jmc projects india ltd Management discussions

Global Economy

While the last year was marred by rising infection, volatile commodity cycles, supply chain challenges, rising logistics expenses and inflation, as a consequence of fast immunisation programmes and continued fiscal and monetary relief measures adopted by economies worldover, there have been some green shoots emerging in the global economic recovery during 2021-22. While the effects of the pandemic were waning off across regions, the Russia- Ukraine war that commenced in February 2022, has again shaken up the world order, sending economies into a turmoil, with energy and supply chains being impacted in a big way. The economic implications of the war are expected to create a significant downturn all through the CY 2022. Further, it has lead to additional inflationary pressures, with the fuel and food prices, running up significantly. The general rise in prices, have disproportionately harmed the low-income countries with vulnerable populace. As a result, the International Monetary Fund in its World Economic Outlook (WEO) report, published in April 2022, project the Global growth to slow down from 6.1% estimated in CY 2021 to 3.6% in CY 2022, which is lower than its January, 2022 estimates.¹

Outlook

As the global economy is experiencing a downturn, regulators throughout the world are considering tightening monetary policies to decrease inflation expectations and remove excess liquidity from their systems. In CY 2022 and CY 2023, advanced nations are anticipated to grow by 3.3% and 2.4%, respectively. The emerging nations are expected to grow by 3.8% and 4.4%, respectively in CY 2022 and CY 2023. Overall, the global GDP growth is expected to be at 3.6%, in both CY 2022 and CY 2023.

Collaborative efforts by nations is the need of the hour, which will enable a response to the humanitarian crisis caused as a result of the Russia-Ukraine conflict. Also the need to ensure no further economic fragmentation, cant be downplayed anymore. Alongside, the need to tackle climate change, manage global liquidity and the end of the nCov pandemic are required.

Indian Economy

Indias economic growth, which is estimated to touch 8.9% in CY 2022 has been aided by a favourable business climate, strong industrial production, and extensive vaccination coverage. A conflict in Russia and Ukraine i.e. one area of the world has had an influence on the entire world economic order. Supply chain disruptions, increase in energy prices, and the inflationary pressures have all impacted India as well. Despite these, Indias goods exports reached a record high of USD418 Billion in 2021-22. Due to its rapidly growing domestic consumer market and enormous industrial activites, India has become a very popular investment destination for across manufacturing, infrastructure, and services segments.³

Outlook

Owing to the extensive vaccine coverage, gains from supply- side reforms, regulatory easing, export growth, and the availability of fiscal leeway to enhance capital investment, Indias GDP is expected to grow by 8.2% in 2022-23. The year ahead looks bright for Private sector investment, with the economy in good health and a stable financial position. The growth prediction for 2022-23 is based on the assumption that there would be no more interruptions or economic hardship. Besides, in line with the expectations, India is expected to continue to grow as one of the worlds fastest-growing economies during the next decade.⁴

Construction and Infrastructure Industry

The Indian economy relies heavily on the infrastructure industry. The sector is critical to Indias overall growth and consequently the government has placed it on a high priority for enacting regulations that would assure the development of world-class infrastructure on time. Power, bridges, dams, highways, and urban infrastructure development are all part of the infrastructure industry. The construction industry market in India works across 250-sub-sector with linkages across sector.

The infrastructure and construction sectors in India have progressed well in the aftermath of slowdown and lockdowns, after the economy has started opening up. The global construction survey states that the construction industry in India is expected to grow by 16.5% over CY 2021 to reach USD42,127 Billion in CY 2022. The countrys focus on developing infrastructure is expected to lead to the growth of the construction sector as well.

In the latest Union Budget, the Government of India (GoI) has announced significant allocations towards infrastructure development. A budget of Rs 1.9 Trillion has been allocated towards the Roads sector, which is ~52% higher than the revised estimates for 2021-22. Rs 2.5 Trillion, ~14% higher than the revised estimates for 2021-22, has been allocated to Railway infrastructure development focussing on new lines, guage conversion, electrification and other performance and efficiency enhancement initiatives. Affordable housing, smart cities, data centres etc. also witnessed heightened focus and budget allocations.

Focus and rigour displayed by GoI is expected to auger well for the infrastructure sector and create multiple opportunities for companies.⁵

SECTORIAL OPPORTUNITY

Buildings (Residential & Commercial) and Factories

Overcoming the pandemic-related challenges, the real estate industry remained resilient and grew steadily in 2021. For a time, Indias first wave of Covid-19 brought the industry to a halt. However, by the fourth quarter of 2020, the market had began to pick up speed, owing in part to increased development of residential space. Just as the economy had started to bounce back, the second wave of Covid-19 disrupted the growth progress. However, unlike the first wave, the second wave had less lasting and conspicuous consequences. Vaccination campaigns and decreased infection rates boosted market confidence. Furthermore, the holiday season aided the sectors expansion. The Indian real estate sector is predicted to reach a market size of USD1 Trillion by 2030, up from USD200 Billion in 2021, and to contribute 13% of the countrys GDP by 2025.

Residential

In the residential category, Indias real estate market is expected to rise by roughly 5% in capital value by 2022. According to some estimates, sales momentum will go up in 2022 as potential home buyers favour larger houses with more facilities. Furthermore, in the following year as employees and employers favour the work-from-home or hybrid working model, the luxury home market in suburban locations is expected to reach greater levels.

The Central Government, in collaboration with the State governments, has launched several initiatives to promote growth in the industry. The Smart City Project, which aims to develop 100 smart cities, represents excellent potential for real estate corporations. The proposals made in the Union Budget 2022-2023 are expected to aid in the development of a robust real estate market.

0 High priority on affordable housing while also searching for methods to improve the current finance processes in order to offer liquidity to stalled real estate projects.

0 Grant Rs 2.17 Lakhs Crores in additional Central and State financing to the main rural plan, Pradhan Mantri Awas Yojana-Gramin, in order to meet its aim of constructing 2.95 Crores dwellings

0 Under the Pradhan Mantri Awas Yojana (PMAY), 80 Lakhs houses have been completed, with Rs 48,000 Crores allotted for urban and rural PMAY in 2023-24⁶

Healthcare

The COVID-19 has offered India with both obstacles and chances for growth in healthcare sector. Hospitals in India are in high demand from both international and indigenous investors. Healthcare demand is increasing in Tier 2 and Tier 3 cities across the country, in addition to urban areas. These cities have cheaper costs for resources like land and labour. In the hospital/medical infrastructure sub-sector, there are roughly 600 investment possibilities totaling USD32 Billion (Rs 2.3 Lakhs Crores).⁷

Airports

India is the third-largest civil aviation market, with a market size of USD16 Billion in July 2021. According to the International Air Transport Association (IATA), India is predicted to surpass China and the United States as the worlds largest air passenger market by 2030. The aviation industry is on track for substantial expansions and enhancements. The Ministry of Civil Aviation plans to build 21 additional airports across India in the next four to five years. Further, over the same time period the Airports Authority of India (AAI) plans to expand and upgrade many current airports at an investment of Rs 25,000 Crores. This includes the widening and modification of existing terminals, the construction of new terminals, the expansion or strengthening of existing runways, technical blocks, and the control towers of the Airport Navigation Services.⁸

Urban infrastructure

The transport sector in India is enormous and diversified, serving the demands of 1.1 Billion people. The industry generated around 5.5% of the nations GDP with road transportation accounting for the lions share. According to the ICRA, the transportation industry is likely to grow by 6-9% in the current financial year while domestic road transportation sector is likely to grow by up to 12% till 2023.

National Transport Master Plan (NTMP)

With an estimated investment of Rs 10 Lakhs Crores, various transport ministeries (road & highways, shipping, aviation and railways) of India are jointly working on the National Transport Master Plan (NTMP) aimed at providing seamless movement of freight and passengers across multiple modes of transport. NTMP is a strategic framework and investment plan for sustainable development of the transport infrastructure envisaged to include construction of multi-modal transport hubs that will have railway stations, light railway stations (metro) and bus terminals under one roof.

The roads ministry plans to develop 10 such hubs across the country in partnership with railways and shipping ministries.

Road Networks and National Highways

Physical connections in urban and rural areas are critical to economic progress. Roads being the most common means of transportation in India, transport about 85% of the countrys passenger traffic and more than 60% of its freight. With a total length of 5.23 Million kilometres, India boasts of having the worlds second-largest road network (in kms).

While the quality of road transportation and overall infrastructure in the country has progressively risen over time, however, further infrastructure development continues to be of high priority for the government with significant budget allocations every year. Between 2016-17 and 2021 - 22, the highway development in India grew at 17% CAGR. Amidst the pandemic and lockdowns, India built 13,298 kilometres of roadways in 2021-22. The Ministry of Road Transport and Highways has been given ?199,107.71 Crores (USD26.04 Billion) in the Union Budget 2022-23. Over next five years, the road sector is expected to contribute for 18% of capital spending.

Railways

India houses the fourth largest railway network globally and aims to contribute about 1.5% to the countrys GDP by building infrastructure to support 45% of the modal freight share of the economy.

The rail sector was not immune to the impacts of the coronavirus pandemic, although travel and transportation have gradually resumed. With nations opening up and demand for both passenger services and freight transportation of products beginning to revive, the Indian Railways clocked an 18% increase in the freight loading during 2021-22 upto 31.12.2021.¹⁰

Metro Rail

Metro transportation is a rapidly expanding sector all over the world. The metro is the ideal transit option due to its versatility, accessibility, comfort, and safety. With a Budget allocation of Rs 19,130 Crores in 2022-23, multiple Metro projects are being planned and built in India as well. Currently, ~700 kms of conventional metro is operating in the country across 18 cities, while another ~1,000 km of metro and RRTS are under development across 27 cities (18 existing + 9 new). The government plans to implement two new technologies, MetroLite and MetroNeo, to deliver metro rail systems at a lower cost while providing the same experience, convenience, and safety in Tier-2 cities and Tier-1 city outskirts.

Regional Rapid Transport System (RRTS)

RRTS is a new, dedicated, high speed, high capacity, comfortable commuter service connecting regional nodes in National Capital Region (NCR). This region, which covers around 35,000 km, includes complete NCE as well as portions of the bordering states of Haryana, Uttar Pradesh, and Rajasthan. RRTS is different from conventional Railway as it aims to provide reliable, high frequency, point to point regional travel at high speed along dedicated path way.

High-Speed and Semi High-Speed Rail

India, like Japan and China, sees high-speed rail as a way to cut travel times, expand capacity, and boost economic activity. All big cities in north, west, and south India shall be connected by high-speed rail, according to an ambitious National Rail Plan released in 2021. Towns with populations of at least one Million people between 300 and 700 kilometres apart are being selected by the government for the development of high-speed rail. India has hired Japanese technology, engineers, and financing to help build its first railway line, a 508-kilometer link between Mumbai and Ahmedabad in western India.¹¹

Water

Water is one of the key necessities of life and currently across a world, a significant portion of the population lives without access to potable water. It is also an essential element for agricultural production and plays a key role in food security. Given its vitality, governments across the world, including India, have focussed their investments towards programs to ensure water availability for masses.

Jal Shakti Ministry, created in 2019 by integrating the Ministries of: (i) Water Resources, River Development, and Ganga Rejuvenation, and (ii) Drinking Water and Sanitation, received an allocation of Rs 86,189 Crores in the 2022-23 budget - a 24.8% increase over the revised estimates of 2021-22.

Drinking Water and Sanitisation

The Department of Drinking Water and Sanitation administers programs for safe drinking water and sanitation in rural areas. In 2022-23, 78% of the total budget allocation to Jal Shakti was towards these programs.

Jal Jeevan Mission (JJM) - envisioned to provide safe and adequate drinking water through individual household tap connections by 2024 to all households in rural India, also focusses on implementing source sustainability measures such as recharge and reuse through grey water management, water conservation, rain water harvesting etc. In the financial year 2021-22, more than Rs 40,000 Crores grant was released to States/ UTs based on the output in terms of providing household tap water connections and utilisation of available Central grant with matching State share. The JJM budget for 2022-23 has been enhanced to Rs 67,000 Crores, thereby making it evident, the importance of Har Ghar, Nal Se Jal programme.¹³

Water Resources and River Development

With a budget allocation of ~Rs 19,000 Crores - a 5% increase over the revised estimate of 2021-22 - 58% of this expenditure is estimated to be on the Pradhan Mantri Krishi Sinchai Yojna (PMKSY).

With 52% of the total net sown area in India still unirrigated (The Economic Survey: 2016-17) and with the changing weather patterns, it is more needed that ever to increase the irrigation coverage of the country and support consistent productivity of farming.

Under the mission name Har Khet ko Pani, the program focusses on (i) creation of new water sources, (ii) restoration and repair of traditional water bodies, (iii) command area development, and (iv) strengthening of distribution network from irrigation sources to the farm etc. Thus creating opportunities for companies to participate in construction of such government driven initiatives.

Outlook, Opportunities and Challenges

The Indian economy following the pandemics recovery has bounced back. As a result of the vaccination programmes and preventive measures, economic activity has revived. Despite the challenges, the sectors ever-growing potential suggests a speedy recovery. Many variables will influence infrastructure requirements, including:

Outlook

Demograhic development

Aging population, population increase, urbanisation tendency, and migration from rural and coastal areas to urban areas are all factors to consider.

Environmental Factor

Growth is also fueled by environmental issues such as climate change and increased resource requirements.

Infrastructural Spending

Any economy relies heavily on the infrastructure sector. Governments across the world are focused on enacting regulations that will assure building of world-class infrastructure in a timely manner. Consequently, with the easing of economic environment, the infrastructure spending is expected to rise globally; albiet with high degree of sensitivity towards economic sentiments.

Technological Advancements

The pandemic has further emphasised the importance and need of technology for businesses. While technology led investments have become common globally, India is the worlds third most appealing investment location for technology deals. Modern India has placed a high emphasis on science and technology, realising that it is a critical component of economic development.

Opportunities

Real Estate

Many elements are likely to lead to Real Estates strong expansion. Both luxury as well as affordable housing are seeing increased demand. Demand is further fueled by the availability of low-interest loans, tax breaks, and a burgeoning middle class with more money to save.

Healthcare

The pandemic has glaringly highlighted the need for wider and more advanced healthcare system in the country. Government as well as private players are consciously directing investments towards strengthening the nations healthcare infrastructure to increase its reach and ability to tackle larger and more complicated scenarios. This has created widespread opportunity in the sector for construction companies.

Airports

Internal passenger traffic and international outbound traffic are expected to continue to expand due to the favorable demography and strong economic expansion. With increased investment and commerce activity, as well as marketing Indias rich legacy and natural beauty to foreign leisure travellers, international inbound tourism will develop fast. Modernisation and upgradation of exisiting infrastructure along with development of new airports are expected to auger well for the industry.

Transport infrastructure

Comprehensive and reliable transport infrastructure is seen as vital to Indias economic progress. With financing currently in place, the government intends to significantly expand spending on bulding roads, highways, railways, water ports, airports etc. a major portion of this will be built through public-private partnerships.¹⁵

Water

Availability of water is the basic requirement for any social and economic activity. The government has earmarked significant investments towards ensuring water availability across rural parts of the country while also working towards improving water resource quality.

Challenges

Geopolitical Risks

Given the interconnected nature of world today, economic and/or political uncertainty across any part of the globe has the potential of impacting the geopolitical landscape across other countries. Any such event may further lead to postponement of large development plans which pose a risk for companies focussed on infrastructure development.

Environmental Risks

With rising economic activity across countries, the world is facing the threat of widespread climate change. Based on the latest Intergovernmental Panel on Climate Change (IPCC) findings, unless governments everywhere reassess their energy policies, the world will be uninhabitable. Despite the 2015 Paris Agreement, the world is on a pathway to global warming of more than double the 1.5-degree (Celsius, or 2.7-degrees Fahreinheit) limit.

It has become essential for countries and in-turn corporates to actively work towards studying their environmental footprint and implement plans to reduce their emmissions and contribute positively towards the environment.¹⁸

COMMODITY RISK

Infrastructure industry relies heavily on commodities like Steel, Aluminium and Zinc etc. Any volatility in the commodity cycle can impact the industry significantly.

As a consequence of fluctuations in commodity prices, development projects can get delayed while construction Company margins are severely impacted.

Competitive intensity

As governments across the globe chart ambitious growth plans for nations, the infrastructure development opportunities are expected to rise going forward. As a result, many new companies have ventured into the industry increasing the competitive intensity. Amidst the competition between companies to win contracts to gain technical experience, the overall industry profitability is adversely impacted.

Talent Availability

As the world reels out of the impact of the pandemic, employee preferences have evolved with respect to the industry and nature of work. Further with increased competitive intensity, the demand and supply equation has become imbalanced while the pool of talent has various options available for them. This is led to a talent crunch across the industry with attrition also becoming a key issue attraction management attention.

Company Overview

With an industry presence of over three decades, JMC Projects (India) Limited (JMC) has emerged among the leading Indian Civil Construction EPC companies. The Company is renowned for possessing excellent execution skills, adherence to safety & quality standards and efficiency in using advanced technology. Our presence is spread across Buildings & Factories (residential complexes and townships, hospitals, hotels, commercial complexes, institutions, power plants etc.), water supply and irrigation projects, roads and highways, airports, flyovers and elevated corridors, metro rail and other urban infrastructure projects.

The Company aims at contributing towards sustainable nation-building efforts and improving its reach in international markets. Presently, JMC carries out operations in South Asia, East Asia, East Africa and West Africa. The organisation has made investments over the last few years to gain a foothold in the international market as well. We have setup strong teams led by industry leaders with international market know-how, to drive the Companys international growth. We expect to receive more orders from international market, eventually contributing towards our overall growth. Furthermore, with the overall development in Indias infrastructure, JMC is well positioned to ride the growth wave while strengthening its roots both within the country and internationally.

Business Strengths and Strategies

Over the years, JMC has undertaken conscious efforts to ensure that it adheres to its core values of Business Ethics, Quality and Prudence while catering to our customers both stated and latent needs. We have set-up a holistic ecosystem to deliver best-in-class services:

Human Capital

0 Accumulated human capital to establish a committed and competent team

0 Always foster an efficient and extremely valuable workforce through focus and relentless efforts towards building professional and skilled employees

0 Committed towards the welfare of workmen providing upskilling, multi-skilling and other trainings while also enhancing their living conditions at the project sites

0 Always maintain high levels of subcontractor satisfaction while continuously identifying further ways to of enhancement

Developing Assets

0 Acquired best-in-class fixed assets and equipments required for business delivery and growth across all areas of operations

0 Cash flow driven growth strategy for business sustainability amid uncertainties

Process Excellence

0 Focused on continuous improvement, productivity and utilisation enhancement, reducing wastage and minimising cycle times/turn-around times

0 Driving innovation, sustainability and engineering excellence through a collaborative approach with the client to provide the best and environment friendly solution

0 Practice the Right First-Time approach in Quality management, through process assurance framework, mockup/trials, skill development and behavior-based quality

0 Practice Zero Fatality approach in Safety management through near-miss incident reporting, transparency and behavior-based safety

0 Committed to a robust vendor relationship management to maximise the value proposition and driving Procurement Excellence

By delivering services with Pride, Respect and Humility with Customer Centricity as key focus, JMC has ensured that it has:

0 Strong credentials for undertaking projects of various sizes in all areas of its business operations

0 Capability to compete in challenging and complex projects backed by deep expertise and rich industry experience

0 Expertise to undertake and complete projects within time, backed by best-in-class technology, using digitisation and mechanisation

0 Strong Brand Equity in building, industrial, infrastructure and water sector

0 Strong clientele ranging from Governments to private entities

Operational Highlights and Achievements

During the year under review, the Company has received new contracts of more than Rs 10,000 Crores including projects in Maldives, Ethiopia and Ghana. As of 31 March, 2022, the aggregate value of orders in hand stands at approx. Rs 17,139/- Crores. Details of some of the major / prestigious projects won during the year are as follows:

Buildings & Factories

0 Construction of one residential and one commercial project for Brigade Group at Bengaluru

0 Construction of a commercial project for Verde Commercial Real Estate at Bengaluru

0 Construction of a residential project for Puravankara Limited at Bengaluru

0 Construction of a residential project for Bagmane Developers at Bengaluru

0 Design and Construction work for a residential tower for Indis Appa Two Projects Private Limited at Telangana

0 Construction of a commercial project for Kukatpally Developers Private Limited of Lakeshore Group at Hyderabad

0 Construction of a residential project for Garden City Realty Private Limited and Cybercity Developers at Vizag, Andhra Pradesh

0 Construction of 3 downtown & service block at DLF Downtown, Taramani, Chennai

0 Construction of 2 residential project for Prestige Group at Ranga Reddy, Telangana and Noida, Uttar Pradesh

0 Construction of Vellor Institute of Technology Campus at Chennai

Urban infrastructure

0 Design & Construction of 60 KM Expressway in Ethiopia 0 Design & Construction of 83 Km Highway in Ghana

Water

0 Construction of Water and Sewerage Network at Maldives

0 Construction of water supply infrastructure for Gorakhpur, Meerut & Prayagraj districts of Uttar Pradesh.

0 Construction of Rural Water Supply project in Cuttack and Sundergarh districts of Odisha

0 Construction of Piped Water Supply Projects at Gajapati & Kandhamal District and Koraput District of Odisha

Financial Highlights

On a standalone basis, the Company achieved revenue from operations of Rs 5,352.93 Crores in 2021-22 as against Rs 3,688.78 Crores in 2020-21, an Increase of 45%. The Company ended the year with an order book of Rs 17,139 Crores versus Rs 14,009 Crores as on end of 2020-21.

Core EBIDTA [excluding other income and expected credit loss (ECL) provision for loans and advances given to JV] for 2021-22 was Rs 420.72 Crores as compared to Rs 331.55 Crores for 2020-21. Core EBIDTA margin has decreased to 7.9% in 2021-22 from 9.0% in 2020-21. The operating margins decreased due to increase in prices of major raw materials and rise of labour costs.

Net property, plant and equipment (including capital work in progress and Intangible assets), at the end of 2021-22 stood at Rs 690.50 Crores as against Rs 620.1 1 Crores in the previous year. During the year under review, depreciation was at Rs 167.20 Crores and addition in the property, plant and equipment (including capital work in progress) is Rs 208.56 Crores. Net current assets decreased to Rs 658.81 Crores as against Rs 834.67 in the previous year due to the increase in short term borrowings. Borrowing levels of the Company are Rs 987.78 Crores in 2021-22 as against Rs 795.39 Crores in 2020-21. The finance cost was around 2.25% of the revenue during 2021-22 as against around 3.09% of the revenue during 2020-21.

During the year under review, CARE Ratings has upgraded the rating/outlook as CARE AA-/Stable (Double A minus/ Outlook: Stable) to Long Term Bank Facilities & NonConvertible Debentures of the Company. Further, it has also upgraded the rating as CARE A1+ (A One Plus) to Short Term Bank Facilities of the Company. India Ratings & Research has affirmed the rating as IND AA- (Double A Minus)/Outlook: Stable to Long Term Bank Facilities & NonConvertible Debentures and IND A1+ (A One Plus) to Short Term Bank Facilities of the Company. In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to provide details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor.

Ratios

Particulars		2021-22	2020-21	% change	Reason for variance
Current Ratio (Current Assets / Current Liabilities)	Times	1.21	1.33	9%	-
Debt-Equity Ratio Debt (Long term borrowings + Short term borrowings Including current maturities ) / (Equity share capital + Other equity)	Times	1.11	0.77	(44%)	Due to increase in long term and short term borrowings
Debt Service Coverage Ratio (PAT+Interest+Depreciation+Loss/gain on sale of FA+Expected credit loss provision for loans and advances given to joint venture / others+ Exceptional items)/(Gross interest+Lease payment+Repayment of long term debt excluding prepayments)	Times	1.52	1.32	(15%)
Return on Equity Ratio (Annualised) (Net Profits after taxes / Average Shareholders Equity)	%	(16.54%)	7.15%	331%	Due to expected credit loss on loans and advances given to joint venture/others and exceptional items
inventory turnover ratio (annualised) (365 days / (Cost of materials consumed / Average Inventory))	Days	36	53	32%	Due to increase in sales
Trade Receivables turnover ratio (annualised) (365 / (Net Sales / Average Trade Receivable))	Days	72	99	27%	Due to improvement in realisation
Trade payables turnover ratio (annualised) (365 / (Net Purchase / Average Trade Payable)	Days	209	308	32%	Due to vendor payments
Net capital turnover ratio (annualised) (Net Sales / Average Working Capital )	Times	7.17	4.57	(57%)	Due to increase in sales
Net profit ratio (Net profit after tax (Before OCI) / Sales)	%	(2.93%)	1.93%	252%	Due to expected credit loss on loans and advances given to joint venture/others and exceptional items
Return on capital employed (annualised) (PBT+Interest+Expected credit loss provision for loans and advances given to joint venture / others+ Exceptional items / Average capital employed)	%	13.94%	10.72%	(30%)	Due to increase in sales
Return on investment (Annualised) (Net Profits after taxes / Average Equity)	%	(40.59%)	18.38%	321%	Due to expected credit loss on loans and advances given to joint venture/others and exceptional items
Interest service coverage ratio (iscR) (times) ((PAT + Interest + Depreciation + Loss/gain on sale of FA + Expected credit loss provision for loans and advances given to joint venture / others + Exceptional items ) / Gross interest)	Times	4.26	2.88	-48%	-Due to increase in profit after tax (excluding Expected credit loss provision for loans and advances given to joint venture/ others and Exceptional items)
Operating margin Operating profit / Sales (Operating profit is profit before exceptional items and tax, Expected credit loss provision for loans and advances given to joint venture / others, depreciation, finance costs and other income)	%	(40.59%)	18.38%	321%	Due to expected credit loss on loans and advances given to joint venture/others and exceptional items

Further, the Return on Net worth ratio (Standalone) during 2021-22 was 17.5% as compared to 10.3% during 2020-21 which improved by 720 bps majorly on account of revenue growth due to healthy execution in B&F and Water business in 2021-22

Risk Management

1 Performance of construction industry and real estate market

Risk

Risk Remediation

A slowing economy and changes in the regulatory environment might harm the construction sector and real estate market, affecting the Companys operations.

The Company is in a good position to take advantage of expanding market prospects. Every quarter, the Company examines its policy with a focus on accomplishing its major business objectives within the policy framework, which includes growth, profitability, and risk mitigation measures. The Company has expanded into numerous categories and geographies as part of its effort to ensure long-term growth.

2 Availability and Price of Raw Materials:

Risk

Risk Remediation

The enforcement Steel, ready-mix concrete, steel, pipe and pipe fittings, and cement are only a few of the basic resources that the Company needs. Due to a supply and demand mismatch, severe competition, and fluctuations in production levels, its price and availability may be affected. Price changes and failure to purchase items on schedule may influence the Companys brand value and profitability

The Company has maintained positive, mutually beneficial relationships with its suppliers, ensuring a steady supply of high-quality raw materials. It also gets into contracts with clients to establish the base price of raw materials in many cases. It also engages in contracts where the conditions include a general escalation clause based on the wholesale price index of materials, which transfers the risk of fluctuating input prices to the client. Seasonal changes in raw material costs, however, are unavoidable and are accounted for in the cost calculations.

3 Changes in the Competitive Landscape:

Risk

Risk Remediation

The construction business is vulnerable to both new and established competitors. The intense rivalry may result in pricing pressure, affecting the Companys profitability and growth.

In In small tasks, the Company is aware of new rivals, as well as preapproval limits in bigger projects. Internally, the Company is devoted to boosting efficiency, decreasing wastage, and cost optimisation, among other things, to remain competitive and secure projects without sacrificing profitability. Furthermore, the Company is dedicated to a strong customer relationship management strategy, with an emphasis on repeat purchases from the private sector and expansion into new public-sector business fields.

4 INFORMATION TECHNOLOGY AND CYBER THREAT

Risk

Risk Remediation

Due to insufficient IT infrastructure, there is an increased risk of cyber-attack and data loss as a result of digitalisation. This might lead to data loss, which could lead to financial losses, Company and customer service disruptions, and the loss or leaking of personal information.

The Company is always working to strengthen the security of its digital assets by implementing steps to effectively combat and manage cyberattacks. The Company has implemented cutting-edge technologies to boost operational efficiency and cross-departmental communication. To avoid cyber-attacks, a variety of cybersecurity measures, such as firewalls, suspicious mail quarantines, and port restrictions, have already been implemented.

5 Retention and Acquisition of Skilled Employees:

Risk	Risk Remediation
The key to an organisations success is having skilled and competent personnel. The Companys capacity to effectively pursue its growth goals may be hampered if it is unable to retain or hire qualified and experienced staff.	A robust engagement and development policy are in place at the Company. It routinely conducts training and development programs, involves staff in a variety of activities, and fosters talent through mentorship programs. HR policies, procedures, and processes have been built at the Company which makes it highly appealing to qualified and talented people to join.

6 Management of currency Risk:

Risk	Risk Remediation
Because of its foreign operations, the Company is subject to currency risk. Currency rate fluctuations may have a negative influence on the Companys profitability due to the fluctuating market conditions.	Hedging interest rate swaps, and currency contracts are some of the tools the Company uses to manage the risks of currency fluctuations.

7 Business Disruption and uncertainty:

Risk	Risk Remediation
The operations were hit by a second wave as a result of the current Coronavirus epidemic, which caused substantial supply chain risk and poor client demand. It might result in a drop in growth and profitability.	For such an unusual event, contingency plans were devised and reassessed as circumstances changed. Senior management and operational teams continued to keep an eye on the situation in order to provide timely education and assistance.

Environment, Health and Safety Management System (EHS)

JMC strives to promote & foster a safe working environment by proactively incorporating EHS into daily operations. Thereby, the Company ensures implementation of the following five pillars for achieving EHS excellence and sustenance.

JMC has inculcated Environment, Health and Safety Management System (EHS) as a core value proposition and is committed to continuous improvement of business processes by implementing globally recognised standards such as ISO 45001:2018 (OHSMS) and ISO 14001:2015 (EMS).

The Company encourages teams across sites and levels to translate the EHS policy into practice and motivate employees to incorporate safety procedures in all our operations and functions. To achieve the goal of ZERO harm across all organisational levels, we integrate safety in all our construction activities. Moreover, we adopt safe working practices in the daily business operations, to ensure prevention of injury and illness among employees, contractors & visitors, within the corporate, state and local statutory obligations governing the business.

In 2021-22, JMC worked towards aligning the Management, employees, contractors, interested parties and stakeholders with the organisations goal of preventing and mitigating incidents/accidents. This is achieved through a focused approach and enhanced awareness among the organisations workforce by involving them in various campaigns and workplace monitoring programmes through regular audits and checks. At JMC, the team implemented the following areas effectively:

Process Driven Structure

Reporting and Monitoring

0 Weekly inspection by project leader, team leaders and EHS personnel.

0 Regular follow-ups for monitoring the efficacy of Covid-19 preventive measures.

0 Mitigation of risks through safety reporting and joint inspection of P&M and work equipment safety compliance.

0 Encouraging and ensuring reporting of Near-Miss Incidents (NMC) to deploy organisation-wide preventive measure.

Technology initiatives

0 Development and adoption of EHS Digital Reporting Tool for monitoring and evaluating the Companys EHS performance.

0 Ensuring employees safety backed by relevant, real-time updates shared simultaneously with the Management, workplace custodians and process owners.

0 Installation of GPS tracking systems on vehicles for monitoring vehicle speed to prevent risks while travelling.

Adopting Best Practices

0 Integration of EHS in planning and designing stage through IFC audits/checks - conducting audits at regular intervals, to ensure safety practices are in place and being followed effectively.

0 Procurement of uniform and standard safety gears/ appliances from centralised vendors, with the help of an Annual Rate Contract (ARC).

0 Supervision and monitoring of safety at work during extended work hours, through work permit systems.

0 Implementation of period health check-ups for food processers & handlers and half-yearly eye test for equipment operators and drivers.

0 Allocation of electricians and drivers/operators through internal licensing process in addition to statutory requirements.

0 Strict adherence to the Companys ten core life-saving rules.

0 Empowerment of the EHS personnel for restricting unsafe working conditions.

New initiatives

0 Conceptualised and designed safety parks at JMC project sites

0 Installation of anti-smog guns to reduce environmental pollution across Delhi-NCR projects

More Focus on Training

During 2021-22, the Company

0 Conducted 19,529 internal trainings for staff and workers, clocking over 4,85,685 training man-hours

0 Accomplished training & certification for Scaffolding Inspector

0 Identified various trainings as per skill matrix and conducted it on a monthly basis (4 trainings every month for workers and 2 trainings for staff)

Safety Walkthrough/Audit Mechanism

0 Carried out 4,337 weekly walk-through inspections/ audits by PM/PIC/ PC

0 Involved seamless management in audit process through 3-layer EHS audit mechanism

0 Held joint inspections of plant & machinery equipment on a weekly basis, by P&M and EHS function

0 Carried out jointed inspections of EHS function/ mechanism and workmen camp by admin & for ensuring welfare facilities to workers, on a fortnightly basis

World Environment day (WED)

Organised theme-based World Environment Day celebration on a week-long basis, planted 7,839 saplings, 519 seeds distributed, installed 108 solar lights and saw a participation of 2,629 for green run.

National Safety Week/Day (NSD)

Organised theme-based National Safety Day celebration on a week-long basis, and conducted 548 trainings with 23,289 participants, alongside slogan/drawing/guiz competitions that saw participation from 1,150 employees . These events were organised with an aim of spreading awareness and motivating employees through recognition of their efforts and rewards.

INTERNAL CONTROLS AND ITS ADEQUACY

The Company has put in place an internal control system to guarantee that all assets are secured and protected from unlawful use or disposal and that all transactions are properly approved, recorded, and reported. Internal controls over financial reporting is included in the framework, which maintains the integrity of the Companys financial statements and decreases the risk of deception. Internal Audit and corporate risk assessment and mitigation procedures are well-developed within the Company.

The department of Corporate Audit & Assurance offers well-documented operational procedures and authority with suitable built-in controls. These are done at the start of any activity and during the process to keep note of any significant changes.

They also examine the design of important processes from the standpoint of control adequacy as part of the audits. The Corporate Audit team tests the efficacy of internal controls across all of the Companys project sites and departments, and the results are evaluated by management for corrective actions regularly.

According to the yearly plan agreed upon with the Audit Committee, the Internal Audit covers all business sites and activities of the Company. The Audit Committee approves the audit coverage plan at the start of each year. Every quarter, the Boards Audit Committee receives a summary of important control concerns and measures done in response to issues raised in the preceding report.

For self-assessment of business risks, operating controls, and compliance with Corporate Policies, Business Risk Assessment processes have been established. Tracking the evolution of risks and delivering mitigating action plans is a continuous activity.

The Companys internal financial control architecture is appropriate for the Companys size and operations, and it complies with the provisions of the Companies Act of 2013. The three lines of defense approach underpin the Companys internal financial controls. To manage the businesss operations, the Company has established Standard Operating Procedures and rules. Unit heads are accountable for ensuring that the managements policies and procedures are followed.

The Companys internal monitoring procedures that are robust and ongoing guarantee that risks and concerns are identified quickly. The Companys control environment is rigorously tested by management, statutory auditors, and internal auditors.

They also examine the design of important processes from the standpoint of control adequacy as part of the audits. Periodic reports are prepared as part of continuous monitoring to discover exceptions using data analysis. The Corporate Audit team tests internal controls for design and operational effectiveness across all of their locations and operations, and control failures are assessed by management regularly for corrective measures.

Policies in underlying IT systems for authorisation are also checked regularly to ensure that users have access to just the transactions that their responsibilities need. An Information Security Management System is used by JMCs main office in Mumbai, in their offices across India, and in all of their key factories.

The whistle-blower mechanism is a crucial part of the internal control system because it encourages Directors and employees to disclose legitimate concerns, wrongdoing, or fraud without fear of being punished or treated unfairly. The Audit Committee oversees the operation of the whistleblower process in the Company.

Human Resource Management

At JMC, we consider human capital as our most valuable resource, and believe in facilitating their development through holistic engagement. Our workforce is motivated and resilient, coupled with a can-do attitude. We have put in place robust and structured HR processes and policies to focus on talent acquisition, talent management and talent development. As of 31 March, 2022, we have 4223, employees on our rolls - 457 added during the year, net of attrition.

We hired employees by recruiting laterally from the industry, and acquired new and fresh talent from various technical institutes. The aim of our recruitment process is to carry out need-based hiring for projects while maintaining employee costs.

During the year, we focused on designing and delivering comprehensive training programmes for enhancing the technical and managerial skills of our employees across all levels. We continued with our online training delivery methodology, and also re-started our classroom trainings to build capabilities for our people, overall, enhancing their performance. While delivering programmes through our internal SMEs and external faculty, we also tied up with IIM-Ahmedabad to develop our identified senior leaders in strategic areas.

We did not let our guards down in this fiscal, and took all measures to ensure the mental and physical well-being of our employees, providing safety during the challenging period of the Covid-19 pandemic. Numerous health checkups and vaccination camps were conducted throughout the year for all our employees. Thereon, continued good health of our employees resulted in higher levels of productivity and efficiency in organisational performance throughout the year.

Information Technology

The Company strives to digitise its operations to increase integration, transparency, ease of monitoring, efficiency and hence reduce errors and defects. The implementation of SAP HANA with Commercial Project Management (for project budgeting and controls) allowed us to improve collaboration among various departments. The Company has implemented SAP Dashboards for data visualisation as a single point of truth for senior management and leadership meetings. Our auditors successfully completed IT General Controls (ITGC) audit and have found the controls at various levels to be satisfactory.

The Company implemented SAP Success Factors (Human Capital Management System) to transform HR practices and deploy the best practices for effectively managing our human capital. The modules that have gone live are: Employee Connect JAM, Employee Central, Performance Management System, Learning and development & Recruitment and are part of HR process.

The Companys data security efforts are regularly reviewed and appropriate actions are initiated pro-actively to further improve and adopt new technologies with a dedicated CISO (Chief Information Security Officer) at Kalpataru group level. JMC also has a dedicated resource focusing on the IT Security needs of the Company to strengthen monitoring and protection of our digital assets from any internal/ external threats.

As the industry is heading towards Industry 4.0, we have deployed multiple tools and enhancements using technologies like Robotic Process Automation (RPA), Chatbot and IoT (to connect various equipment and gather data for ensuring optimum utilisation of P&M equipment and fuel management systems) and many other digital initiatives as a part of our Vision 2025. Drones are being used for aerial surveys to improve the land survey and monitoring of various projects.

The Company has implemented Project Life Cycle Monitoring (PLCM) system to improve execution and collaboration between various stakeholders at project sites, regional offices and head-office level, for gathering of data from source location using mobiles/smart phones through real-time information system dashboards for various departments including Quality, Environment, Health & Safety, Plant & Machinery, Project Management, Contracts Management, Subcontractors etc.

The Company implemented a vendor registration portal, followed by an evaluation for execution of an e-sourcing platform and a transparent vendor rating process. To improve the co-ordination for engineering process. We introduced Integrated Design/ Estimation/ Planning process using 3D tools. Internal and partner collaboration and review for Engineering Drawings for any project happens using the EDMS tool.

Master Data Management, Site Safety monitoring based on Video Feed AI Analytics and Cloud-based Face Recognition/ Attendance are some other key projects in progress where the overall aim is to sustain higher growth of the organisation with an improved productivity. One of our key objectives is to setup a command control center at Head Office (HO) for remote monitoring of various site activities including project progress, site EHS, movement of people, vehicles, equipment, and more. The digital journey at JMC projects has delivered great business value in terms of increased productivity and employee safety with overall cost reduction. There is also a well-defined roadmap chalked out with clearly formed, actionable steps in line with Vision 2025.

Cautionary Statement

Information in the Management Discussion and Analysis that describe the Companys aims, plans, or projections may be considered forward-looking under applicable securities laws and regulations. Actual outcomes may differ significantly from those stated in the statement. Strong competition leads to price cuts, high volatility in prices of major inputs such as steel, cement, building materials, and petroleum products, changes in government regulations, tax laws, economic developments within the country, and other factors such as litigation and labor relations are all important factors that could affect the Companys operations.