further strengthen its financial position.

RISK MANAGEMENT:

HCC considers risk management to be an integral part of its business strategy and corporate governance framework. The Company follows an enterprise-wide approach to identifying, assessing and managing risks that could affect its strategic objectives, operational performance, financial position and stakeholder interests. The framework supports timely identification of emerging risks and opportunities, protection of business assets, compliance with applicable laws and regulations, and sustainable value creation for shareholders.

Risk management is embedded across the organisation, with risks identified and evaluated at both the enterprise and project levels. Key risks are assessed based on their likelihood and potential impact, following which appropriate mitigation measures are implemented and periodically reviewed. The framework covers strategic, operational, financial, contractual, order book, execution and project delivery risks, with operating teams and functional heads responsible for implementing and monitoring mitigation actions as part of their day-to-day responsibilities.

Governance and Oversight:

The Risk Management Committee of the Board oversees the Companys risk management framework and reviews key enterprise risks, mitigation measures and the effectiveness of the overall framework at least twice during the year. As on March 31, 2026, the Committee comprised five members and met on May 15, 2025 and December 10, 2025. Further details of the Committees composition and meetings are provided in the Corporate Governance Report.

OPERATIONS REVIEW

During FY2025–26, Hindustan Construction Company Limited ("HCC") maintained execution momentum across a diversified portfolio spanning transportation, metro rail, hydroelectric infrastructure and urban development. Operational priorities remained focused on timely delivery, productivity enhancement, cost optimisation, safety performance and disciplined working capital management.

The Companys operational performance was supported by improved execution efficiency, reflected in EBITDA margins of ~14.9% in Q1 FY26, ~16.1% in Q2 FY26, ~15.2% in Q3 FY26 and ~18.2% in Q4 FY26, indicating stable margin performance across the year.

Transportation and Metro Infrastructure

Transportation remained a key execution segment, with continued progress across metro rail, railway and urban mobility projects.

In the metro segment, the Company achieved a significant milestone with the successful delivery and inauguration of the Mumbai Metro Line 3 (UGC-02 package) by the Honble Prime Minister in October 2026. The project included the execution of key underground stations such as CST, Kalbadevi, Girgaon and Grant Road. Spanning 33.5 km underground, Metro Line 3 connects Aarey to Cuffe Parade, significantly enhancing north–south connectivity and serving over 1.3 million passengers daily. HCC executed four underground stations—CSMT, Kalbadevi, Girgaon and Grant Road—along with twin bored tunnels extending over 3,115 metres.

Progress was also recorded in emerging metro systems. At the Indore Metro project, piling works and station construction activities advanced across multiple locations, while excavation activities commenced at key stations. The Company also commenced execution of the Patna Metro Rail Project (Packages 05 & 06), establishing its footprint in Bihar through its first project in the State and contributing to the development of Bihars first metro rail system.

During the year, the Company delivered a landmark achievement in railway infrastructure with the successful completion and inauguration of the Anji Khad cable-stayed bridge by the Honble Prime Minister. As Indias first cable-stayed railway bridge, the structure features a 193-metre-high pylon, twice as high as the Bandra Worli Sea Link and among the tallest of its kind in the country) and represents a significant engineering accomplishment in complex terrain. The project underscores HCCs expertise in executing technically challenging infrastructure and reinforces its leadership in delivering iconic, high-impact national projects.

The Company also secured and initiated execution of railway packages during the year, including projects from Northern Frontier Railways, reinforcing its presence in rail infrastructure. Urban transport infrastructure execution remained strong, with the Mumbai Coastal Road project becoming one of the marquee urban infrastructure projects delivered in FY 25-26. Construction also progressed steadily on the 4.31 km Agardanda Creek Bridge, one of Maharashtras most significant coastal bridge projects, creating a new gateway across the Konkan coast.

Hydro, Water and Underground Works

HCC continued to make steady progress across its hydroelectric and underground infrastructure portfolio, leveraging its established technical capabilities.

At the Vishnugad Pipalkoti Hydroelectric Project, tunnelling progress improved progressively during the year, reaching ~8.5 km of the total 12.1 km headrace tunnel reflecting consistent advancement in underground works.

The Tehri Pumped Storage Project (PSP) achieved multiple milestones during the year, including commercial operation of Units 5 and 6 and synchronisation of Unit 7 with the grid indicating progressive commissioning of capacity.

Execution also progressed across other pumped storage projects, including Bhivpuri PSP, where excavation and civil works across key structures continued in line with project schedules.

Project Execution Excellence

Operational excellence remained a key management priority during the year, supported by strengthened project planning, rigorous milestone monitoring and improved resource deployment across sites. Consistent EBITDA margins through the year reflected greater cost discipline, a favourable project mix and improved operating efficiencies. The Company continued to optimise procurement, subcontractor management and equipment utilisation to mitigate cost pressures and support timely project delivery. Safety and quality remain integral to project execution, particularly given the scale and technical complexity of HCCs operations.

MANAGEMENT SYSTEMS

HCCs Integrated Management System (IMS) is aligned with international standards ISO 9001:2015 for Quality Management, ISO 14001:2015 for Environmental Management and ISO 45001:2018 for Occupational Health and Safety. The framework promotes consistency, operational efficiency and continual improvement across the Companys projects and functions.

Implementation is supported by periodic management reviews and a structured programme of internal and external audits across project sites and the Head Office. During FY2025–26, HCC successfully completed the recertification of its IMS following audits of key Head Office functions and selected projects across the hydro, transportation and nuclear sectors. The certifications were renewed for a further three years.

The Company continued to reinforce its QHSE culture through training and awareness programmes across project sites. Initiatives included automated external defibrillator (AED) and cardiopulmonary resuscitation (CPR) training, first-aid and fire-safety programmes, environmental initiatives and employee recognition programmes. HCC also observed key national and international awareness days relating to safety, quality, health, water and the environment.

Industry Recognitions in FY 2025–26:

• December 2025: The DC-06 Project received the

Sustainability Excellence Award from the Institution of Engineers (India).

• December 2025: The DC-06 Project was also honoured with the IEI Industry Excellence Award by the Institution of Engineers (India).

• December 2025: Vishnugad Pipalkoti HEP and the Mumbai Coastal Road Project were awarded a Certificate of Merit by the National Safety Council for notable achievements in

Occupational Safety & Health.

• April 2026: The Tata Bhivpuri PSP Project received appreciation from Tata Power Company Limited for achieving

2.58 million safe man-hours during FY2026.

KEY SUBSIDIARIES

HCC INFRASTRUCTURE COMPANY LTD.

HCC Infrastructure Company Ltd. (HICL) functions as the infrastructure development and investment platform of Hindustan Construction Company Limited for projects executed under the Public-Private Partnership (PPP) framework. The Company undertakes infrastructure development through various concession models, including Build-Operate-Transfer (BOT), Build-Own-Operate-Transfer (BOOT) and Hybrid Annuity Model (HAM), contributing to the creation of long-term infrastructure assets across India.

HUMAN RESOURCES

HCCs people strategy is centred on building a technically capable, safety-conscious and future-ready workforce. As a company executing complex infrastructure projects across diverse geographies and technical domains, HCC places strong emphasis on talent development, leadership continuity, employee engagement, capability building and workplace safety. HCC, a pioneer in infrastructure development, has long been recognised as an employer of choice in the Indian construction industry. We regard our people as our most valuable asset and have continuously strengthened our work culture, systems and policies to support their growth, engagement and well-being.

With a workforce of nearly 8,000 employees, we remain committed to promoting diversity across gender, region and ability. To build a future-ready talent pipeline, we continue to attract high-calibre professionals from premier engineering and management institutes across the country.

Our inclusive philosophy extends to creating employee-friendly infrastructure at project sites and providing young professionals with cross-functional exposure to prepare them for future leadership responsibilities. We continue to maintain one of the highest retention rates among campus hires in the industry.

We invest significantly in capability building through a balanced mix of technical, functional and behavioural learning and development programmes. These initiatives are delivered in collaboration with domain experts and specialised institutions. Our robust performance management framework, powered by SAP SuccessFactors, enables objective assessments, helping recognise, reward and retain high performers.

Employee engagement remains central to our people agenda, with celebrations of festivals, national events, project milestones and employee achievements organised across locations. Our POSH policy reinforces a respectful, safe and gender-neutral workplace, supported through regular awareness and sensitisation sessions.

HCC remains focused on nurturing talent, fostering inclusion and building an agile organisation equipped for the future.

FINANCIAL REVIEW

Table 1: Abridged Profit and Loss account of HCC

(Rs crore)

	Standalone
	FY 26	FY 25
Income from Operations	3937.25	4,801.1
Other Income	99.35	98.0
Total Income	4036.6	4,899.1
Construction Cost(incl. material)/ Other Exp.	2,972.59	3,551.4
Employees Cost	331.42	316.7
EBITDA (excluding Other Income)	633.24	933.0
EBITDA margin (%) (excluding Other Income)	16.08%	19.43%
Finance Cost	436.30	506.4
Depreciation	25.20	64.7
Exceptional items - Gain / (Loss)	2.18	-
Profit / (Loss) Before Tax and Exceptional Items	271.09	460.0
Profit / (Loss) Before Tax after Exceptional Items	273.27	460.0
Tax expense	67.46	375.1
Profit / (Loss) After Tax	205.81	84.9
Other comprehensive income / (loss)	(10.84)	(7.1)
Total Comprehensive Income (after Tax)	194.97	77.8

Key Financial Ratios

	Standalone
	FY 26	FY 25	Reason for variance above than 25%
Debtors Turnover Ratio (in times)	1.22	1.74	Variation is less than 25%
Inventory Turnover Ratio (in times)	19.83	24.68	Variation is less than 25%
Interest Coverage Ratio (in times)	1.95	2.40	Owing to decrease in EBITDA and operating in-come
Current Ratio	1.23	1.31	Variation is less than 25%
Debt Equity Ratio	0.27	0.79	Owing to reduction in debt and in-crease in net worth on account of profit for the year and capital raised during the year.
Operating Profit Margin (%)	16.08	19.43	Owing to decrease in EBITDA and operating in-come
Net Profit Margin^ (%)	5.23	1.77	Owing to in-crease in net profit for the year due to the reduction of tax expenses.
Return on Net Worth	6.67	4.47	Owing to in-crease in net worth on account of capital raised during the year and in-crease in net profit after tax due to reduction in tax expense.

^ Before Other comprehensive income/(loss), net of tax

CORPORATE SOCIAL RESPONSIBILITY

HCCs approach to corporate social responsibility is aligned with its commitment to sustainable development and the well-being of communities around its operations. In accordance with Section 135 and Schedule VII of the Companies Act, 2013, the Company has established a formal CSR Policy, supported by its Integrated Management System. Its initiatives focus on sustainability reporting, water stewardship, disaster relief and response, HIV/AIDS awareness and community development.

HCC also contributes to the broader dialogue on sustainable infrastructure and urban development. Arjun Dhawan, Vice Chairman & Managing Director, serves as a member of the World Economic Forums Global Commission on Nature-Positive Cities, which brings together leaders from government, business, civil society and academia to advance resilient, inclusive and nature-positive urban development

SUSTAINABILITY REPORTING

HCC has published fourteen sustainability reports to date, aligned with the Global Reporting Initiative framework and independently assured. Sustainability considerations are integrated across the Companys operations, with emphasis on water conservation, waste management, occupational health and safety, responsible resource use and inclusive community development.

HCC is a member of the United Nations Global Compact and the TERI World Business Council for Sustainable Development and is a signatory to global initiatives including Caring for Climate and The CEO Water Mandate.

WATER STEWARDSHIP

HCC was the first Indian company to endorse the United Nations Global Compacts CEO Water Mandate. The Company monitors water consumption across its project sites and applies the 4R principle—Reduce, Reuse, Recycle and Recharge—to improve water-use efficiency and reduce freshwater consumption.

Water conservation measures include the treatment and reuse of water, groundwater recharge and watershed-management initiatives. During periods of scarcity, HCC also supports communities around its project locations with access to drinking water. Through these sustained efforts, the Company has maintained a water-positive status for nine consecutive years.

DISASTER RELIEF AND RESPONSE

HCC leverages its engineering expertise, project-management capabilities, trained personnel and access to heavy equipment to support emergency response and relief efforts. Its project teams have mobilised during natural disasters to assist with evacuation, restoration of access and immediate relief.

HCC is a founding member of the World Economic Forums Disaster Resource Partnership, which facilitates coordinated private-sector support during natural disasters. Since 2004, the Company has contributed to rescue and relief efforts in India and internationally.

HIV/AIDS AWARENESS

Recognising the vulnerability of migrant and construction workforces, HCC conducts HIV/AIDS awareness programmes across its project sites. Awareness and sensitisation sessions are integrated with workplace health and safety initiatives to encourage preventive healthcare and reduce stigma.

COMMUNITY DEVELOPMENT

HCC undertakes community-development initiatives in areas surrounding its project locations, with a focus on education, healthcare, local infrastructure and livelihood enhancement. These initiatives are designed to respond to local needs and contribute to inclusive development and improved quality of life.

INTERNAL CONTROLS AND THEIR ADEQUACY

HCC has established a comprehensive system of internal controls designed to support operational efficiency, safeguard assets and ensure the accuracy and integrity of financial and operational information. The framework provides for appropriate authorisation, accurate recording of transactions, regulatory compliance and reliable reporting to support informed decision-making.

The effectiveness of the control environment is supported by a structured internal audit programme, periodic management reviews and clearly defined policies, procedures and accountability mechanisms. Internal audit observations and recommended corrective actions are reviewed by management and reported to the Audit Committee, as appropriate.

OUTLOOK

As HCC enters its second century, the Company does so with a significantly strengthened balance sheet, strong risk management, improving execution capabilities and a favourable infrastructure investment environment. Indias infrastructure investment cycle is expected to remain favourable over the medium term, supported by continued public capital expenditure, urbanisation, energy transition, logistics modernisation and water security requirements. HCC is well positioned to participate in opportunities in transportation, metro rail, hydroelectric works, pumped storage, tunnels, bridges, nuclear infrastructure and complex urban infrastructure. The Companys priorities will remain focused on profitable order acquisition, accelerated execution, improved cash generation, working capital discipline, balance sheet strengthening and selective participation in technically complex projects where HCC enjoys a competitive advantage. Supported by its engineering expertise and century-long experience in delivering some of Indias most complex infrastructure projects, HCC believes it is well positioned to participate in the countrys next phase of infrastructure development while creating sustainable long-term value for all stakeholders.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied. Factors that could impact performance include changes in the infrastructure sector, shifts in Indias political and economic environment, fluctuations in exchange rates, amendments to tax laws, litigation, labour relations and variations in interest costs.