IL&FS Engineering & Construction Co Ltd Management Discussions

Company Overview:

The Company boasts over thirty years of expertise in the engineering and construction sector, offering comprehensive Engineering, Procurement, and Construction (EPC) solutions. Leveraging its proficiency across various infrastructure domains and a skilled workforce, the Company has been predominantly engaged in executing infrastructure projects throughout India. The company has a proven track record of delivering projects across diverse sectors including Power, Oil and Gas, Roads, Railways and Metros, Water and Irrigation, Ports, and Buildings & Structures sectors.

Indian Infrastructure Industry:

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

Indias economy is projected to grow by 6.6% in 2025, driven by robust consumption, investment, and strong export growth in services and goods. While global challenges persist, Indias focus on infrastructure and export growth fuels optimism.

Additionally, capital expenditure on infrastructure development is expected to have strong multiplier effects on growth in the coming years, Investment growth has remained particularly strong in East Asia and South Asia, partly driven by domestic and foreign investments in new supply chains, particularly in India, Indonesia, and Vietnam.

In India, the public sector continues to play a pivotal role in funding large-scale infrastructure projects, physical and digital connectivity, and social infrastructure, including improvements in sanitation and water supply. Strong investment growth is expected to continue through 2025.

In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand.

The sectors success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback.

Outlook:

Under the Union Budget 2025-26, the centre has re-emphasised its strategic focus on Viksit Bharat 2047 and infrastructure development, a key catalyst in this journey. Other prominent themes include agriculture, MSME, investment, and exports.

In order to foster private sector engagement, the infrastructure- related ministries will now come up with a three-year pipeline of projects in the PPP mode. The Union Government will also set up an Urban Challenge Fund of Rs 1 trillion to implement the proposals for ‘Cities as Growth Hubs, ‘Creative Redevelopment of Cities and ‘Water and Sanitation. Additionally, building on the success of capital recycling efforts, the centre will also launch the second asset monetisation programme for 2025-30, aiming to mobilise funds up to Rs 10 trillion to fund new projects.

Development of infrastructure has a multiplier effect on demand and efficiency of transport and increases commercial and entrepreneurship opportunities.

The India Infrastructure Sector Market size is estimated at USD 223.59 billion in 2025, and is expected to reach USD 353.11 billion by 2030, at a CAGR of 9.57% during the forecast period (2025-2030).

The government demonstrates its commitment to infrastructure with an allocation of INR11.21 lakh crore, building on the previous years INR11.11 lakh crore. A new Asset Monetization Plan is set to unlock value from public assets, while a three- year pipeline for PPP projects will encourage private sector engagement.

Building on the theme of inclusive and economic development and better connectivity across India, the UDAN -Regional Connectivity Scheme aims to revolutionize air travel by adding 120 new destinations and targeting 4 crore passengers over the next decade.

On the backbone of strong infrastructure, developing 50 top new tourist destinations sites along with world class facilities will further create employment led growth and boost domestic spend. Towards growth and improving quality of life in rural areas, extension of the Jal Jeevan Mission to achieve 100 percent coverage until 2028 is in line with the theme of ‘Sabka Vikas.

Balancing urban development through setting up of Urban Challenge Fund of INR 1 lakh crore will transform cities into growth hubs.

The fourth engine of growth i.e. Exports will require a strong supply chain system and availability of dedicated transportation vessels. Building a strong maritime ecosystem is the need of the hour. Setting up of Maritime Development Fund with INR 25,000 crore to foster private sector participation and expand maritime infrastructure is a step towards building Atmanirbhar Bharat.

Plan for asset monetisation for 2025-30 to be launched to plough back capital of INR10 lakh crore in new project.

The forthcoming opportunities in the business sectors of IECCL are as follows:

Roads:

The government has set ambitious goals, aiming to construct a 2 lakh-km national highway network by 2025, expand airports to 220, operationalize 23 waterways by 2030, and establish 35 Multi-Modal Logistics Parks (MMLPs).

At the start of the 2024-25 financial year, the Ministry had approximately 20,000 km of National Highways (NHs) planed construction. Additionally, there is a collection of projects in the DPR and tendering stages to enhance construction progress in the current and upcoming fiscal years.

Union Minister of Road Transport & Highways Mr. Nitin Gadkari has unveiled over 200 projects totalling Rs 1.25 lakh crore (US$ 14.97 billion) earmarked for the next five years under the National Ropeways Development Programme known as "Parvatmala Pariyojana”.

The government has allocated Rs. 2,87,333.3 crore (US$ 33.07 billion) to the Ministry of Road Transport and Highways, reflecting a modest increase of 2.41% compared to the FY25.

The Bharatmala Pariyojana, with its Phase I, is actively working toward the development of 34,800 km of National Highways. This ambitious project, slated for completion by 2027-2028, spans across 31 States/UTs and over 550 districts. Notably, the government has also set its sights on constructing 22 new Greenfield expressways, underscoring a major stride in Indias transportation infrastructure.

Further network of 35 Multimodal Logistics Parks is planned to be developed as part of Bharatmala Pariyojana, with a total investment of about Rs. 46,000 crore, which once operational, shall be able to handle around 700 million metric tonnes of cargo.

Railways:

The Union Government has allocated Rs 2,652 billion for Indian Railways under the Union Budget 2025-26,

The Urban Rail has allocated funds worth Rs 312.39 billion (budget estimate) for various metro rail and mass rapid transit system (MRTS) projects under Union Budget FY 2025-26.

The sector has also rolled out 35 Vande Bharat Express trains, all designed in-house, and plans to introduce six more soon. These trains connect a vast network, reaching as many as 247 districts across the nation. In a bid to combat climate change, Indian government has laid an ambitious target to allocate US$ 1.4 trillion between 2019 and 2023, including investment to the tune of US$ 750 billion on the railway infrastructure by 2030.

Indian Railways is developing and creating technology in areas such as signalling and telecommunication with 15,000 kms being converted into automatic signalling and 37,000 kms to be fitted with ‘KAVACH, the domestically developed Train Collision Avoidance System.

Water & Irrigation:

The Ministry of Housing and Urban Affairs has received an allocation of Rs 967.77 billion.

Jal Jeevan Mission extended till 2028 focusing on quality infrastructure and rural piped water supply schemes

Water and Sanitation as announced in the Interim Budget, Allocation of INR 10,000 crore proposed for 2025-26.

Maritime Development Fund with a corpus of INR 25,000 crore to be set up with contribution by the Government, ports and private sector.

Oil & Gas:

The Union Government has allocated funds worth Rs 193.27 billion to the Ministry of Petroleum and Natural Gas under the Union Budget FY 2025-26.

India aims to commercialize 50% of its SPR (Strategic Petroleum Reserves) to raise funds and build additional storage tanks to offset high oil prices

Indian refiners would add 56 million tonnes per annum (MTPA) by 2028 to increase domestic capacity to 310 MTPA

Indian refining capacity has increased from 215.1 Million Metric Tonne Per Annum (MMTPA) to 256.8 MMTPA in last 10 years

The Government has allowed 100% Foreign Direct Investment (FDI) in upstream and private sector refining projects.

Ports:

The Ministry of Ports, Shipping and Waterways (MoPSW) has received an allocation of Rs 34.71 billion

India plans to establish a new shipping company to expand its fleet by at least 1,000 ships in the next decade, aiming to reduce freight costs and capture more revenue from increasing trade, with joint ownership by state-run oil, gas, and fertilizer companies, along with the state-run Shipping Corporation of India and foreign companies, targeting a reduction of at least one-third in foreign freight outgoings by 2047

Union Cabinet approved the development of the National Maritime Heritage Complex (NMHC) at Lothal, Gujarat, showcasing Indias 4,500-year-old maritime heritage. This project is expected to enhance employment, tourism, and cultural preservation.

Airports:

In March 2024, the Minister of Civil Aviation and Steel announced inaugurating 15 airport projects worth US$ 12.1 billion by 2028. In December 2022, AAI and other Airport Developers have targeted a capital outlay of approximately Rs. 98,000 crore (US$ 11.8 billion) in the airport sector in the next five years for expansion and modification of existing terminals, new terminals and strengthening of runways, among other activities.

Civil Aviation Ministrys "Vision 2040" report states that there will be 190-200 functioning airports in India by 2040. Delhi and Mumbai will have three international airports each, while the top 31 Indian cities will have two operational airports each.

Power and Renewal Energy:

Power:

According to a report by Reputed Agency, the Indian power sector presents an investment opportunity worth Rs. 40,00,000 crore (US$ 461.95 billion) over the next decade, driven by rising demand, infrastructure upgrades, and the transition to clean energy.

In order to meet Indias 500 GW renewable energy target and tackle the annual issue of coal demand supply mismatch, the Ministry of Power has identified 81 thermal units which will replace coal with renewable energy generation by 2026.

Renewal Energy:

The net budgetary allocation for the Ministry of Power has been pegged at Rs 218.47 billion for 2025-26, The net budgetary allocation for the Ministry of New and Renewable Energy.

Indian conglomerates plan to invest Rs. 67,42,400 crore (US$ 800 billion) in green hydrogen, clean energy, semiconductors, and EVs.

Indias installed renewable energy capacity is expected to increase to about 1 70 GW by March 2025 from the level of 136.57 GW as of December 2023, according to research agency ICRA.

Government plans to invest Rs. 9,12,000 crore (US$ 107.89 billion) in power transmission infrastructure by 2032 to boost capacity and support growing electricity demand.

Overall, the Indian infrastructure sector is set for substantial growth, driven by strategic investments and policy initiatives aimed at enhancing the countrys economic and social infrastructure. Addressing infrastructure projects challenges will require coordinated efforts from the government, private sector, and other stakeholders to ensure sustainable and efficient infrastructure development.

Source: DPIIT Media sources, EY PIB, Mordor Intelligence, Union Budget Highlights - 2025-26.

Performance during the year:

Business Performance:

Our company is actively executing various EPC and item rate projects with both government and private clients in sectors like Railways & Metros, Water & Irrigation, and Roads, situated across India. Most of these projects are nearing completion. Despite facing severe challenges, we have successfully completed several projects of national importance. Additionally, we have actively engaged with clients to ensure the financial closure of outstanding dues for completed projects.

The Sector-wise Order Book of the Company is as follows:

Sector	On hand as on 31-3-2025	On hand as on 31-3-2024
Roads	31	192
Railways & Metros	597	223
Oil & Gas	7	7
Total	635	422

Developments at IL&FS and its adverse impact on the Company/IECCL:

As part of its initiatives for Resolution of IL&FS Group, the Reconstituted Board of Directors of IL&FS in their reports to Honble NCLT categorised the Company under the Group "Red" implying that the Company is unable to meet its contractual, statutory and debt obligations. The Honble NCLAT vide its Order dated 15th October 2018 ("Interim Order") in the Company Appeal No. 346 of 2018 after taking into consideration the nature of case, stayed certain coercive and precipitate actions against IL&FS and its group companies including the Company. The NCLAT vide its Judgement dated March 12, 2020, accepted the resolution process and revised resolution framework, including October 15, 2018, as date of initiation of resolution process of IL&FS Group entities, (including the Company) and crystallization of claims as of that date i.e. cut-off date with no interest, additional interest, penal charges or other similar charges to accrue after the said cut-off date. Accordingly, the Company is currently not settling liabilities existing prior to October 15, 2018, being the cutoff date to its Financial Creditors and the Operational Creditors. Adverse developments in promoter group entities have impacted the operations of the Company and resulted in cancellation/termination/suspension/foreclosure of certain contracts with customers. The Reconstituted Board and the management of the Company have taken various steps to continue the operations at present level during the period as per the resolution process framework accepted by the Honble NCLAT

Further, the Reconstituted Board is in the process of finalizing a comprehensive approach to manage the current situation including sale of existing equity share holding by IL & FS Group. In this process, the Reconstituted Board, as part of resolution process for the Company, has invited expression of interest for acquiring the equity stake in the Company. In January 2022, a bid had been received from an unincorporated Consortium which was subjected to challenge through counter bid under a Swiss Challenge method. The successful bid has been approved by the Committee of Creditors and the process of securing the approval by Justice D.K. Jain (Retd.), followed by approval of Honble NCLT is in progress.

Discussion on Financial Performance:

Your Companys Resolution process is still underway thereby leading to a significant impact on its business plans. Despite adverse situations, all out efforts have been made for running the organization on sustainable basis. All efforts are directed towards completing the order book in hand, liaise with the clients for financial closure of completed and projects where amicable foreclosures have been signed. The negotiations followed by execution of requisite documentations are being held for settlement in the lawful financial interests with minimal damage to the organization for the projects, terminated on account of IL&FS crisis.

The Results of these efforts led to increase in operation of the Company when compared to previous year, in FY 25 turnover of the Company stand at Rs. 321 Crore when compared to Rs. 258 Crore in FY 24. This increase in on account of operational performance and successful project execution. Most of our projects are nearing completion, and despite facing severe challenges, the Company has been able to successfully execute projects in hand.

Overall Financial Performance:

Particulars	Amount in Rs in Crore	Remarks
Revenue	321.38	-
EBITDA	(21.62)	-
PAT	(4,92)	Includes exceptional items of Rs (27.57)Cr
EPS	(0.38)	Same as above
Share Capital	131.12
Debt	2667.80
Net Worth	(3184.79)
Fixed Assets
Inventory	15.07
Debt Equity Ratio	-	Due to negative net worth the ratio not calculated
Current Ratio	0.14
Return on Equity	-	Due to negative PAT the ratio not calculated
Interest Coverage Ratio	-	Interest expenses not recognized due to moratorium

Highlights of the financial year 2024-25 :

1. Although the Company is experiencing challenging times, the Company is making all out efforts in responding to these challenges.

2. Further, the Company has incurred accumulated loss of Rs. 3600.37 Crore as at March 31, 2025 (As at March 31, 2024 Rs. 3595.44 Crore). The Company has incurred loss of Rs. 5.04 Crore for the year ended March 31,2025 (Loss for the year ended March 31,2024, is Rs. 77.47 Crore). The Companys net worth is fully eroded, existing projects being executed by the Company

are nearing completion or approaching their end of term, which resulted in significant reduction in Companys operations over the past three years. The Company has continued to default in payment of various loans to the lenders of the Company, including borrowings from promoter group entities.

Risks and Concerns:

While the Indian infrastructure and construction sectors present significant opportunities, as detailed in the "Indian Infrastructure Industry" section, the Company is currently navigating a period of substantial challenges. Despite recognizing promising prospects across key sectors including Power, Oil & Gas, Railways & Metros, Roads, and Buildings & Structures, the Companys negative net worth and prevailing financial constraints, particularly concerning bank guarantee requirements, have currently rendered it unable to pursue new projects. Furthermore, the adverse developments within the IL&FS Group have significantly impacted the Companys revenue growth strategies.

The newly constituted Board is actively addressing these challenges through the development of a comprehensive resolution plan. The successful implementation of this plan is anticipated to enable the Company to resume bidding activities, secure new projects, and recommence its business operations. However, the ongoing business realignment is expected to span several months, during which the Company will face considerable uncertainties. The Company remains optimistic about its ability to successfully navigate this transitional phase.

Risk Management:

The Company has established an integrated Enterprise Risk Management (ERM) framework to systematically identify, assess, mitigate, and report potential risks. The Management is periodically reviewing critical business risks and the corresponding mitigation strategies. The key enterprise-level risks confronting the Company and the measures being implemented to address them are detailed below:

Liquidity Risk:

Pursuant to the IL&FS crisis, NCLAT has put a moratorium on the payment against all liabilities existing as on the cut off date i.e 15th October 2018. Thus your company is not servicing its liabilities to the lenders and has not paid dues to operational creditors for dues pertaining to pre-cut off date period. As per the IL&FS resolution framework, your company has been categorized as a "Red Entity" which signifies that it cannot service its debt and operational liabilities. The resolution of your company is underway and when it is successfully implemented, it shall lead to comfortable liquidity in the company.

Order Book Risk:

The Company has faced a prolonged period of limited new contract acquisitions over the past six years, except for two subcontracting arrangements with a contractor, for the Gujarat Metro Rail Corporation related to the Surat Metro Rail Works and Delhi Metro Rail Corporation Limited related to the Bhubaneswar Metro Rail Works. The current inability to pursue new projects is primarily attributable to the Companys negative net worth and the consequent lack of necessary financial support from banks.

Reputation and Brand Risk:

The debt crisis within the IL&FS Group and associated concerns regarding corporate governance have negatively impacted the reputation of affiliated entities, including the Company. This adverse perception presents challenges in securing new EPC projects, obtaining favorable borrowing terms, and accessing credit facilities from vendors. Despite these headwinds, the Companys established track record of delivering high-quality EPC projects and consistently meeting its contractual obligations provides a strong foundation for rebuilding trust with clients and vendors.

Operational Risks:

The Company encounters various challenges in the execution of its project operations, which can lead to both cost and time overruns. To mitigate these operational risks, the Company places significant emphasis on meticulous planning across all stages, including design, subcontractor selection, supplier management, recruitment, resource allocation, and insurance coverage. Standard Operating Procedures (SOPs) have been rigorously documented and implemented across all critical operational areas. These are further supported by a robust business monitoring mechanism and proactive strategies for risk identification and mitigation.

Political Risk:

Operating across multiple states in India exposes the Company to diverse political environments and their associated risks. To mitigate this, the Company has adopted comprehensive strategies, including the diversification of its operations across different infrastructure sectors and geographic regions to reduce concentration risk.

Contractual Risks:

The Company faces contractual risks in its interactions with clients, subcontractors, suppliers, and lenders in its day-today operations. To manage these risks effectively, the Company has a dedicated Contracts Department responsible for overseeing contract documentation, managing significant claims, and handling arbitration processes in collaboration with the Legal team.

Subcontractors Risk and Joint Venture Risks:

The Companys reliance on subcontractors and joint venture partners for project execution introduces inherent risks to revenue and profitability due to potential non-performance. To mitigate these risks, the Company employs stringent selection criteria and conducts regular performance monitoring to ensure adherence to contractual obligations.

Material Risk:

Materials located at completed, foreclosed, or terminated projects pose a potential risk given the Companys current inability to secure new projects. To address this, efforts are underway to facilitate the sale of surplus materials, subject to the approval of relevant authorities, with the aim of minimizing potential losses from deterioration or theft.

Internal Control Framework and its sufficiency :

The Company maintains a robust internal financial control framework that is appropriately designed for its operational scale and the complexity of its business, aligning with the requirements of the Companies Act, 2013. To ensure the effectiveness and adequacy of these controls, M/s. TRC Corporate Consulting & T R Chadha & Co LLFj an independent audit firm, conducts regular internal audits based on an Audit Flan approved by the Audit Committee. The findings of these audits are reported to the Audit Committee on a quarterly basis, providing valuable insights into compliance and operational integrity. Furthermore, an internal Risk & Control function actively evaluates organizational risks and designs and implements necessary control mechanisms for effective risk mitigation.

The Company has institutionalized key internal controls, including a well-defined Delegation of Authority (DoA) and comprehensive Standard Operating Procedures (SOPs). These established mechanisms promote orderly and efficient business conduct, safeguard assets, aid in the prevention and detection of fraud, ensure accurate and reliable financial record-keeping, and facilitate adherence to all applicable statutory requirements.

Enhancing the strength of its internal control environment, the Company utilizes the Oracle e-Business Suite as its Enterprise Resource Planning (ERF) system. This integrated platform ensures seamless and accurate recording of all transactions, providing a comprehensive audit trail that significantly enhances transparency and accountability across all operational processes.

Human Resources & Industrial Relations:

HR department is fostering a productive, engaged and legally compliant workforce aligned with the Organisations goals. The HR Department regularly assesses its policies, aligning them with industry best practices to maintain a competitive edge. Updated policies are communicated to all employees through email notifications and training sessions.

The Company maintains constructive and harmonious relationships with its workforce across all project sites and offices in India. As of March 31,2025, the company had 248 employees on its payroll.

Cautionary Statement:

Statements in this Annual Report, describing the Companys outlook, projections, estimates, expectations, or predictions may be "Forward Looking Statements" within the meaning of applicable laws or regulations. Actual results could differ materially from those expressed or implied. Several other factors could make significant difference Companys operations which includes economic conditions affecting demand and supply, Government Regulations, taxation, natural calamities and so on, over which the Company does not have any control.