ITD Cementation India Ltd Management Discussions

COMPANY OVERVIEW

ITD Cementation India Limited (ITD Cem) has been one of Indias premier Engineering and Construction companies for over nine decades, recognised for its competence in executing Heavy Civil and EPC projects with commitment, reliability and quality. The Company has a well-diversified portfolio in India and overseas spanning various high-growth infrastructure sectors such as Maritime Structures, Urban Infrastructure, MRTS and Airports, Highways, Bridges and Flyovers, Industrial Structures and Buildings, Hydro, Dams, Tunnels and Irrigation, Water and Wastewater, Foundation and Specialist Engineering.

The Company along with the expertise of its parent Company Italian-Thai Development Public Company Limited (ITD, Bangkok) has garnered a reputation for its technical pro_ciency, advanced technologies and modern construction techniques in delivering iconic projects efficiently as a part of our nation-building efforts in India and also expanding internationally to support our future growth strategies. The Company is well-positioned strategically to take advantage of Indias ambitious infrastructure development drive and is dedicated to remaining agile, adaptive and innovative in response to the evolving market dynamics and regulatory changes.

GLOBAL ECONOMIC REVIEW

The global economy remains remarkably resilient, with growth holding steady as inflation started to gradually come down to pre-pandemic levels. However, during 2023-24, the world economy encountered significant obstacles starting with supply-chain disruptions in the aftermath of the pandemic, a Russian-initiated war on Ukraine that triggered a global energy and food crisis and a considerable surge in inflation followed by a globally synchronised monetary policy tightening. As per IMF, World Economic Outlook, the baseline forecast for the world economy is that it will continue to grow at 3.2 percent in 2024 and 2025. A slight acceleration for advanced economies where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. Global inflation is forecast to decline steadily from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies.

Growth Projections: Global Economy

Source: World Economic Outlook, IMF

INDIAN ECONOMY REVIEW

The Indian economy is witnessing strong momentum with real GDP expanded at 7.6 percent in 2023-24 on the back of buoyant domestic demand. The Reserve Bank in its monetary policy in April 2024 has decided to keep its GDP growth forecast unchanged at 7.2% for the fiscal year 2024-25. India continues to be one of the fastest growing economies of the world supported by an upturn in the investment cycle on the back of the governments continued thrust on capital expenditure, higher capacity utilisation, underlying resilience of the services sector, double-digit credit growth and healthier corporate and bank balance sheets. However, escalating geopolitical tensions, inflationary pressures, disruptions in supply chains, unpredictable commodity prices and volatile global financial conditions might hurt the GDP outlook.

Indias recent growth performance has surprised many international agencies triggering a _urry of upgrades. The International Monetary Fund (IMF) has revised its forecast for 2023 upwards by 80 basis points between April 2023 and January 2024. India has the potential to become the worlds third-largest economy led by factors such as domestic consumption, better trade policies, increased investments in infrastructure and the ongoing process of digitalisation.

INDIAN CONSTRUCTION INDUSTRY REVIEW

Indias construction industry drives infrastructure development and creates millions of jobs, making it a major contribution to the nations GDP. With a rise in capital expenditure to more than I 11 Lakhs crore, prospective green initiatives and workforce development programmes, the Union budget 2024 presents promising opportunities for the construction industry. These developments offer both domestic and foreign companies the chance to participate in Indias expanding construction market. This could result in increased job creation, increased foreign investment and technology transfer, improved skills and innovation within the industry and most importantly, a more competitive and efficient construction sector. Indias construction sector has grown significantly in recent years and accounts for about 9% of the countrys GDP. India is well-positioned for sustained economic progress with comprehensive strategic reforms like the National Infrastructure Pipeline, National Monetisation Pipeline, National Logistics Policy etc. Due to its numerous opportunities, diverse projects and quickly growing economy, the construction sector offers considerable potential on both national and international fronts.

PORTS AND MARINE

Indias maritime sector is a vital component of the countrys economy due to its extensive coastline, strategic location and the importance of maritime trade. The Government of India has been focusing on the blue economy which aims to sustainably utilise marine and coastal resources for development. Programmes like Sagarmala were introduced which involve upgrading existing ports, constructing new ports, improving port connectivity and supporting coastal community development. The ambitious "Maritime Amrit Kaal Vision 2047" was launched by the Government of India which involves the development of six mega ports with a capacity exceeding 300 and 500 Million tonnes per annum, promoting environmentally friendly practices and blue economy initiatives, investment in research and development for advanced maritime technologies, developing efficient port infrastructure and trade corridors to strengthen global connections and skill development programmes to cater to the evolving needs of the maritime sector. India aims to become a global leader in the blue economy and leverage its maritime assets for inclusive and sustainable development which will contribute to Indias strategic interest in the Indian Ocean region and beyond. ITD Cem has contributed significantly to the development of maritime structures in India and has successfully executed projects in India and overseas to promote global trade. Some of the major projects that the company is currently executing include the 8 km approach trestle works and island breakwater for Udangudi Super Critical Thermal Power project in Tamil Nadu, Wharf and Approach trestle works at JNPT in Maharashtra, captive oil jetty at Kamarajar port in Tamil Nadu, a marine infrastructure project in Karwar (Karnataka) and balance outer harbor works in Vizag (Andhra Pradesh). The Company has also expanded in international markets and is currently executing projects at West Container Terminal in the port of Colombo, Sri Lanka and a marine project for Power Grid Company of Bangladesh Ltd in Bangladesh.

METRO RAIL

India metro railway systems have seen significant growth and expansion in recent years, with several cities operating or developing metro networks to address urban transportation challenges. The expansion of Indias Metro Rail system has revolutionised urban commuting, with the network set to increase from 248 km in 2014 to an impressive over 900 km in March 2024 and is expected to reach approximately 1700 km of operational lines by 2025. Additionally, the introduction of Indias first state-of-the-art Namo Bharat train underscores the nations commitment to enhancing regional connectivity and modernising its transport infrastructure.

ITD Cem is amongst the few Companies to build elevated metro rail projects in the country, which have helped to reduce urban traffic congestion, improve air quality, mobility, and accessibility. The Company has completed elevated metro rail projects in Bengaluru, Kolkata, Nagpur, Delhi and Jaipur and is currently executing projects in Surat and Kolkata. In addition, the Company has ongoing underground metro projects in Chennai, Bengaluru, Mumbai and Kolkata. Source: https://indiainvestmentgrid.gov.in/sectors/urban-public-transport/metro Source: https://pib.gov.in/PressNoteDetails aspx?NoteId= 151870&ModuleId=3#_ftn11

AIRPORTS

The advent of the UDAN Scheme and the operation of greenfield airports transformed Indias aviation sector, contributing to improved connectivity and accessibility across the country. This dynamic transformation has pushed India to the forefront of the global aviation ecosystem, making it the worlds third-largest aviation market. Indias aviation sector has expanded significantly, with 545 routes running under the UDAN, which aims to improve air connectivity to underserved areas. In addition, 21 greenfield airports have been identified for development in the country, 12 of which have been operationalised, demonstrating the governments commitment to improving air travel infrastructure. Indias aviation network, which now has 158 operating airports, is quickly expanding which will further contribute to the economic growth of the country.

ITD Cem has a proven track record in contributing to the airport modernisation programme of the country and has executed integrated passenger terminal buildings at international airports in Kolkata, Trichy and Pune. The Company is currently executing the airport project in Ahmedabad.

Source: https://pib.gov.in/PressNoteDetails.aspx?NoteId= 151870&ModuleId=3#_ftn11

ROAD TRANSPORT

India is developing its road network into a strong and efficient system through strategic planning and significant investment. The road sector in India has made substantial progress, owing to considerable increases in budget allocation and construction space. The Bharatmala Pariyojana was established with the primary goal of increasing the efficiency of the movement of goods and people across the country. The Pariyojana primary components are economic corridor development, inter-corridor and feeder route development, national corridor efficiency improvement, border and international connectivity roads, coastal and port connectivity roads, and expressways. Bharatmala Pariyojana plans to develop 25 greenfield high-speed corridors.

ITD Cem has vast experience in constructing roads and bridges across the Golden Quadrilateral, National Highways, major river bridges and _yovers in densely populated cities. The Company is currently constructing the prestigious six-laning greenfield expressway project in Uttar Pradesh and it has recently completed the construction of a steel bridge over river Ganga in Uttar Pradesh.

Source: https://pib.gov.in/PressNoteDetails.aspx?NoteId= 151870&ModuleId=3#_ftn11

INDUSTRIAL STRUCTURES AND BUILDINGS

Indias industrial structures and building sector has witnessed significant growth and diversification in recent decades that is led by rapid urbanisation, infrastructure development, digitalisation, population growth and rising income levels that have fuelled demand for housing, office spaces, malls, hospitals and educational institutions. This sector is an integral part of the countrys economic development and is likely to remain dynamic and vibrant in years to come.

ITD Cem has contributed to the growth and development of the sector by constructing diverse institutional, commercial, factories and industrial buildings. The Company is currently constructing a residential colony in Delhi for Central Public Works Department, a circuit bench of Calcutta High Court, an aerospace museum in Delhi, Thal Sena Bhawan in Delhi, buildings for Sikkim University, Piling and Civil work for Coke Oven Project at Hazira in Gujarat

WATER AND WASTEWATER

The water and wastewater sector in India is of critical importance due to the countrys large population, rapid urbanisation, industrial growth, and increasing water scarcity. The Government of India has implemented several water and wastewater treatment programmes like the Jal Jeevan Mission, National Urban Sanitation Policy, Atal Mission for Rejuvenation and Urban Transformation, Clean Ganga Mission, National River Conservation Plan, Swachh Bharat Mission to improve access to clean water, enhance wastewater treatment capacity and promote sustainable water management practices.

ITD Cem has proven its expertise in this sector by laying water/sewer pipelines in urban/semi-urban areas through micro-tunneling, sewage treatment plants and drainage systems. The Company is currently executing a water infrastructure project in Karwar, Karnataka.

DAMS AND IRRIGATION

Dams are an integral part of Indias irrigation infrastructure providing water storage, _ood control and hydro power generation. Schemes like the Accelerated Irrigation Benefit

Programme have been introduced to provide central assistance to state governments for the construction of dams, canals and other irrigation infrastructure. Investment in modernising irrigation infrastructure, promoting sustainable water management practices and enhancing the resilience of irrigation systems will be essential for ensuring food security and rural development in India. ITD Cem expertise includes the construction of dams and reservoirs, tunnels, and even hydroelectric power projects, displaying its dedication to long-term and irrigation solutions. The Company is currently constructing the laying of the main trunk sewer by micro-tunneling at Churial Canal in West Bengal, a water conveyor system of line gravity in Telangana and has recently been awarded the construction of civil and hydro-mechanical works for a 500 MW pump storage project in Andhra Pradesh.

RISK MANAGEMENT AND MITIGATION

Through strategic Risk Management practices, ITD Cementation secures its operations, paving the way for sustained growth and empowerment in our future endeavors.

IDENTIFIED RISKS, IMPACTS & MITIGATION

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

ITD Cementation India Limited places a strong emphasis on the efficacy of its Internal Control Systems (ICS) to ensure operational efficiency and adherence to regulatory standards. By meticulously aligning operations with established policies and guidelines, the company safeguards its assets and mitigates risks effectively. Regular evaluations of the ICS are conducted to ensure their responsiveness to emerging challenges and changes in the business environment. This proactive approach not only enhances fraud prevention and error detection but also creates a culture of continuous improvement and adaptability within the organisation.

BUSINESS REVIEW AND OUTLOOK

ITD Cementation India Limited has made significant strides in advancing its core objectives and delivering value to stakeholders. During the year under review, the Companys financial performance reflects its continued commitment to prudent financial management and strategic decision-making. Despite the challenges posed by market volatility and economic uncertainties, the Company achieved commendable revenue growth and maintained robust profitability while maintaining its conservative balance sheet position. A crucial component of the Companys success has been its ability to complete several key projects which reflects its technical prowess, commitment to quality standards and customer satisfaction. The Companys execution track record, financial stability, technical expertise and strong balance sheet have helped it secure new orders worth over I6,900 crore during the year, resulting in a consolidated order book of I 19,918 crore as of 31 March 2024.

Indias construction sector continues to be a key driver of economic growth supported by various flagships programmes of the Government such as the National Infrastructure Pipeline (NIP), National Monetisation Pipeline (NMP), Bharatmala, Sagarmala, UDAN etc. These initiatives are being supported by an increase in budgetary allocation for the sector to over I 11 Lakh Crores for FY 2024-25. The Company as a part of its growth strategy is also exploring opportunities for international expansion, particularly in regions with robust infrastructure development plans. Overall, while the construction industry presents promising growth opportunities, the Company is well-positioned to capitalise on these prospects by leveraging its strengths, embracing innovation and maintaining a customer-centric approach for sustainable growth and value creation.

Financial Performance (K in Lakh)

HUMAN RESOURCE DEVELOPMENT & INDUSTRIAL RELATIONS

ITD Cementation India Limited places significant emphasis on its Human Resource Development and Industrial Relations functions, in driving the Companys strategic objectives. The Company has created a culture of excellence through comprehensive training and skill enhancement initiatives, enabling employees to tackle complex engineering and construction challenges effectively. ITD Cementation continually invests in the development of both new and existing employees, empowering them to innovate in the workplace and ensuring their satisfaction which are instrumental in attracting and retaining top talent while maintaining high standards of output and effectiveness.

DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements have been prepared in accordance with all applicable accounting standards.

DISCLAIMER

Certain statements in the MDA section, concerning future prospects, may be forward-looking statements, which involve a number of underlying identified/non-identified risks and uncertainties that could cause actual results to differ materially. In addition to the foregoing changes in the macro environment, global pandemics like COVID-19 may pose an unforeseen, unprecedented, unascertainable and constantly evolving risk(s), inter-alia, to the Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the Report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based, are also subject to change accordingly. These forward-looking statements represent only the Companys current intentions, beliefs or expectations, and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.