Kalpataru Power Transmission Ltd Management Discussions.

Global Economy

The Covid-19 pandemic is a global shock ‘like no other, involving simultaneous disruptions to both supply and demand in an interconnected world economy. Significant reductions in income, rising unemployment, disruptions in the transportation, service, and manufacturing industries have been rampant in the wake of the pandemic. The shock of the COVID pandemic has prompted governments to raise their investments to unprecedented levels, with over USD 10 trillion being allocated globally.1 The economic damage is already evident and represents the largest economic repurcussion the world has experienced in decades. Global growth has declined by 3.3% in 2020, the deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support.2

Outlook:

Activity in many sectors has picked up and partially adapted to pandemic restrictions. Vaccine rollout, although uneven, is gaining momentum and government stimulus is likely to provide a major boost to economic activity. But prospects for sustainable growth vary widely between countries and sectors. Faster and more effective vaccination deployment across the world is critical. Global growth is projected at 6% in 2021, moderating to 4.4% in 2022. Growth in emerging market and developing economies (EMDEs) is envisioned to firm to 6.7% in 2021.3

Indian Economy

The Indian macro-economic environment has become increasingly challenging after the pandemic. The impact of the pandemic and lockdown was disproportionately felt across industries. While industries such as hospitality and manufacturing were impacted immediately, the impact on the financial sector was felt gradually, as is evident from the quarterly GDP numbers. The Indian economy contracted by 7.3% in FY20-21 on account of the massive disruptions caused by the pandemic and the subsequent lockdown in Q1FY21. The GDP plunged a record -23.9% in Q1FY21 due to restricted mobility and social distancing measures that impacted almost all sectors of the economy.4 As the lockdown continued to be lifted in phases, the pace of rebound has been equally lopsided. Pent-up and festive demand, and the revival of several infrastructure projects by the government helped the manufacturing and construction sectors to bounce back. The same was reflected in subsequent quarters and GDP crossed into positive territory in Q3Y21 and Q4FY21. The optimism sustained further with the vaccination drives launched at the beginning of Q4FY21. The monetary policy support by the central bank, to infuse liquidity and increased government expenditure to drive demand kept the economy buoyant amidst the crisis.

Outlook:

As India continues to grapple with the pandemic, recent high-frequency data suggests India may have turned towards the road to recovery. The GDP is projected to register a strong recovery of 9.3% in FY22, the highest among emerging and advanced economies, due to normalisation of economic activity.5

Nevertheless, the path to recovery may have a few challenges. The recovery momentum is prone to risks, depending on the availability of Covid-19 vaccines and the emergence of subsequent waves of the Coronavirus infection. High inflation, job losses, poor wage growth, and low asset values may impact the consumers purchasing power, especially among the low- and middle-income class.

Power Transmission and Distribution Industry

The global electricity industry continues to witness a transformational shift, with an increasing demand for electricity, driven by rapid growth in population and urbanisation and incremental use of renewable energy. These changes create significant opportunity for electricity generation as energy demand is expected to increase exponentially. Global electricity demand fell by around 1% in 2020, predominantly in the first half of the year, as lockdowns restricted commercial and industrial activity. However, as the world economy recovers in 2021, electricity demand is forecast to grow by around 4.5%. With a projected GDP growth of 9% in China and 9.3% in India, in 2021, electricity demand is expected to grow by around 8% in both countries, in comparison to 2020.1 ,6,7

Electricity demand growth in India is anticipated to outpace other regions till 2030, after which growth will be most pronounced in Southeast Asia and Africa. Electricity demand growth globally is likely to be way more than all other fuels.

The renewables segment is expected to contribute 80% of the growth in global electricity demand througRs. 2030, as supportive policies and maturing technologies are enabling access to cheap capital in leading markets. Among renewables, solar is expected to attract significant investments as solar photovoltaics (PVs) become economical and enable low-cost electricity generation, compared to coal or gas-based plants in most countries. While solar would be the growth driver post 2022, followed by onshore and offshore wind, hydropower is likely remain the largest renewable source of electricity.8

Change in Global Electricity Generation by Source, 2000-2040 (TWh)

Grid investment is expected to reach USD 460 billion in 2030, two-thirds more than 2019 levels, which will create an additional 2 million km of transmission and 14 million km of distribution lines.9 The projected decadal network expansion plan, in new transmission and distribution (T&D) lines worldwide, is estimated to be 80% greater than that of previous decade. The aspirational growth in demand is due to high likelihood of grids becoming modernized, expanded and digitalized.

Investment in Electricity Networks, 2012-2030 (USD Bn)

Regional focus Africa

The African electricity sector is characterised by its expansive geography, limited inter-connectivity and trade, and the prevailing system adequacy issues. According to World Bank Doing Business 2020 survey results, indicate 42% Africans experienced, on average, at least 24 hours of outages over the period May 2018–May 2019, while 79% experienced at least 2 hours of outages. The estimations are stark when compared with only 5% of European countries, having customers experiencing at least 24 hours of outages and 13% in Asia.10 With approximately 600 million people in Africa devoid of access to electricity, the current momentum behind policy and investment plans is unlikely to meet the energy demand of Africas population in full.

Policy makers are expected to address the persistent lack of access to electricity and the unreliability of electricity supply impeding the continents development.

Electricity demand in Africa is 700 terawatt-hours (TWh), with the North African economies and South Africa accounting for over 70% of the total. Nevertheless, the other sub-Saharan Africa countries are expected to witness the fastest growth to 2040, which is likely to provide lucrative opportunities.11 Electricity demand is expected to more than double to over 1600 TWh in 2040, and reacRs. 2300 TWh in Africa, with most of the additional demand stemming from productive uses and emerging middle and higher-income households.

Investment in networks and battery storage in Africa, 2020 (USD Billion)

Africa needs to significantly scale up electricity sector investment in generation and grids, which currently ranks among the lowest in the world. Despite being home to 17% of the worlds population, Africa currently accounts for just 4% of global power supply investment. While achieving reliable electricity supply for all would require a fourfold increase in investments, approximately USD 120 billion a year througRs. 2040, the mobilisation of investment at such scales are fraught with risks. The ecosystem will require a strong policy and regulatory environment to improve the financial and operational efficiency of utilities and effective use of public funds to catalyse private capital. It is imperative to nurture the continents financial sector, which is critical for ensuring a sustained flow of long-term finance to energy projects.11

Europe

Over the past five years, the European Union (EU) has made significant progress in developing the domestic market for electricity through proactive measures. The EU promoted energy efficiency action through renewable energy deployment, greenhouse gas (GHG) emissions reduction and a strong carbon price signal. In 2019, the EU proposed the European Green Deal (EGD), which is a set of 50 actions for the next five years covering all sectors, to prepare the EU economy for climate neutrality by 2050.

Power obtained by renewable sources dominated the European power mix in 2020. About 42% of the total electricity generation in 2020 is expected to have been generated from renewable sources. On the contrary, coal and nuclear based power generation plummeted to their lowest levels during this period, corresponding to the target set by the European Commission to reduce carbon emissions by 55% by 2030.12 The European Union (EU) is in the process of transforming its economy to minimise greenhouse gas (GHG) emissions and electricity is expected to play a key role in this low-carbon revolution. Factors such as increasing demand for electricity derived from clean sources of energy and an increasing proportion of renewable sources in the production mix, are expected to reduce GHG emissions from electricity generation. Moreover, the share of electricity in total energy use is expected to increase, especially in the transport sector (electrically chargeable vehicles) and in heating and cooling requirements. The extensive electrification demand, coupled with low-carbon electricity production, is expected to drive the power market in Europe. Europe needs to invest between USD 456 billion to USD 516 billion in distribution grids between 2020 and 2030 to cope with the increasing volumes of variable renewable energy, upgrading the existing infrastructure and green hydrogen production, besides catering to the expected demand in heating and transport.12

Southeast Asia

The electricity demand in the region has been growing at 6% annually over the past two decades, driven by increasing use of various household appliances and electronic equipment along with massive power consumption from industrial activities. However, the Covid-19 pandemic reduced electricity demand in the ASEAN countries and it is anticipated to have fallen by 1% in 202013. Coal-fired electricity generation is common in Southeast Asia with countries such as Indonesia, Vietnam and the Philippines relying heavily on thermal power stations. The ASEAN communitys target of integrating

23% renewable energy by 2025 is emblematic of the intent to expand renewable sources of power generation. Established in the ASEAN Plan of Action for Energy Co-operation, the target has been implemented in the national plans of ASEAN member states. The commitment substantiates the necessity for increasing investments in the renewable energy capacity and electricity networks, to facilitate the flexibility needed to integrate renewables. The ASEAN Power Grid aims to adopt a fully integrated power grid system in Southeast Asia.

Significant investments in the power generation capacity are a requisite for desired transformation in Southeast Asia. Under the IEA Stated Policies

Scenario, cumulative investment between 2025 and 2030 is estimated . at USD 350 billion and it can increase to USD 490 billion in the Sustainable Development Scenario14

Latin America

The Latin America region witnessed a significant decline in electricity demand due to the economic recession in the global economy in 2020, with Brazil, Mexico and Argentina experiencing the greatest dip in the region. The coal-based power generation was severely hit as power generation inclined towards renewable sources including hydropower and solar energy, in 2020. Rising population and lack of access to electricity are the key demand drivers for energy in the region. Currently, 4.8% of people in Latin America lack access to electricity15. According to Economic Commission for Latin America and the Caribbean, the population is estimated to rise from 625 million in 2016 to 680 million in 2025 reaching up to 779 million in 2030. Consequently, the power generation in the region is expected to double by 2030, which will require more than USD 700 billion in investments to enhance the grid infrastructure. Recent developments include Brazils energy agency Empresa de Pesquisa Energtica (EPE) approving the Plano

Decenal de Expanso de Energia 2026 or Decennial Energy Expansion Plan 2026 (PDE 2026). The plan includes an investment of USD 0.36 trillion for expanding the energy infrastructure by 2026, with one fourth investment flowing into the energy generation and transmission segments. The total investment for the power transmission segment is likely to reach USD 30.9 billion till 2026, including USD 20.2 billion expected to be invested in transmission lines and USD 10.6 Billion in substations that include border facilities.16

Brazilian government is likely to add 54 GW of power generation capacity during 2018–26 to cater to the expected demand, with renewable energy sources contributing 72% of the electricity demand and thermal sources making up the rest. Additionally, Brazils wind energy capacity is likely to increase by 29 % in the same period. Consequently overall 60,004 km of line length is expected to be added to Brazils network between 2018-26, along with more than 188 GVA of substation capacity. Of the total line length capacity, 20 per cent is likely to be based on direct current (DC) technology at the 800 kV level and the rest on alternating current (AC) technology.

MENA

The power sector in the Middle East and North Africa (MENA) region is a major driver of business and investment opportunities, with about USD 30 billion of capital spending per year. The Covid-19 crisis led to a significant fall in the value of power project contract awards to USD 5.9 billion in the first half of 2020 . The power sector activity in the region resumed pace in the second half of the year, especially in the renewable sector.

Over the past three years, sustainability and energy efficiency have been the primary focus areas in the region. With strong prospects of recovery in 2021, the outlook for the power sector in the MENA region is promising.

Planned investments in power transmission and distribution, to strengthen the grid, is expected to increase in several countries of the region. The factors spurring the investment are increased penetration of renewables and the recent push to increase regional interconnection.

MENA Electricity Investments, 2020-24 (USD Billion)

India

India is one of the fastest growing economies in the world and is considered important for the future of global electricity markets. Indian economy has made significant progress in the successful implementation of a wide range of electricity market reforms and deployment of renewable sources of energy. The country is making energy security a priority and continues to attract investments in thermal and renewable capacity.18 The power sector in India is highly diversified, consisting of conventional sources of power ranging from coal, lignite, natural gas, shale, hydro and nuclear power to non-conventional sources such as wind, solar and agricultural waste. As of October 2020, India was the worlds third largest producer and second largest consumer of electricity with an installed capacity of 3,75,323 MW. The power mix consists of 2,31,591 MW of thermal, 45,798 MW of hydro, 6,780 MW of nuclear and 91,154 MW of renewables among others.19

The electricity demand in India declined drastically due to the Covid-19 pandemic. While power demand from hospitals, essential services and the residential sector witnessed an uptick, demand from the industrial and commercial sectors fell significantly. The demand for power gained momentum with the resumption in economic activities during the second half of 2020 and is expected to reach pre-Covid levels by 2021. Indias power sector is expected to be larger than that of the EU by 2040 to become the worlds third largest in terms of electricity generation, resting on the favourable policies being deployed for the sector.20 The economy holds potential for significant investments in the power sector, propelled by strong tailwinds from population growth and electrification potential across the country. A comprehensive network of transmission lines has been established over the years to evacuate power from generating stations with a Central Transmission

Utility being incorporated in FY20-21 to ensure seamless transmission of power. However, the power losses in the transmission and add space before the bracket sector continue to be a drag, despite the gradual decrease in losses since FY01-02.

Outlook

Indias power market is witnessing a major transition that has redefined the future of the industry. Electricity demand in India continues to be powered by sustained economic growth. The Government of India aims to achieve 175 GW of renewable energy capacity, consisting of 100 GW solar power, 60 GW wind energy, 10 GW bio-power and 5 GW hydro power by the year 2022. Besides, Investment Information and Credit Rating Agency (ICRA) has forecasted an investment of J 1.8 trillion in the power transmission segment over a period of five years from FY20-21 to FY24-25, indicating an optimistic outlook for the sector. 21

Projected Generation Capacity, Demand and Transmission Capacity by March 2025

Construction and Infrastructure Industry

The civil construction and infrastructure industry plays a pivotal role for the growth of the Indian economy. Over the past few years, the Indian Government has provided much-needed impetus to infrastructure development. Moreover, the focus on urban development and transport infrastructure will make the sector more competitive and improve the quality of living in urban areas. The effect of Covid-19 on Indian infrastructure and the construction sector has been severe. The restrictions imposed by the government to contain the spread of the virus impacted supply chains, plant, equipment and manpower, resulting in increased risks and expenditures, project delays and disruptions. While 2020 posed several challenges that affected the construction activities and led to reverse migration of labour, the overall market for the infrastructure sector remained strong.

The Government of India launched the National Infrastructure Pipeline (NIP) in FY2020 with an initial planned expenditure of USD 1.4 trillion on various infrastructure projects througRs. 2019-2025 to become a USD 5 trillion economy by 2024-25. The NIP aims to create job opportunities, improve living standards and offer equitable access to infrastructure for all, thus ensuring inclusive development of economic and social infrastructure projects. The coverage of NIP was expanded from 6,835 projects to 7,400 projects in FY21-22 and completion of 217 projects worth RS. 1.10 lakh crore was presented in the Budget FY22.21

The government is actively promoting sustainable development in urban areas through schemes such as Smart Cities Mission and Housing for All. The Affordable Rental Housing Complex (ARHC) scheme, launched under Pradhan Mantri Awas Yojana, aims to provide migrant workers and the urban poor with affordable rental accommodation to enhance their standard of living. The scheme is an important step towards realising the vision of ‘Aatmanirbhar Bharat as it serves to advance the objective of ‘Housing for All.. A sizeable proportion of metro rail projects and highway construction projects by the Government is likely to accelerate the infrastructure development of India. While allocation for the infra space had moderated in Union Budget 2021, outlay for infrastructure witnessed a significant uptick in Budget FY2022.

Union Budget Outlay for Key Segments of Infrastructure Industry

(Rs. in Billion)

Particulars FY20 Actual FY21 Revised Estimates (RE) FY22 Budget Estimates (BE) FY22 (BE) growth over FY21 (RE) (%)
Railways 1,480 1,614 2,149 33
Roads 1,434 1,571 1,732 10
Water supply 182 170 600 253
Metro & MRTS 182 86 233 172
Affordable Housing 250 405 275 (32)
AMRUT 64 65 73 13
Smart City 32 34 65 90
Overall capex 3,623 3,944 5,126 30

Source: Budget 2022 Analysis

Some of the major highlights of Budget FY22 are:

Funding boost for the National Infra Pipeline (NIP) by setting up a Development Financial Institution (DFI) with an initial corpus of RS. 200 billion. The DFI aims to build a lending portfolio worth RS. 5 trillion in three years.

Debt financing of InVITs by Foreign Portfolio Investors through amendments in legislation.

Asset monetization of operating public infrastructure with an aim to finance new infrastructure along with a "National Monetization Pipeline" for potential brownfield infrastructure assets A revamped reforms-based, result-linked power distribution sector scheme with an outlay of RS. 3.1 trillion over five years to provide assistance to Discoms for infrastructure creation.

Overall, the budget has led to optimism regarding the capex trajectory and will lead to enormous opportunities for EPC and civil construction companies like KPTL.

Outlook

Enduring a significant economic shock in 2020, the construction industry is expected to witness a sharp rebound and grow by 11.6 % in 202122 and is expected to become the third largest in the world by 2025. Having establishing a dedicated ‘India Investment Grid to attract investments, India is anticipated to invest over USD510 billion on infrastructure by 203023. The expansion of existing schemes such as National Infrastructure Pipeline and emphasis on Aatmanirbhar Bharat Abhiyan marks a promising future for the infrastructure industry in India.

Railways Industry

Indian rail network is the fourth largest in the world, after the United States, Russia and China. The rail network in India has a track length of 123,542 kilometres, spanning over 67,415 kilometres and nearly 7,300 stations. Around 13,000 passenger trains are operated on the rail network, carrying over 23 million passengers daily24. It is also the largest employer in India and the eighth largest in the world, employing over 1.4 million people25. Apart from being an energy-efficient and economical mode of transport, the railway network facilitates long-distance travel and transportation of bulk goods. With rapid urbanization, rising income and increased industrialization, passenger and freight traffic continue to grow at a fast pace.

The Government of India, through investor-friendly policies, has concentrated on investing in railway infrastructure. It has allowed Foreign Direct Investment (FDI) in railways and has encouraged the development of freight and high-speed train infrastructure. Indian Railways (IR) capex received significant boost following the allocation of RS. 2.1 trillion during the Budget, at 31% growth over FY20-21. The Indian Railways has planned to focus on developing new rail lines, doubling of tracks and electrification amongst others.

Indian Railways Investment Plans Under Key Heads

(Rs. Billion)

Key Heads FY20 (Actual) FY21 (RE) FY22 (BE) YoY Increase
New Lines (Construction) 127 150 170 13%
Gauge Conversion 41 34 22 -35%
Doubling 224 222 261 18%
Electrification 71 66 75 14%
Track Renewables 78 92 93 1%

Source : Press Reports, Edelweiss Research

Some of the initiatives undertaken to improve the railway infrastructure are:

Railway Electrification

Indian Railways aims to achieve net zero carbon emission through railway electrification, enhancing energy efficiency of locomotives and trains, green certification for stations and shifting towards renewable sources of energy. Electrification has been a priority to comply with the objective of transforming India into a green nation. As of November 2020, 66% of the track length has been electrified26 and Indian Railways aims to achieve 100% electrification on the entire broad-gauge network by 2023.

The speed of electrification has increased significantly from 1,176 kilometres in FY14-15 to 4,378 kilometres in FY19-20. Despite the setback caused due to the Covid-19 pandemic, 1,682 route kilometres (RKMS) were electrified until November 202026. When completed, IR will accomplish a rare feat of becoming one of the worlds major railway networks to entirely operate trains with indigenous power, without any reliance on imported fossil fuel. It is estimated to ensure savings on fuel/energy bill, amounting to around RS. 14,500 crore per annum26.

Station Redevelopment Program

Indian Railway Stations Development Corporation (IRSDC), a Special Purpose Vehicle, was incorporated in 2012 under the Ministry of Railways and Ircon International Limited (IRCON) with the objective of improving the facilities of existing and new railway stations. Indian Railways has an ambitious plan of redeveloping 123 stations to convert them into Railopolis or 24x7 multi-modal hubs. The first phase of redevelopment covers 50 stations at an estimated cost of J 50,000 crore27.

Works on redevelopment of Habibganj station in Bhopal and Gandhinagar station in Gujarat are in progress .IR plans to transform these stations into world-class travel hubs that are similar to airports. The other stations which are being developed include, New Delhi, Surat, Chandigarh, Amritsar, Kanpur, Gwalior, Sabarmati besides others.

Semi Speed and High-Speed Rail Railways - High Speed (HSR)/Semi-High Speed Rail (SHSR):

India is entering a new era of passenger rail transport through development of HSR and SHSR systems. Policy planners in India have proposed new rail-based alternatives for inter-city travel:

Regional Rapid Transport System (RRTS), connecting New Delhi with various cities in the National Capital Region (NCR).

High Speed Rail (HSR) systems or ‘Bullet Train projects on various routes like Mumbai-Ahmadabad, Delhi-Varanasi, Mumbai-Nagpur, etc.

Semi-High Speed Rail (SHSR) systems like Ahmadabad–Rajkot, Pune–Nashik, Thiruvananthapuram–Kasaragod, Haryana Orbital Rail Corridor, etc.

Status of project awared for MAHSA and NCR-RRTS

Projects such as the Mumbai-Ahmadabad HSR (MAHSR) and the Regional Rapid Transit System (RRTS) in NCR are already under construction. In addition, many other projects are at various stages of development. For e.g., the central government has approved the financing plan of the RS. 640bn Trivandrum-Kasargod SHSR in Kerala and asked the state government to commence land acquisition. Similarly, the Maharashtra government has recently approved the RS. 160 billion Pune-Nashik SHSR project. Apart from these, DPRs are being prepared for the following HSR projects: Delhi – Varanasi (865 km) Varanasi – Howrah (760 km) Delhi – Amritsar (465 km) Delhi – Ahmedabad (886 km) Mumbai – Nagpur (741km) Mumbai – Hyderabad (711 km) Chennai – Mysore (435 tkm) With these projects being of significant size and scale, the outlays will naturally be high. Even for the two projects currently under construction viz. the MAHSR and NCR-RRTS, the cumulative project award will easily exceed RS. 1 trillion.

Dedicated Freight Corridor (DFC)

The DFC project aims to construct six freight corridors across the country to provide safe and efficient freight transportation. Construction of two freight corridors, the Western DFC connecting the states of Haryana and Maharashtra and the Eastern DFC connecting the states of Punjab and West Bengal, are in progress. The Western and Eastern DFCs span over 1,504 route kilometres and 1,856 route kilometres respectively. The other four corridors which are in the planning phases are

• North-South (Delhi-Tamil Nadu),

• East-West (West Bengal-Maharashtra),

• East-South (West Bengal-Andhra Pradesh) • and South-South (Tamil Nadu-Goa). In 2020, the 306 kilometres long Rewari-Madar section in Western DFC and 351-kilometre long Khurja-Bhaupar section has been completed. Eastern DFCs Sonnagar-Gomoh Segment (263,7 km) will be constructed in 2021-22 and section Gomoh-Dankuni of 274.3 km is expected to be start soon.28 The Ministry of Railways continue to monitor these projects to ensure its completion by June 2022. The Dedicated Freight Corridor is expected to become a prime contributor to the economic development of India.

Modern Signalling and Telecommunication System

Modern signalling systems are expected to play a major role in enabling reliable and safe operation of trains in India. Electronic interlocking is being implemented on a large scale, to utilise the advantage of emerging technology and enhance efficiency. Axle Counters for Automatic clearance of Block Section (BPAC) is also used to ensure seamless arrival of trains without manual intervention. Automatic Block Signalling has been adopted to increase line capacity and run more trains on existing High-Density routes of Indian Railways. Moreover, modern signalling system has been proposed in the High-Density routes of the Golden Quadrilateral and the Golden Diagonal.

Metro Rail

Metro rail is rapidly becoming the most common means of mass rapid transit in India witRs. 13 cities having functional metro rail networks. In India, 702 kilometres of conventional metro is functional and 1,016 kilometres of metro and RRTS are under construction. Delhi metro, the largest and busiest metro rail network in the country, witnessed inauguration of the first driverless metro in India in FY21. Metro projects in Navi Mumbai, Pune, Indore Kanpur, Agra, Meerut and Surat are expected to be operational soon. The Union Budget 2021-22 proposed two new technologies, ‘Metro Lite and ‘Metro Neo as a cost-effective alternative to the existing technologies, without compromising on safety and experience. Besides, the budget has been proposed for the funding of the second phase of Kochi, Chennai, Bengaluru and Nagpur metro rail projects.

Outlook

Indian Railways aims to invest USD 190 billion over the next five years and the capex additions in the Budget FY22 are significant. The Ministry of Railways has developed a long-term strategic plan, the National Rail Plan, to improve the infrastructural capacity of railways and increase the modal share of railways from 27% to 45% by 2030, to meet the demands till 2050.29 A Vision 2024 document has been developed that seeks to improve rail infrastructure and enhance capacity whilst removing impediments and improving safety of train operations.

Oil and Gas Infrastructure

Oil and gas industry, a core sector of Indian economy, plays a crucial role in the socio-economic development of the country. Energy consumption in India is proportional to the countrys economic growth, making the sector investment-friendly. In several segments of the industry, including natural gas, petroleum products and refineries, the government has allowed 100% Foreign Direct Investment (FDI) to meet the rising demand.

India is the third largest consumer of crude oil and petroleum and the fourth largest importer of Liquefied Natural Gas (LNG) in the world. India currently has a total of 23 refineries, 18 in the public sector and 3 in the private sector along witRs. 2 joint venture companies. Their combined refining capacity stands at 249 MMTPA (million metric tonnes per annum) in FY2130.

Outlook

Currently, LNG constitutes a relatively small share of Indias total energy consumption. Fossil fuels dominate the energy mix, with coal and oil accounting for 82% of consumption and natural gas constituting 6% of the total mix. Natural gas is considered the cleanest fossil fuel by broad consensus. To improve air quality, the Government of India has set an ambitious target to increase the share of natural gas in Indias total energy consumption from approximately 6% to 15%, by 2030.31 The development of LNG infrastructure is vital to fulfil the growing demand and complement domestic production. According to The Ministry of Statistics and Programme Implementation (MoSPI) 66.4% or 988.9 billion cubic metres (BCM) of domestic natural gas reserves are offshore and only 33.6% or 499.6 BCM is on onshore. Consequently, massive infrastructure development is required to transport natural gas from offshore production sites to consumption centres. This includes new processing platforms, offshore pipelines, cross-country pipelines and distribution pipelines. The government is expected to invest around USD 60 billion, till 2024, to establish infrastructure for natural gas consumption in the country and increase its share share in the energy mix by up to 15%, by 2030.32 India has a relatively under-developed gas pipeline infrastructure compared to developed countries. National Gas Grid has been envisioned to ensure adequate availability and an equitable distribution of LNG and India has over 16,000km of pipeline which will require significant extension to build the 33,000km ‘National Gas Grid pipeline. The proposed infrastructure plan includes pipelines, LNG (Liquefied Natural Gas) terminals and CGD (City Gas Distribution) networks.

Development of additional 14,300 km pipelines to complete the National Gas Grid which are at various stages of development. The government has planned an additional 1,000 LNG fuel stations across the country, apart from the 6 operational LNG regasification terminals.

Coverage of CGD projects is being expanded to 232 geographical areas spread over 400 districts across the country. The network is expected to cover approximately 53% of the countrys geography and toucRs. 70% of the population. National Gas Grid: India has built more than 16,000 km of gas network since the National Gas Grid (NGG) was conceptualized in 2000.

Logistics and Warehousing

Agriculture is the primary source of livelihood for about 58% population of India. The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. Indian food and grocery market is the worlds sixth largest, with retail contributing 70% of the sales. The Indian food processing industry accounts for 32% of the countrys total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. During FY19-20 crop year, food grain production was estimated to reach a record 295.67 million tonnes (MT). In 2020-21, Government of India is targeting food grain production of 298 MT.34, 35 The agricultural warehousing market was valued at RS. 145.82 billion in 2019 and is expected to reach RS. 365.75 billion by the end of 2024. Growing need for proper storage of fruits and vegetables in the country is fuelling the demand of agri-warehousing in the country. Currently, Indias total warehousing capacity is estimated to be 160 Mn tonnes. Around 30% of this capacity is managed by the private sector, and the rest is divided between FCI (Food Corporation of India), CWC (Central Warehousing Corporation), SWC (State Warehousing Corporation), state agencies and the co-operative sector.35 Increasing demand for storage space, need for efficient handling of produce and supporting regulations have encouraged private players to make investments in the warehousing sector. Companies have adopted different models to build a profitable business. Private players are also focusing on providing premium warehousing services by building sophisticated large-scale storage spaces. End-to-end logistics service providers have started tapping the opportunities created by the government in the Agri-warehousing segment. India is expected to achieve the ambitious goal of doubling farm income by 2022. The agriculture sector in India is expected to gain momentum in the next few years due to increased investment in agricultural infrastructure consisting of irrigation facilities, warehousing and cold storage.

Structural changes in the Indian agriculture sector, especially in FY21, is expected to liberalize the sector along with private sector participation. The New farm laws, enacted in FY21, seeks to provide pan India market access to farmers for selling produce, bypassing the state APMC. The market access is complemented by a dedicated electronic infrastructure (e-NAM) for providing real time price information and access to special services of Indian railways. Kisan rail was introduced for dedicated transportation of perishables and agri-product in FY21 while Krishi Udan, corresponding air services, is expected to be launched in FY22.35 The end-to-end value chain is highly likely to integrate storage solutions at key nodes for better supply chain management. Under the Aatmanirbhar Bharat Abhiyan, the government announced a RS. 1 trillion agriculture infrastructure fund to aid post-harvest management and marketing of agricultural produce for improving farm gate prices.

Company Overview

With nearly four decades of experience and presence in 63 countries, Kalpataru Power Transmission Limited (KPTL) is among the largest players in the global power transmission and infrastructure space. The Company offers comprehensive solutions encompassing design, testing, fabrication, erection and construction of transmission lines, oil and gas infrastructure and railway projects on a turnkey basis. As a diversified conglomerate spanning power transmission & distribution, oil & gas pipeline, railways, infrastructure development, civil construction and agri-commodity warehousing, the Company combines its technical prowess and excellent execution strategies to deliver exceptional service to its varied clientele. The Company is also involved in development of assets and has a portfolio of power T&D and road assets along with two Biomass based power plants in Rajasthan, India.

Operational Review

Geographically, the consolidated revenue of the Company can be divided into two different segments – domestic and international. Revenue from the domestic segment was RS. 8,217 Crore (63.46%) and the international segment recorded revenue of RS. 4,732 Crore (36.54%) in FY20-21.

Engineering, Procurement and Construction (EPC)

EPC is the largest business segment of KPTL, witRs. 96% share in consolidated revenue for FY20-21 and similar share in FY19-20. The revenue of EPC Segment is RS. 12,426 Crore in FY20-21, compared to RS. 12,195 Crore in FY19-20.

The Company continues to strengthen its position in the domestic and international EPC segment and is proactively working to increase its presence in high-growth markets of SAARC, Africa, Latin America, Europe and South East Asia. The company has made acquisitions in Sweden and Brazil to capitalise on opportunities in the T&D business. The companys subsidiary, JMC has won projects in Mongolia and Maldives during FY20-21. During FY20-21, production (including outsourced) and dispatches of transmission line towers/structures were 1,56,214 MT and 1,57,095 MT respectively, as compared to 1,73,094 MT and 1,67,206 MT in FY19-20. In FY20-21, the Company erected around 1,15,800 MT of transmission towers at various locations domestically and internationally and executed about 3,330 ckm of stringing.

For the FY20-21, on a consolidated basis, the EPC segment has received new orders of approximately J 16,359 Crore. The aggregate value of orders on hand as on 31st March 2021 is appropriately RS. 27,900 Crore. The details of business-wise orders received are as below:

Transmission and Distribution Business (T&D):

Transmission & Distribution (T&D): Numerous transmission line and substation orders in international and domestic markets totaling approx. J 6,289 Crore has been secured by KPTL. In India, the Company secured orders from Power Grid Corporation Ltd. (PGCIL), State Electricity Boards (SEBs) and private clients.

Oil & Gas Pipeline:

During FY20-21, the Company secured several orders of RS. 1,057 Crore from various oil & gas marketing companies in India.

Railways:

The Companys Railway business has garnered orders worth RS. 1,097 Crore related to gauge conversion, railway electrification and associated works from Rail Vikas Nigam Ltd. (RVNL), Central Organisation for Railway Electrification (CORE) and G-RIDE in FY20-21.

Civil Construction:

Our subsidiary, JMC Projects (India) Ltd. received orders of approximately RS. 7,916 Crore in FY20-21 in its Buildings & Factories and Water business.

Financial Review

On a standalone basis, the Company achieved revenue from operations of RS. 7,671 Crore in FY20-21 as against RS. 7,904 Crore in FY19-20, a decline of 3%. Domestic and International sales were affected due to the challenges related to COVID-19 pandemic. PAT was up by 33% in FY20-21 to RS. 615 Crore from RS. 463 Crore in FY19-20. Profitability has increased due to reduction in finance cost and sale of two of the transmission assets.

Net property, plant and equipment (including capital work in progress) and Intangible assets, at the end of FY20-21 stood at RS. 663 Crore as against RS. 633 Crore in the previous year. During the year under review, depreciation was at RS. 115 Crore and net addition in the property, plant and equipment (including capital work in progress) is RS. 109 Crore. Net current assets increased to RS. 2,169 Crore (Includes RS. 370 Crore of current assets pertaining to Assets held for Sale) as against RS. 1,950 Crore in the previous year due to higher working capital. Borrowing# levels of the Company are RS. 1,107 Crore in FY20-21 as against RS. 1,334 Crore in FY19-20. The net debt# is RS. 777 Crore in FY20-21 against RS. 970 Crore in FY19-20. The Borrowing levels remain at a comfortable level with net debt/ equity ratio of 0.20:1. The finance cost was around 1.42% of the revenue during FY20-21 as against around 2.10% of the revenue during FY19-20.

The Company enjoys A1+ and AA Stable rating for its short-term and long-term borrowing from both CRISIL and CARE. The Company has sufficient working capital to support its growth plan. Consolidated revenue of the Company grew by 2%, with revenue of RS. 12,949 Crore in FY20-21 as compared to RS. 12,676 Crore during FY19-20. Net debt at consolidated level stood at RS. 2,304 Crore in FY20-21 as against RS. 3,458 Crore in FY19-20. The consolidated order book of the Company is approximately RS. 27,900 Crore as on 31 March 2021.

In accordance with the SEBI (Listing ObligationsandDisclosureRequirements) (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.

The key financial ratios are given below:

Standalone Consolidated
FY 2019-20 FY 2020-21 FY 2019-20 FY 2020-21
Debtors Turnover (No. of Days) 167 183 138 147
Inventory Turnover (No. of Days) 34 28 35 30
Interest Coverage Ratio 5.00 8.66 2.24 3.17
Current Ratio 1.35 1.42 1.29 1.36
Debt Equity Ratio* 0.38 0.29 1.22 0.80
Operating Profit Margin (%)** 11.18 12.71 11.55 13.03
Net Profit Margin (%) 5.86 8.02 3.07 5.11

*Debt is inclusive of current maturities and excluding interest free loans from entities other than bank and financial institutions. **Operating Profit (Profit before tax, depreciation, Interest and other income)

At standalone and consolidated level, there has been increase in interest coverage ratio and Net profit margin by more than 25% due to increase in profit, reduction in debt and finance cost on account of sale of two of the transmission assets.

At consolidated level, there has been improvement in debt equity ratio by more than 25% due to reduction in debt on account of sale of two of the transmission assets.

Further, the Return on Net worth ratio (Standalone) during FY20-21 was 15.92% as compared to 13.10% during FY19-20 which improved by 282 bps on account of higher profitability. Also, the Return on Net worth ratio (Consolidated) during FY20-21 was 17.95% as compared to 11.60% during FY19-20 which improved by 635 bps given higher profitability.

Risk Management

Nature Description Mitigation Measure
Macroeconomic risks The latter part of the year saw the risk of the pandemic affecting operations across the globe. The Company was not immune to the same. The company is broad basing its business and exploring niche opportunities across geographies to diversify the risk. It continues to maintain a strong governance framework and internal and financial controls to mitigate any possible economic slowdown.
Cybersecurity risks Threats of cyber-attacks and hacking are well-known and poses a significant threat to a companys operations, In addition to external threats, there are risks of information being leaked or changed by individuals within the Company. Online cyber-security awareness campaign on phishing and e-mail security are conducted on a regular basis. Network devices, server operating system and hardware are upgraded periodically. The Company also actively monitors security logs to detect any malicious attempt and takes the necessary to mitigate the risk. Adequate data safety is ensured during its creation, storage, transit and retrieval.
Legal and Compliance risks With operations in multiple geographies, the Company is exposed to risks related to various statutes, laws and regulations. The Company takes steps to adhere to all laws in its true spirit. Teams within the Company monitor changes in laws and regulations and proactively takes steps to ensure compliance to regulatory standards. The Company also employs the services of country specific legal advisors and subject matter experts to offer advice on legal matters and compliances.
Financial risk Interest Rate Risk, Exchange Rate Risk and Liquidity Risk are the major Financial Risks. Exchange rates and Interest rate fluctuations impact the Companys finances as changes in interest rate affects the variable interest on the Companys debt. The Company dynamically manages interest rate risks through a mix of fund-raising products across maturity profiles. For mitigating currency risk, it has a strategy of mixing its domestic and foreign order books spread across various geographies. It also uses currency forward contracts to mitigate foreign exchange related risk exposure.
The Company constantly monitors its liquidity levels, economic and capital market conditions and maintains access to sources of liquidity through banking lines, trade finance and capital markets.
People risk Risk of maintaining employee relations, attracting and retaining talent, and creating an engaged set of employees have become important in an environment where talent is becoming scarce. The Company takes active steps to constantly engage with the employees and understand their aspirations, needs and any issues they may have. Policies, practices, compensation and developmental conversations are modified based on constant feedback from employees.
The Company has a systematic employee hiring policy and to attract the best talents in the industry.
The Company regularly conducts Periodic training and mentoring to develop future leaders within the organisation.
Operating risk The company is involved in the EPC business and exposed to various operational risks that may lead to unplanned interruptions of operational processes, delaying execution of projects, affecting the companys topline and bottomline. The Company has set policy and procedures to minimize the risk associated with projects.
Projects are analysed within the operational risk spectrum, adopting best practices to ensure timely execution and maximum value creation for all stakeholders
Safety risk The Company operates across multiple locations and is subject to various stringent safety laws and regulations. Non-adherence to process and employee safety requirements, provisions of safety laws and regulations may impact business continuity and reputation. The Company has built a strong safety management system that encompasses its operational ecosystem.
Safety trainings are conducted to meet the requirements of employees, contractors and other relevant stakeholders as a part of the safety competency and capability enhancement initiative.
The Company follows strict policies to ensure safety of employees and contractors, and abide by environmental regulations to preserve natural resources.
Input Price Risk/ Commodity Price Risk The Companys business is significantly dependent on availability, cost and quality of raw materials and fuel for the construction and development of projects undertaken. The principal raw materials include steel, zinc, aluminium conductors, copper, cement and insulators. Prices and supply of may vary due to global economic conditions, supply demand mismatch, competition, production levels, and taxes. The Company currently manages such risk through a mix of back- to-back sourcing of materials and hedging through commodity futures. This moderates risks posed by volatile raw material prices.
In the domestic market, most of the T&D orders have a price variation clause linked to applicable industry indices protecting the profitability from volatility in major input prices.

Internal Control

The Company has adequate system of internal controls in place. The Company has documented internal control policies and procedures covering all financial and operating functions. The Company has aligned its internal controls with the requirements of Companies Act, 2013. The Company also complies with the requirements of ISO 37001:2016 which establishes global standard best practices for companies to manage bribery related risks.

The Company has adopted Internal control is the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The Company is committed to ensuring an effective Internal Control environment that will help in preventing and detecting errors and irregularities, thus ensuring security of Companys assets and efficiency of operations. The Company has an internal control mechanism which is commensurate with the size and complexity of business and aligned with evolving business needs. This is demonstrated through various means including, but not limited to Code of Conduct together with the Whistle Blower Policy and Anti Bribery & Anti Corruption Policy for raising concerns about unethical behaviour, improper practice, any misconduct, any violation of legal or regulatory requirements, actual or suspected fraud by any official of the Company without fear of punishment or unfair treatment, appraising Senior Management and the Audit Committee of the Board periodically on the internal processes of the Company with respect to Internal Controls, Statutory Compliances and Assurance etc.

Periodically, the Audit Committee takes cognizance of the significant risk assessment processes, audit plans, reported observations, recommendations and adequacy of Internal Controls and provides directions and guidance including external benchmarking of best practices for further action, if any. Extensive use of technology ensures robustness and integrity of financial reporting and internal controls, allows optimal use and protection of assets, facilitates accurate and timely compilation of financial statements and management reports and ensures compliance with statutory laws, regulations and company policies. The Company has Group Assurance division besides external firms that reviews internal controls and operating systems and procedures.

Environment, Health and Safety (EHS)

KPTL strives to abide by the the highest EHS standards with a dedicated approach and a strong commitment to fulfil its obligation. We encourage our employees to imbibe EHS policy and procedures into routine practice and motivate them to incorporate safety procedures in all operations and functions. To achieve the organizational goal of zero harm, the Company aims to integrate safety in construction work procedures. Moreover, KPTL is committed to promote a safe working environment by adopting safe working in day-to-day operations to prevent injury and illness to employees, contractors & visitors and continuing compliance with corporate, state and local statutory obligations governing the business.

In FY20-21, KPTL inculcated safety drives and delegated safety ownership to line management, employees and contractors for prevention and mitigation of incidents, with a focused approach on the following areas:

COVID-19 precaution drive:

Designed and rolled out detailed pictorial guideline for work resumption after lockdown. Design of COVID-19 tracker for reporting, tracking and maintaining a checklist, as per Corporate EHS guidelines. It helped to implement measures that curbed the spread of COVID 19, in compliance with guidelines issued by local authorities, Ministry of Health & Family Welfare, Government of India and countries where we operate.

Consistent follow-up & monitoring on daily basis for effective implementation of COVID-19 preventive measures.

Weekly circulation of COVID-19 dashboard to top management of Kalpataru group.

Periodical health check-ups of workers and staff for health monitoring and protection from COVID-19.

Daily Training /Awareness session /Encouragement program/ Yoga for worker engagement during the lockdown.

Weekly video conference with business units, project sites and country heads to examine the COVID-19 prevention drive.

Process Driven Structure

Virtual project site EHS audit from corporate and regional offices. Safety walk through by project managers along with team leaders and EHS personnel on weekly basis. Developing digital reporting tool for observations, incidents, work permit, inspection, MIS.

EHS reward and recognition policy to encourage employee for EHS performance.

Effective and Constant Daily Safety reporting from all sites.

EHS Disciplinary Policy to maintain discipline and increase productivity.

Robust EHS Review Mechanism

Formation of EHS steering committee at business units, regional offices and site level for robust & effective EHS review mechanism: introduced EHS steering committee to implement detailed guidelines at business units, regional offices and site level. Monthly EHS Snapshot: Business unit wise monthly EHS updates circulated to the leadership team to adopt a focused approach across KPTL project sites.

EHS Walk around Project Site: Regular rounds by BU Head

/ RO Head /project site line management team around the sites helps to resolve the EHS issues and encourages the staff to implement EHS policies in day-today activities. Fortnightly EHS review: Fortnightly review for monitoring status of initiatives and ongoing EHS performance.

Fire safety audits of major business buildings of KPTL to avoid any untoward incident.

EHS council meet for all business units and regional offices heads to review the site EHS status and Road Map for the upcoming quarter. Annual feedbacks from clients/ customers to understand their expectations on safety.

More Focus on Training

Organized different webinar sessions for all employees – Total training Man-hours – 4040 Hrs. Virtual Reality (VR) simulation used for the various types of EHS training to easily understand the training content.

EHS training is organized with the help of professionals.

Daily motivation and encouragement program for workers during lockdown period.

Effective Communication

EHS Toll free number to capture and report incidents from site instantly.

Reporting of Incidents to RO/ Corporate through Fast track incident communication/reporting and investigation of incident through Why-Why Analysis helps to derive root causes of incidents. Incident sharing & analysis of case study through Safety alerts. Rolled-out EHS E-journal on a quarterly basis for knowledge sharing.

EHS dashboards/EHS statistic boards to reflect and monitor performance.

The Company has been consistently transcending EHS compliance across all project sites with high standards of safety in the organization, with robust health and safety systems, processes, safer equipment and trainings. This has helped it to achieve various Awards and appreciation in 2020-21.

Corporate Social Responsibility

KPTL has always been at the forefront of CSR activities as a responsible and responsive corporate citizen. KPTL believes that sharing success with the larger communities and societies is both a responsibility as well as an opportunity to make a difference to the lives of people. Kalpataru Foundation and Kalpataru Welfare Trust are the two CSR arms of the Company. In the communities we operate, be at Mumbai, Gandhinagar, Rajasthan, Raipur or any Project location, KPTL takes pride in working with all sections of society, selecting projects with adequate care, and working in areas that fulfil the needs of beneficiaries.

Kalpa-Arogya Seva (Project KARE)

Under Project KARE, the Company runs medical dispensaries in the name of Kalpa Arogya Seva Kendras (KSAK) in Gandhinagar and Mumbai. KSAK Gandhinagar is a state-of-the-art medical dispensary which provides a range of diagnostic and treatment services to economically distressed people in and around Gandhinagar on a regular basis. This medical dispensary is a multi-specialty dispensary with ultra-modern facilities (X-Ray, Sonography, Dental,ENTequipments,ECGequipment etc.) The cutting-edge equipment in the pathological laboratory is highly effective in catering to the medical requirements of those in need. Apart from the facilities, the dispensary has about 30 eminent personalities from the medical fraternity of Gandhinagar including General practitioners, various specialists, Ophthalmologist, MD Surgeon etc. attending to the medical requirements of the poor and needy. The patients are provided free medicine along with specialized doctor consultations at minimal charges. In FY20-21, KSAK Gandhinagar has initiated setting up of an MRI centre comprising advanced technologies of Magnetom Sempra MRI–1.5 T. Magnetic resonance imaging (MRI) scanners, use strong magnetic fields and radio waves to generate images of the organs in the body. At the MRI centre, the Company will provide subsidized services to the poor and needy. The specialized centres are likely to reduce the dependence on private clinics and provide access to better healthcare facilities to the marginalized sections of society. Periodic Osteopathy Camps and Health awareness programs are organized at KSAK Mumbai. After the success of Gandhinagar and Mumbai, the Company has initiated establishment of its third KSAK centre at Raipur, Chattisgarh in 2021 close to our manufacturing facility. The Company realised that that other than the government Primary Health Centre, there is no medical dispensary in the vicinity of about 10 kms of the manufacturing plant, which cover about 12-15 villages, that can provide medical treatment to the poor and needy at a nominal cost. Hence, the Company conceived the idea of opening KSAK Raipur near to plant.

Benefitted more than 3,13,000 patients at KSAK, Gandhinagar till FY 21 Benefitted more than 13,000 patients at KSAK, Mumbai till FY 21 The Company also aimed to improve healthcare facilities with the establishment of a general hospital, Jankikund Chikitsalaya near Satna, Madhya Pradesh, to serve deprived rural communities. The hospital is being constructed now.

To support people suffering from Parkinsons disease, the Company organized group multidisciplinary rehabilitative therapy, training activities, need based individual counselling services, awareness initiatives, distribution of resource material and information dissemination to People with Parkinsons (PwPs), caregivers and senior citizens at various locations in Mumbai.

166

Sessions conducted in FY 21

627

People Benefitted

Through Vision Foundation of India, KPTL provided Free Eye Surgeries to people who cannot afford the fees for surgeries. The beneficiaries include people from weaker socio-economic families, especially from rural areas & urban slums.

Surgery Date: 25th March, 2021

Mrs. Anandi Devi had become bilaterally blind with cataracts. Her vision was (PL+). She could not work, cook, or even walk without help. Her son carried her on his back from their very remote village so that she could attend the Hospital screening camp in Aurangabad district. Following successful cataract surgery, her vision was completely restored (6/24) on the next day of the surgery. She was able to see her sons face and was able to walk home herself with her son.

500

Surgeries undertaken in FY 21

3675

People Benefitted as on 31st March 2021

Kalpa Aapda Seva

KPTL understands the unfortunate impact of the novel COVID-19 and its effect on the underprivileged. It has therefore provided its support for Combating and Containing the Novel Corona Virus (CoVID-19) through various relief activities including construction of a 1000 bedded COVID Hospital in Thane, Mumbai, engagement with NGOs that provide food to vulnerable communities, labourers and supported the local administration for relief efforts. The Company also made contributions to Relief Funds including PM Cares Fund to support the government machinery to fight the pandemic. The Company arranged food for labourers at Railway Stations. It also provided more more than 50,000 free meals to the poor and needy during the pandemic.

50,000+

Free meals kalpa Vidhya kalpa Kaushal (kVkK)

KPTL has undertaken the development of Smt. Sugni Devi Pukhraj Munot Government Senior Secondary School located in Pipar City, Jodhpur, Rajasthan, as an Adarsh school, to improve its infrastructural facilities. The Company has changed the entire landscape of the School and is on the way to develop it as an Adarsh School. Through its constant efforts, KPTL not only develops and renovates schools but, also provides access to books and learning materials, makes provision for digital learning through mini science centre, computers and laptops etc. Kalpataru Foundation runs Kalpataru Skill Development Academy to provide residential practical skill development training. Trainings are provided in 3 Trades, namely Welder, Fitter and Grinder. The Company also provided scholarship to deserving students and made arrangements for a school bus for carrying for carrying deaf and mute students to school.

600+

Students benefitted

30+

Trainees

Kalpa Gramodaya

The Company is executing a TL Project at Imphal West, Manipur. The local populace in the project area comprises of people from various ethnic backgrounds. Considering this, the Company is constructing a community hall for the promotion of local art and culture through the promotion of fairs, community programs, cultural activities etc. It will also act as a self employment tool for the local population as this will serve as a market place where people can carry out businesses in the long term.

SAVe our envIrOnment save oUR animals ("SAVIOUR")

The Company undertook various welfare programs for Animals. KPTL runs various CSR Projects to prevent animal cruelty and secure the welfare of animals throughout India, alleviate animal suffering and instills a feeling of compassion in people to make them realize their responsibility towards animals. The Company also works towards the establishment of panjrapoles that offer shelter to animals in sickness and old age, and constantly upgrade veterinary skills and services.

Human Resources (HR)

Theyear2020-21hasbeenachallenging year across the world. COVID-19 is an unprecedented crisis which has unleashed severe uncertainties and economic difficulties. We, like most of the entities across the world needed to think quickly and be nimble in our actions.

In the face of this challenge, we have questioned the way we work and think differently to lead KPTL to recovery and adapt to changing times.

As an organization, our priority was to ensure a safe work environment for our teams across the world through our COVID-19 response mechanism. We initiated determined actions to build such an environment that ensured the safety of our teams at work and to ensured continuity of work at projects and factories.

With collective efforts, within one month, 94% operations resumed with the necessary safety measures in place. In 2020, we have had to challenge our thought process and transform many practices to meet the crisis head on. KPTL placed critical importance on the holistic wellbeing of our team members, ensuring that they are able to cope with change and to maintain enthusiasm towards achieving business goals. While the year was marked by enormous efforts to ensure employee wellbeing, we were also able to transition our Learning and Development efforts to virtual means, to ensure the development of our teams. One of the most important aspects of KPTLs people strategy is to hear what our teams have to say; Covid-19 Employee Survey and Reach Out – Employee Engagement Survey were carried out to understand and address the concerns of our teams across the world.

Efforts to mitigate the risk and impact of COVID were taken up across KPTL. To help build employee immunity against COVID, Homeopathy & Ayurvedic medicines as prescribed by Ministry of AYUSH, Government of India, were distributed to all employees including overseas project sites employees. Online consultation support was extended to employees of KPTL through the doctors associated with our Kalpa-seva Arogya Kendra. Covid-19 Employee Survey: In order to understand the pulse of employeesandfindthebestpossible ways to work in the new normal, Covid-19 survey was conducted. 2,054 employees responded to the survey, where the parameters of analysis were Well-Being and Health, Company Confidence, Leadership, Communication and Awareness, Business Continuity and Support Received. Subsequently, an action plan was framed and necessary steps were taken to enhance employee well-being and experience.

Employee Wellness: To prepare the employees for the challenging time during the pandemic KPTL had collaborated with UIB India and residential doctors for various health & well-being sessions. Sessions like Ergonomics and Spine Health Session, Stress Management and Emotional Wellbeing, COVID Awareness, Emotional Intelligence, Eye Care during Covid, were conducted. Mental Wellbeing and Mind Body Nutrition (holistic stress management): With growing anxiety, during the pandemic, in addition to regular meditation sessions two important sessions were organized to facilitate employee wellbeing. A session on Mental Wellbeing was attended by 147 employees and a session on Mind Body Nutrition (holistic stress management) was attended by 180 participants (employees and their family members).

Talent Development & Review Council:

Nurturing talent is a way of life at Kalpataru Group. For this purpose, the KPTL Talent Development and Review Council

(TDRC) was introduced this year. TDRC operates at Business level and at Organization Level and facilitates a closer review of high potentials and further enables planned career progression road map for such individuals. Awareness Sessions were conducted for senior leadership and their active participation in the process will help us in institutionalizing the TDRC. High potential individuals, across KPTL has been covered this year.

Long Term Leadership Development:

a) ELEVATE - Early Leadership Excellence, Visioning and Talent Engagement Program - is a long-term continuous development journey of 9 months for high potential employees for Deputy Manager to Sr. Managers levels. The intervention is facilitated in collaboration with renowned external agencies.

This journey is a combination of classroom sessions at periodic intervals, practical implementation of learning, Group Coaching and talent review.

This aims at Transitioning

2 passages of leadership pipeline i.e.

1. Leading self to leading others and

2. Leading others to leading managers

b) LEAP - Leadership Excellence and Pride is also a long term development journey of 9 months for high potential employees at Assistant General Manager to Assistant Vice President level in collaboration with external experts. The program focuses on predefined competencies relevant at organization level and aims to address relevant transitional aspects of leadership in the broader perspective.

This aims in Transitioning 2 passages of leadership pipeline i.e.

1. Leading Managers to Leading Function and

2. Leading Function to Leading Business

Key Contributors Incentive: The Key Contributors Incentive Policy aims at retaining and rewarding consistent performers who display critical leadership qualities in their roles and the ability to become future leaders at KPTL.

Virtual Learning and Development Initiatives: Despite the COVID 19 pandemic, we organized 500+ technical & soft skills programs on virtual platforms like Zoom, MS Teams etc. We have covered 98% employees in one or more programs.

Learning Management System:

The LMS has been our most critical resource in continuing our learning programs, even during the pandemic.

- 98% employees have accessed one or more courses

- Total 21000+ courses completed

- 60+ technical & soft skills courses are live & functional

- 7 Technical modules of Transmission Line were upgraded

- 12 new soft skills modules Analytical Thinking, Leadership for Middle Managers, Strategy in Practices, Stress Management etc. were launched

- Modules based on Organization policy like ABAC and KCoC were updated.

Swagat Induction Program: Amid the COVID crisis, the Induction and orientation of new joiners was facilitated virtually through Swagat Induction Program, whereby, all the important aspects of the organization like introduction with Sr. Leaders, Policies & Practices, Behavioral Competency Framework, Performance Review

& Development, ABAC & KCOC policies were covered. Anti Bribery – Anti Corruption Management System: KPTL undertook a massive training and recertification drive for the ABAC Policy under ABMS. This is a part of our commitment to the ABMS certification of the company and our strong devotion to remain rooted in ethical practices. Over 97% employees have been successfully trained and certified with the help of LMS based ABAC module and training drives.

The HR strategy is of KPTL focuses on Aligning, Executing and Renewing. The focus remains on aligning HR initiatives to meet business needs, executing initiatives to deliver real time results ensuring partnership with businesses and continual renewal of our approach approach to meet the ever-changing needs of business.

Cautionary Statement

This report comprises the facts and figures along with assumptions, strategy, goal, and intentions of the Company which may be "forward-looking". The Companys actual results, performance may differ considerably from those presented herein. The Companys performance is dependent upon global and national economic conditions, the price of commodities, business risk, change of Governments rules and regulations, etc.