IL&FS Engineering & Construction Co Ltd Management Discussions.


Your Company has more than twenty-five years of experience in the engineering and construction business with capabilities in providing integrated Engineering

Procurement and Construction (EPC) services for civil construction and infrastructure projects

Your Company has been awarded mandates across various business segments on a competitive bidding basis. With engineering experience, trained and qualified manpower, your Company can successfully execute and implement projects independently or through subcontracting

(B) ECONOMIC OVERVIEW (1) Indian Economy

The Indian economy has sustained an environment of relatively lower inflation, fiscal discipline and moderate current account deficit coupled with broadly stable rupee-dollar exchange rate. Volume growth is improving in a number of sectors in FY 2018. Agricultural growth and rural demand in FY 2018 will be influenced by monsoon dynamics. Lower Inflation, especially in food and fuel items and the impact of lower interest rate will improve the purchasing power of consumers. Policy rate changes by Central Banks impact the economy with a lag. The Government of India announced demonetization of notes on November 8, 2016, in order to eliminate black money and the growing menace of fake Indian currency notes, thereby creating opportunities for improvement in economic growth

The Indian economy is strong enough to absorb the impact of the US Federal Reserve interest rate hike. Recent United States Immigration restrictions are the main source of Indias vulnerability. But India is fundamentally in a strong position due to sharply lower fiscal and current account deficits, lower inflation and sustainable growth prospects due to continued productivity enhancing reforms instituted by Government of India

(2) Infrastructure & Construction Sector in India

Being a rapidly growing nation, India has always accorded higher importance to infrastructure sector and it has received considerable attention from the government as well as private players. Indian infrastructure sector mainly includes development of roads, airports, shipping and ports which have contributed greatly to the economy of India over the last decade

The government has tried to frontload investments in roads, railways. This approach may continue in next fiscal. These factors will, in turn, raise capacity utilization and create conditions for new investment by the private sector. Construction companies witnessed an improvement in order inflows over the last two years with a major push coming from segments like roads, railways, and urban infrastructure. This has helped improve the order book position of most construction companies.

However, execution has not gained significant traction as the order books of several companies remaining burdened with slow moving or stalled projects and many companies continued to have weak liquidity impacting their project execution ability – thereby resulting in weaker revenue growth. In terms of profitability, however, there has been a gradual improvement and stability in the last two years, led by a reduction in subcontracting and benign commodity prices. The current fiscal has witnessed an uptick in commodity prices which would put pressure on profitability. While the sustainability of the improvement in operating profitability is uncertain, with high overall debt the interest coverage ratios continue to remain weak

(3) Regulatory Challenges leading to time and cost overrun

Funding constraints, land acquisition issues, delays related to identification and award of projects and shortage of skilled manpower are some of the major reasons that are currently causing delays in infrastructure projects

Undoubtedly, infrastructure is a key priority sector clearly made evident from the increasing allocations to infrastructure in every budget since this government came to power. There is consistency and coherence in the governments policy on infrastructure. It is evident that this sector needs consolidation in policy framework starting from approval to implementation, an institutional mechanism for fair pricing and competition, and developing financial markets along with enhanced budgetary allocation even in future for achieving Indias long-term growth potential. The government did focus on kick-starting delayed projects, but it is yet to act on other key issues including setting up of a dedicated institute for

Public Private Partnerships (PPPs), proper risk-sharing measures, independent regulation in few sectors, protection to private investment in infrastructure etc. The government needs to give a serious thought and revisit the PPP models and re-instate some confidence into the private sector. India needs to develop a better regulatory mechanism, a rational pricing system, reform financial markets and strengthen dispute resolution mechanisms so that the private sector finds infrastructure projects economically feasible

Private sector participation in infrastructure has been low due to several bottlenecks and challenges related to availability of bankable infrastructure projects along with land acquisition and environmental issues

(4) Challenges relating to Financing

Finance will become an ever more important constraint for Indian infrastructure over the medium term is evident from calculations on financing gaps. Infrastructure projects are complex, capital intensive, long gestation projects that involve multiple and often unique risks to project financiers. Infrastructure projects are characterized by non-recourse or limited recourse financing, i.e., lenders can only be repaid from the revenues generated by the project. This limited recourse characteristic, and the scale and complexity of an infrastructure project makes financing a significant challenge, which is further compounded by two factors. First, a combination of high capital costs and low operating costs implies that initial financing costs are a very large proportion of the total costs. Second, infrastructure project financing calls for a complex and varied mix of financial and contractual arrangements amongst multiple parties includes the project sponsors, commercial banks, domestic and international financial institutions (FIs), and government agencies. Any significant improvement in the liquidity profile and credit metrics of construction companies will take time and will be contingent on an improvement in the working capital cycle and in the pace of execution, besides their ability to deleverage by raising long-term funds through stake sale or equity placements

The Gross NPA with the Scheduled Commercial Banks currently at 8.5% which is alarming and puts further stress on Capital Adequacy ratio of banks and this highlights the need to diversify the sources of funding for infrastructure

(C) Opportunities: (1) Roads :

Indias Infrastructure projects are drawing substantial interest from Global investors while sovereign overseas funds are also keen to invest in Masala Bonds which would help in financing the expansion of national road network. Also the Ministry of Road Transport and

Highways (MoRTH) is in talks with Japan-based fund for loan at low interest rates as part of a strategy to generate funds for Indias new integrated infrastructure planning initiative

The government has decided to award contracts for building 25,000 kms of highways in the current fiscal and 30,000 kms in the next to augment the road infrastructure

In addition to Rs 4,500 crore approved for Telangana State as per the 2017-18 annual plan, center cleared three projects approving total Rs. 5,900 crore for the state. In addition to the elevated corridors, Central Government has also sanctioned two economic corridors, while the Narketpalli, Nalgonda, Tipparthi, Miryalguda, Kondrapolu and pondugula corridor will cover over 98 Km, the Jedcharla-Dmagnapur-Karnatka Border will spread over 109 Kms

Major Clients like MoRTH, NHAI, various state Road &

Bridge Development Corporation are planning to float tenders worth Rs 2,70,000 crore approx during FY 2018-FY2019

Central Government planning to launch number of ambitious infrastructure projects in the country such as

(a) Bharatmala Project: Central Government plans for Rs 14,000 crore project linking Indias vast west-to-east land border from Gujarat to Mizoram. It will also link to a road network in coastal states from Maharashtra to West Bengal. In a way, this road network will garland the entire country. Central government is planning to finish the 5,000-km road project in 5 years

(b) Mumbai Trans Harbour Link, Shivaji Memorial:

This will be countrys longest sea bridge at 22.5 km. It will connect Mumbais eastern suburbs with the mainland across the Harbour through a 16.5 km sea bridge and a viaduct. The project will cost around Rs18,000 crore and completed by 2019. It will connect Sewri in central-east Mumbai with Nhava Seva across the Harbour. The Central government is also building a Rs 3,600 crore grand memorial of Chhatrapati Shivaji in Mumbai

(c) Setu Bharatam project: The Rs 50,800 crore Setu

Bharatam project aims to ensure highways without railway crossings by 2019 and overhaul of 1,500 British-era bridges. Under this project, 208 railway crossings will be replaced by rail over bridges (ROBs) by 2019 at an estimated cost of Rs 20,800 crore. Also, 1,500 bridges of the British era across the country will be overhauled for around Rs 30,000 crore

(d) Rashtriya Rajmarg Zila Sanjoyokta Pariyojna:

This project aims to connect 100 of the 676 district headquarters in the country with world-class highways. The project entails development of 6,600 km of highways at an estimated cost of about Rs 60,000 crore

(e) Chardham-Highway Project: The Chardham Mahamarg Vikas Pariyojna or the Chardham highway development project, is an ambitious initiative to improve connectivity to the Char Dham pilgrimage centres in the Himalayas. The projects main objective is to develop around 900 km of national highways. These highways will be built in Uttarakhand at an approximate cost of Rs 12,000 crore

(f) Highest bridge of the world on river Chenab: The government is building the tallest bridge in the world over river Chenab at Doda (359 metre above the river). The bridge would be built at a cost of Rs 1198 crore. After construction, it will surpass the current record held by Beipan river Shuibai railway bridge (275m) in Guizhou province of China (g) Haryana Government Plan to launch 22.5 Km elevated road project from Rajiv Chowk to Sohna road (Approx Cost of the project is Rs 1,385 crores)

(2) Railways :

Japan International Cooperation Agency (JICA) which has provided loans for metro rail projects in the country, has also shown “keen interest” in supporting six more Metro projects (Delhi Metro Phase-IV, Pune Metro, Vijayawada Metro, Chennai Metro Phase-II, Thiruvananthapuram

Light Metro and Kozhikode Light Metro Projects) which are under consideration for approval and whose total debt component stands at over Rs 38,700 crore. Under the new modified Special Terms for Economic Partnership (STEP) with Japan, JICA loan comes at an interest rate of 0.30 per cent as against 1.30 per cent on earlier loans

For 2017-18, the total capital and development expenditure of Railways has been pegged at Rs 1,31,000 crore. This includes Rs 55,000 crore provided by the Government. Railway lines of 3,500 kms will be commissioned in 2017-18. During 2017-18, at least 25 stations are expected to be awarded for station redevelopment. 500 stations will be made differently abled friendly by providing lifts and escalators. It is proposed to feed about 7,000 stations with solar power in the medium term

Odisha has been allocated Rs 5,102 crore for development of Railways in the Union Budget for 2017-18 and other states like Andhra Pradesh and Chhattisgarh have been allocated Rs 3,406 crore and 3,676 crore respectively. Railways have put up joint ventures with 9 State Governments, 70 projects have been identified for construction and development

Dedicated freight Corridor Coproration of India (DFCCIL) also plans to have other corridors apart from under execution Eastern and Western Dedicated Freight Corridors, viz :East West Dedicated Freight corridor (From Kolkata to Mumbai Approx 2000 kms), North South Dedicated Freight Corridor (From Delhi to Chennai Approx 2173 Kms), East Coast Dedicated freight corridor (From Kharagpur to Vijaywada Approx 1100 Kms) and South West Dedicated Freight corridor (From Chennai to Goa Approx 890 Kms).

The Centre has set aside over Rs 17,810 crore for metro projects across the country in the Union Budget for 2017-18, which is a jump of nearly 14 per cent over last years allocation

This year, the pass through assistance i.e. loan amount provided by external agencies like JICA has been pegged at Rs 13,644 crore, as against last years Rs 12,470.75 crore. While the Rs 42,000 crore Phase III project of Delhi Metro Rail Corporation Limited is nearing completion and is likely to see a staggered launch this year, its Phase IV has recently been cleared by the Delhi government and it awaits the clearance of the Centre. The mega project, as part of which 72 new stations will be built, will cost over Rs 50,000 crore, which is to be borne equally by the state and the Centre

High Speed Rail Status

The Railways has finalized the detailed project report (DPR) for an ambitious project aiming at running trains at 160 Kmph on two busy corridors. New Delhi-Howrah and New Delhi-Mumbai corridors would be upgraded to run trains at speed of 160 kmph as part of ‘Mission Raftaar launched by railways. According to the DPR, New Delhi-Howrah sector including Kanpur-Lucknow section is estimated to cost Rs 6,974 crore and the New Delhi-Mumbai corridor including Baroda-Ahmedabad section is slated to cost Rs 11,189 crore

(3) Ports :

Government of India plans to Develop 10 Coastal Economics Region as a Part of Sagarmala (Strings of Ports) Project and this could span 300 to 500 kms of Coast line. Government plans to Invest Rs 70,000 Crore in 12 major ports in next five

Sagarmala Project: It aims to promote port- led direct and indirect development and provide infrastructure to transport goods to and from ports quickly, efficiently and cost- effectively. The project is estimated to cost around Rs 800,000 crore. The Government wants to implement the projects worth Rs 393,402 crore under the ambitious Programme by March, 2019

Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector. Providers of services such as Operation and Maintenance (O&M), pilotage and harbouring and marine assets such as barges and dredgers are benefiting from these investments. The Planning Commission of India forecasts an investment of Rs 180,626 crore for this industry in its 12th Five Year Plan. In addition, through The Maritime

Agenda 2010 2020, the Ministry of Shipping has set a target capacity of over 3,130 MMT by 2020, which would be driven by participation from the private sector. Non-major ports are expected to generate over 50 per cent of this capacity

(4) Urban Infrastructure :

The Ministry of Urban Development has approved an investment of Rs 14,353 crore for 2017-2020 (three years) improving basic urban infrastructure in 474 cities in 18 states and Union Territories (UT) under Atal Mission for Urban Rejuvenation and Transformation (AMRUT)

The Ministry of Urban Development has received Smart City Plans for 20 cities with an investment of Rs 57,393 crore. Under the smart city mission, the centre provides Rs 500 crore to each city over a period of five years

Five states - Kerala, Madhya Pradesh, Gujarat, Odisha and Mizoram – have taken the lead to address the issue of water logging in monsoon season with plans to invest Rs 242 crore across 25 cities under AMRUT

France has announced a commitment of € 2 billion to convert Chandigarh, Nagpur and Puducherry into smart cities, thereby becoming the firstnation to specify a financial commitment towards the Governments ‘Smart City initiative

Industrial Corridors:

The Government of India plans to establish five industrial corridors to increase exports, industrial output and employment in the regions impacted by the corridors. Each corridor will have several key nodes that will be developed using Smart City principles

Delhi Mumbai Industrial Corridor: This corridor aims to develop an industrial zone that will span six states in India, to spur economic growth. The project aims to establish industrial clusters, with rail, road, port and air connectivity along the corridor, and to develop six logistics parks and seven Greenfield cities. The states covered under this corridor are Delhi, Uttar Pradesh, Rajasthan, Maharashtra, Gujarat and Haryana

Other corridors in the planning phase are the Amritsar Delhi Kolkata Industrial Corridor (impacting the states of Punjab, Haryana, Uttar Pradesh, Uttarakhand, Bihar, Jharkhand and West Bengal), Bengaluru Mumbai Economic Corridor (impacting the states of Maharashtra and Karnataka), Visakhapatnam Chennai Industrial Corridor (impacting the states of Tamil Nadu and Andhra Pradesh), Chennai Bengaluru Industrial Corridor (impacting the states of Andhra Pradesh, Karnataka and Tamil Nadu)

(5) Irrigation, Water & Waste Water:

A number of challenges in water sector have been identifiedby Ministry of Water Resources and accordingly some of the flagship scheme like“Pradhan Mantri Krishi Sinchayee Yojna (PMKSY), River Linking, Namami Gange etc. has been launched in mission mode

Under PMKSY, 99 projects have been identified on priority basis with an expected expenditure of Rs. 77595 crore. Many projects which were at standstill such as Gosikhurd in Maharashtra were streamlined and put on track for timely completion. Under ‘HAR KHET KO PANI and ‘MORE CROP PER DROP Scheme, 22 Projects in Maharashtra, 6 Projects in Odisha and 17 Projects in Madhya Pradesh have been put on fast track and likely to be completed before 2019

The Government has accorded high priority to inter linking River Projects due to which Ken Betwa Link Project Phase I & II with estimated cost of about Rs 18000 crore is likely to be rolled out soon. All the mandatory clearances and statutory clearances have been obtained from the designated authorities. Draft cabinet note for implementation of project has been circulated for inter-ministerial consultations and copies have also been shared with states of Uttar Pradesh and Madhya Pradesh for obtaining their views

Due to Prime Ministers initiative, focus has also been given towards development of North-Eastern State.

Brahmputra Board has been restructured and Rs 3640 crore has been approved by the Government to expedite the long pending projects like flood control, irrigation etc.

Namami Gange Programme with a budget outlay of Rs. 20,000 crore is also at advance stage and number of projects in Uttarakhand, Uttar Pradesh, Bihar, Jharkhand and in West Bengal are at advance stage of implementation

(6) Power :

Government of India under its 12th central plan has provided expense budget of Rs 15 trillion thereby making this sector full of business opportunities in generation, distribution, transmission and equipments

Present emphasis of the Central Government is to develop a system for providing 24x7 electricity supply to urban and rural areas by year 2021. Accordingly large allocations have been provided in following segments

Upgradation and new 11/33KV lines Rs 100,000 crore
Sub stations Rs 50,000 crore
Rework/modification of current facilities Rs 224,770 crore
Rural Electrification Rs 65,990 crore
Transmission lines Rs 180,000 crore

Also Govt. of India has taken up an ambitious plan of adding 175 GW of renewable energy generation projects, including 100 GW of solar power by year 2022

Out of 319,000 MW present installed generation capacity of the country, more than 70% of the generation plants are coal based. With the current trend and push of the Govt of India, India shall emerge as number one country in terms of installed capacity of renewable energy plants by year 2025

Your Company currently addresses market segments of distribution, sub stations and transmission lines and has booked new orders worth Rs 957 crore in year 2016-17 and has plans to secure Rs 1200 crore of new orders from these sectors in current financial year 2017-18, where your Company qualifies as bidder total potential Rs. 40,000 crore

Most of these new contracts shall be of EPC nature and the Company aims to secure these contracts from financially closed projects

Currently, your Company has a good standing in this segment and is rated as one of the best contractor who has completed quality projects in Rajasthan, Karnataka, Odisha, West Bengal, Uttar Pradesh, Haryana and Andhra Pradesh

(7) Building :

The Government is set to launch a Special Purpose Vehicle for building the Countrys largest exhibition-cum-convention centre in Delhi at an estimated cost of Rs 26,000 crore

Private real estate developers had launched 352 projects in 53 cities across 17 states with an investment of Rs.38,003 crore to build 2,03,851 affordable houses.

Maharashtra has the highest investment in the affordable housing scheme with 1,03,719 houses to be built with the investment of Rs.15,576 Crore. Gujarat comes second with 28,465 houses to be built at an investment of Rs. 9,525 crore and National Capital region comes 3rd with 41,921 houses with and investment of Rs. 6,211 crore

The Ministry of Housing and Urban Poverty Allevation has so far approved construction of 17,73,052 affordable houses under Prime Ministers Awas Yojna (Urban) with an investment of Rs. 95,660 crore in 30 states and union

Territories. These approved projects will be executed with assistance from central and state governments

Inter Continental Hotels Group, the UK based hospitality chain, will open around 100 to 150 Hotels in India over the next 10 Years

Carlson Rezidor Group, a Hospitality major, is aiming to open 8 Radisson Blue Hotels by 2020 in India

National Buildings Construction Company Limited has current order booking of Rs. 80,000 crore out of which they are planning to float tender worth Rs 16,000 crore for Commercial and Hospital Building in FY 2017-18 and FY 2018-19. Similarly, AIIMS projects worth Rs 900 crore are also expected .Government is also planning to make Railway station buildings in various states of India worth Rs 5,000 crore and Residential buildings worth Rs. 11,805 crore

Smart Cities Mission

The objective of the Smart Cities Mission is to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘Smart Solutions. The focus is on sustainable and inclusive development and the idea is to look at compact areas, create a replicable model which will act like a light house to other aspiring cities. The Smart Cities Mission of the Government is a bold, new initiative. It is meant to set examples that can be replicated both within and outside the Smart City, catalyzing the creation of similar Smart Cities in various regions and parts of the country Government is planning to complete smart City project in 3 Phases which will include 60 Cities at a Total Estimated Project Cost of Rs. 1,31,762 crore

(8) Oil & Gas :

India is aiming at USD 100 billion investments in the Natural Gas Sector by 2022, including setting up of RLNG terminals, completion of the gas grid, pipeline projects and setting up of CGD network in more cities

Development of Pipeline Infrastructure

Urja Ganga Gas Pipeline Project: In October 2016, the Government laid the foundation for the gas pipeline project, at Varanasi. The 2540 km long Jagdishpur Haldia & Bokaro –Dhamra Natural Gas Pipeline Project (JHBDPL) under Urja Ganga when completed will supply natural gas to Uttar Pradesh, West Bengal, Bihar, Odisha and Jharkhand

The Government aims to include 228 cities in the City Gas Distribution (CGD) network. It has initiated work on another 14,500 km national gas grid, following clearances

An additional 34 million tonnes per annum of Liquefied

Natural Gas import terminal capacity will be added in the next five years, and the pipeline will also increase to 30,000 kms

Major Project Announcement:

Indian Oil has planned to set up Rs 40,000 crore mega refinery at Nagapattinam (Tamil Nadu)

Indian Oil to invest Rs 15,750 crore to grow pipeline network

As per Indian Oil Ministry, oil refineries will need to invest Rs 80,000 crore in upgrading petrol and diesel quality to meet cleaner fuel specifications by 2020

A new Petrochemical Complex with investment of Rs 30,000 crore to be set up in Andhra Pradesh by 50:50 JV of GAIL and HPCL

The Rajasthan government has signed an MOU with HPCL for 9-million tonne (mt) a year Barmer refinery in Rajasthan at an investment of around Rs 43,000 crore

Your Company is prepared to capitalize on such opportunities to improve its market share on continuous basis

Your Company has more than 25 years of consistent performance in executing projects across sectors, states and of varying complexity

This was possible only through

• Predictable & relatable processes

• Well qualified & experienced engineers

• Proven project management & partner management capability

• Customer engagement processes

• State of the art plant and equipment

Your Company is also well diversified and qualifies on its own in many sectors and for most of the opportunities. The diversity also helps in executing projects which involve all components of engineering- civil, mechanical and electrical. In the last few years, your Company has successfully executed many projects in Roads, Irrigation,

Power and Oil & Gas to the satisfaction of clients.

Building on this foundation, your Company has prepared itself to build these business units into key differentiators and vehicles for future growth and emerge as one of the leading infrastructure company

(D) Performance during the year :

(1) Your company had been able to secure orders in Power, Railways, Roads and Oil & Gas segments (2) Continued management efforts to improve the performance of the Company has resulted in successful completion of some projects in India and overseas

Details of Projects awarded during April 2016 to March

2017 :

(Rs. In Crores)


Total Value Awarded

RE Infrastructure Development works under DUGJY for Sahibganj Package (Sahibagnj & Pakur District) 222.7
Rural Electricity Infrastructure Development works in North 24 Parganas (Bidhannagar Region) & South 24 Parganas Districts 179.6
Rural Electricity Infrastructure Development works in Paschim Midnapore (Feeder) District 176.3
Strengthening of existing Sub-transmission & Distribution Network in Urban area of 24 Parganas (South) Region (Pkg: X) 159.5
Rural Electrification work of Villages/ Majre of Gonda District 149.2
765kV D/C Bhuj - Banaskanta Transmission Line (Part-V) associated with Green Energy Corridors 54.51
Seven Elevated Metro Stations and Three at Grade Stations (N-S Corridor) in Reach-1. 533
Underground station at Sir Thiyagaraya College & Korukkupet Station, including cut & cover tunnel and Ramp (Chennai Metro) 330
Widening to Two/Four Lane with Paved Shoulders (Bidar-Humnabad) of NH 50 (Package - II) (Length 47.03Kms) 104.6
Package No. 10: Widening and reconstruction of Bariya Choki-Lugasi-Garhi Malhara Road, Bamitha-Dumra Road, Rajnagar-Bachhon Road, Khaparia Banspahari Road & Chhatarpur- Vikrampur-Rajnagar Road 86
Package No P2: Ganj - Rajnagar Road (MP- MDR-35-02), Laundi -Mahoba Road (MP- MDR- 35-11), Nawgong- Shrinagar Road (MP- MDR-35-04) & Baxwaha - Dalpatpur Road (MP-MDR-35-18) 79.2
Package No. 11: Widening and reconstruction of Barghat-Kanhiwada Road, Dharna-Asta- Dondiwada- Dharmakua Road & Waraseoni- Katangi Road 162
Oil and Gas
Kochi - Kootanad - Bangalore - Mangalore 173.1
Pipeline Project Phase-II (Section -I: 30" x 91 KM)
Phulpur - Haldia Pipeline Project (Phase 1B) 162.6
Kochi to Mangalore Pipeline Project Phase II
Kochi to Mangalore Pipeline Project Phase II 123.1
(Section IVA: 24" X 70.32 KM & IVB: 24" X 34.83 KM)
Grand Total 2,776

(E) Discussion on Financial Performance:

Notwithstanding the economic slowdown and the exigencies, your Company has been able to retain healthy order book

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

(Rs. In Crores)

Sector On Hand 31.3.2017 On Hand 31.3.2016
Roads 2,695 3,247
Railways 1,721 1,138
Buildings 1,087 1,239
Irrigation 3,044 3,277
Power 1,364 788
Oil & Gas 526 127
Ports 212 212
Total 10,649 10,026

Overall Financial Performance:

(1) Turnover: The Company has achieved a turnover of Rs 1820.22 crore for the FY 2017 as against Rs 1,844.87 crore of the Previous Year

(2) Profit aftertax: Net Profit is Rs. 2.30 crore in FY 2017 against Loss of Rs. 188.52 crore in FY 2016

(3) Earnings per share: EPS for the period is Rs. (0.05) as compared to Rs (16.65) in the Previous Year

(4) Share Capital: The share capital of the Company stood at Rs 170.87 crore as at March 31, 2017 as against Rs 213.91 crore as at March 31, 2016. The changes in share capital of the Company during the financial year 2016-17 were due to allotment of Equity Shares on Preferential Basis and redemption of Preference Shares from the proceeds of the Preferential Issue

(5) Net worth: The net worth of the Company is Rs 125.90 crore as at March 31, 2017 compared to Rs 123.60 crore as at March 31, 2016 (6) Debt: The Company had paid some loans and had raised new loans which have not resulted in the major change in aggregate debt. In order to meet the growing working capital needs of the Company due to increased operations, promoters have advanced loans. Consequently, debt position of the Company increased to Rs 1,992.41 crore as against Rs 1949.48 crore

(7) Fixed Assets: The Companys fixed asset base (Gross Block) decreased to Rs 478.68 crore in 2016-17 from Rs 603.50 crore in 2015-16

(F) Outlook:

Your Company has significantly strengthened its business developments initiatives and is reaping the rewards of the efforts, in terms of order inflow. Your Company is in the process of executing various projects i.e., Metro railway projects, Road projects and power projects. With experience of handling legacy projects and present government impeccable reforms your company is confident to reap fruitful results in future

(G) Challenges, Risks and Concerns:

The Indian infrastructure industry has tremendous scope in the future. However, in the current macro-economic environment, the Company perceives following risks and concerns

(1) Liquidity Position:

The debt burden has increased in a manner that is not commensurate with the size of its operations and there has been severe stress in terms of cash flows. With the support of parent entity your company is improving cash flows for cost optimization and better working capital management. Your company is in discussion with banking consortium for assessment of incremental working capital requirement to support growth in business

(2) Changes in Government policies including change in tax structure:

With Goods and Service Tax (GST) in place, withdrawal of exemptions for road, irrigation projects sponsored by Government and local authorities is expected to create renegotiation of contract prices and higher GST rates may results in liquidity issues. However, availability of higher pool of input tax credit in the hands of the contractors could help neutralize such issues. So introduction of GST seems to be a mixed bag for the infra sector compliance and efficiency being the key advantages, while initial teething issues, higher rate and certain restrictions are negatives

(3) Price Inflation Risk:

Infrastructure projects encountered issues such as land acquisition, volatility in commodity prices, financing charges resulting in time and cost overrun.

Effective Project bidding and Control methods have been placed in your Company to safeguard risk associated with price inflation

(H) Internal Control System and their Adequacy:

The Board of Directors has laid down internal financial controls to be followed by the Company with an objective of orderly and efficient conduct of its business, safeguarding the Companys assets, prevention and detection of frauds, accuracy and completeness of accounting records and timely preparation of reliable financial statements and compliance with applicable statutory requirements. The

Company has implemented Oracle e-Business Suite as Enterprise Resource Planning (ERP) System for recording transactions with complete audit trail, which addresses the requirements of Supply Chain Management, Finance & Accounts, Projects, Plant & Machinery and Human Resource departments in an integrated way

The internal audit of the Company is carried out by the in-house Internal Audit Team of the Company and by an external firm of Chartered Accountants using the Internal Control Framework (ICF). The primary focus of Internal Audit is to ensure that the Companys Internal Financial Control Framework is adequate and implemented effectively and policies and procedures of the company are adhered to. Internal Auditors report directly to the Audit Committee of the Board of Directors. The Internal Auditors scope is derived from the Annual Internal Audit Plan, which is approved by the Audit Committee. The plan is modified periodically to meet requirements arising from changes in law and control environment resulting from the implementation of the ICF including the Internal Controls over Financial Reporting (ICoFR)

(I) Human Resources & Industrial Relations:

The company considers Human Resources (HR) are the main asset to the company and HR is organised to act accordingly. HR function has committed and motivated employees with providing emphasis to retain the employees by providing Training, Succession Planning, cordial atmosphere, freedom to express their opinion. Besides above, the Company has successfully implemented and being implementing several plans to attract the talented manpower at all levels. Your Company also hire subcontractors that utilize temporary or casual labour, especially for construction activities

Your Company continued to maintain harmonious relations with its employees across all its Project sites and offices in India and as on March 31, 2017, the Company had 829 permanent employees

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 by lawsstreamlining or regulations.processes Actual results could differ materially from those expressed or implied. Several other factors could make significant difference to the Companys operations which includes conditions and economic conditions affecting demand and supply, Government Regulations, taxation, natural calamities and so on, over which the Company does not have any control