Kalpataru Projects International Ltd Management Discussions

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Jul 23, 2024|03:32:35 PM

Kalpataru Projects International Ltd Share Price Management Discussions

Economy overview

Global economy review and outlook

Global growth proved surprisingly resilient in 2023, with lower energy prices and fading supply chain pressures helping inflation to decline more quickly than anticipated. However, recent indicators point to some moderation of growth. In the absence of further adverse supply shocks, cooling demand pressures should allow headline and core inflation to fall further in most economies. By the end of 2025, inflation is projected to be back to target in most G20 countries. Geopolitical risks remain high, particularly concerning the ongoing conflict in the Middle East. Further upside surprises in inflation could lead to sharp corrections in financial asset prices, as the market may anticipate higher treasury yields for extended periods. According to the IMF, global growth is projected at 3.2% in 2024 and 3.2% in 2025.1

Indian economy review and outlook

The Indian economy, bolstered by strong macro fundamentals, retained its growth momentum primarily driven by government investments in infrastructure. In Budget 2023-24, capital investment outlay for infrastructure is proposed to increase by 33% to C10 lakh crores (US$ 122 billion), which would be 3.3 per cent of GDP. Another key focus of the Government has been on sustainability and green growth. All these measures had a cascading effect on capacity utilization, and with the strong corporate balance sheet, the private sector is at the threshold of the resurgent investment cycle. The Indian economy underwent significant structural reforms during the period 2014-2024, boosting its macroeconomic foundations. These measures propelled India to become the fastest-growing economy among G20 nations. Further, efficient handling of the COVID-19 pandemic and recent geopolitical challenges has ensured that the Indian economy outperforms its global peers. Current estimates suggest

a growth of 8.2% in 2023-24, building on the impressive 9.1% (FY22) and 72% (FY23) growth in the preceding two years. It is commendable that India is expected to post a GDP growth rate of over 70% for the third year in a row.3

Industry overview and opportunities

Global Power Transmission and Distribution (T&D) Sector

The expanding global population, urbanisation and the escalating demand for electricity represent the key driving factors for the need for reliable and efficient power transmission and distribution infrastructure. Additionally, the rising shift towards cleaner and more sustainable energy sources also represents a vital factor impelling the market growth for T&D infrastructure. Consequently, several countries are investing in grid modernization efforts, which include the deployment of advanced electric power transmission and distribution systems. These upgrades enhance grid reliability, reduce losses during transmission, and enable better load management. Furthermore, the electrification of the transport and heating sectors continued to accelerate globally, with record numbers of electric vehicles and heat pumps getting sold, which in turn is promoting the development of grid infrastructure. Moreover, the growing frequency and severity of natural disasters, also call for increasing the need for resilient grid infrastructure, which, in turn, is influencing the market positively.

According to the International Energy Agency (IEA), the global electricity demand is expected to rise at a faster rate over the next three years, growing by an average of 3.4% annually through 2026.5 In the IEAs Net Zero Emissions by 2050 Scenario, a pathway aligned with limiting global warming to 1.5 ?C, electricitys share in final energy consumption nears 30% in 2030 from 20% in 2023. To meet national climate targets, grid investment needs to nearly double by 2030 to over USD 600 billion per year. 6 The International Energy Agency assesses the need for over 80 million km of grids around the world by 2040, which is equivalent to todays entire existing global grid and estimates around 1,500 GW of advanced renewable projects waiting in grid connection queues.7

Regional Focus

Indias power sector is undergoing significant reforms to achieve financial stability, operational efficiency, and greater integration of renewable energy for a cleaner future. The Government of India aims to reach 500GW of non- fossil fuel-based electricity generation capacity by FY30 from an operational capacity of 181 GW as of December 2023.

To achieve this, regions with high solar and wind potential need to be connected to the Inter-State Transmission System (ISTS) for efficient power evacuation to demand centres.

The draft National Electricity Plan has envisaged 170 transmission schemes with a total estimated cost exceeding C 3.13 trillion for inter-state transmission and around C 1.61 trillion for intra-state systems during the five years from FY23 to FY27.

In terms of physical infrastructure, a total of 1,23,577 km of transmission lines and 722,940 MVA of transformation capacity have been targeted for addition in the FY23-FY27 period. It may be noted that the transformation capacity includes 12,000 MW of transfer capacity to be achieved with HVDC-bipole transmission infrastructure.9

In the last few years, Latin American and Caribbean countries have implemented noticeable efforts to reduce their emissions. Between 2015 and 2022, the region increased its renewable capacity by 51% to reach 64% of electricity generation, mainly with hydroelectricity, solar, and wind energy. However, the pace must be accelerated given that with population and economic growth, electricity demand is projected to increase by an annual average of 2.3% from 2022 to 2050. Additionally, Latin America and the Caribbean have nearly 17 million people without access to electricity. A faster transition to clean energy could reduce energy costs and make it more accessible.10 The Interamerican Development Bank (IDB) has estimated that in less than 10 years (by 2030), Latin America and the Caribbean need more than USD 577 billion to close the electric power gap. Of that total, the region will need around USD 397 billion to build new generation, transmission, and distribution infrastructure, and more than USD 180 billion to replace and maintain existing assets.

International Energy Agency, Electricity Market Report 2024 6IEA, Electricity Grids and Secure Energy Transitions Report 7Electricity Grids and Secure Energy Transitions, IEA, October 2023

8https://iea.blob.core.windows.net/assets/6b2fd954-20T7-408e-bf08-952fdd62118a/Electricity2024-Analysisandforecastto2026.pdf 9CEA Website 10IEA Latin America Energy Outlook 2023 Note: The above are indicative maps

Europe & Nordic

Europe is pursuing one of the worlds most ambitious climate and energy goals. The revised Renewable Energy Directive, adopted in 2023, raises the EUs binding renewable energy target for 2030 to a minimum of 42.5% up from the previous 32% target, with the aspiration to reach 45%. It means almost doubling the existing share of renewable energy in the EU.11 To help deliver this objective, countries across Europe are placing huge emphasis on upgrading and strengthening their transmission infrastructure. Additionally, the rising electricity demand particularly from industrial & mobility, refurbishment of outdated infrastructure and greater need for cross-border transmission capacity is also leading to higher T&D spend. Consequently, an estimated investment of a whopping EUR 584 billion is required in EU transmission and distribution (T&D) grids by 2030.12

Similarly, the road to net zero emissions in the Nordics requires the energy sector to undergo a significant transition during the next few years. With this in mind, the Nordic Transmission System Operators (TSO) plan to invest more than 25 billion euros together over the next decade. The purpose is to enable the ongoing electrification, upgrading transmission grids and integrating new renewable production facilities, especially wind power, both on land and at sea.13

Africa

Africa has the fastest-growing population in the world, and it is set to double by 2050 to reach more than two billion people. Meeting their needs with cost-efficient, sustainable energy sources will be vital to the continents socioeconomic development as well as to achieving the goals of the Paris Agreement.14

There is a profound need for appropriate infrastructure to be put in place to utilise and distribute this potential among the different regions to enable efficient, sustainable, and affordable access to energy across Africa. To date, Africas T&D infrastructure remains grossly underinvested as 38 countries in sub-Saharan Africa have less than 150,000 kilometres of combined transmission lines - one of the lowest per capita rates of any region globally.

As the continents population grows, and investors and governments focus on renewable generation increases, so too will the demand for transmission infrastructure to deliver that new power to households. Indeed, the International Energy Agency estimates that achieving near-universal access to affordable electricity in Africa by 2030 will require connecting 90 million people annually - triple the connection rate of recent years. Additionally, regional integration initiatives are fostering cross-border transmission line projects. Thus, increasing electricity demand, the shift towards renewables and regional integration are driving the expansion of the T&D infrastructure market in Africa. The annual spending on T&D infrastructure is estimated at over $45 billion over the next eight years.15

Middle East

In the Middle East, electricity demand grows by 3.3% each year. Yet the population is increasing at a faster rate with places such as Kuwait, Oman, Qatar, Saudi Arabia and the UAE growing at 3.5% and even higher in other countries within the region such as Egypt, the most populous Arab nation, which adds nearly 2 million people annually.

To make power supply sustainable, the Middle East will need to increase efficient power generation and retire older power plants with lower efficiency levels. Additionally, the GCC countries have also accelerated investments in clean energy sources, namely renewables and nuclear, to decarbonize the power generation sector. The energy industry is witnessing the increasing popularity of solar and wind power, as a result of environmental targets and cost competitiveness.

Saudi Arabia aims to generate 50% of its electricity requirements through renewable energy sources (RES) by 2030 through the installation of 58.7GW of solar/wind capacities, in addition to 2-3GW in nuclear capacity, as stated under Vision 2030.

The UAE also aims to generate 50% of its electricity from carbon-free sources by 2050, and raised its renewable energy capacity target to 14.2GW by 2030; in Abu Dhabi, the plan is to install over 7GW in solar PV by 2030, while Dubai aims to generate 27% of its energy mix from renewables by 2030, and gradually transition to 100% clean energy by 2050. Similarly, Oman has announced ambitious targets to drive lower emissions and achieve net zero by 2050, including deriving at least 30% of its power from renewable sources by 2030 (with an interim target of 16% by 2025) as stated under Oman Vision 2040 and the National Energy Strategy. Overall, based on the announced targets, the GCC is expected to become one of the largest markets globally in terms of renewable energy capacity by 2030, which would entail significant investments in developing and strengthening the T&D infrastructure to the tune of around USD 50 billion by 2030.16

Asia Oceania

The T&D landscape in Asia reflects the regions commitment to meet its growing electricity demand while addressing sustainability and reliability concerns. As the demand for electricity increases, coupled with an increase in the electrification rate, the uptake of T&D projects is expected to grow significantly in the region. In addition, many countries have also set ambitious targets in progressing the renewable power sector in the future. Countries are expanding their capacities quickly — Vietnam recently surpassed Thailand, the Philippines and Malaysia for total installed solar capacity and met its 18.6 GW target for 2030 10 years ahead of schedule. This is leading to noticeable developments in grid planning and investment. According to the IEA World Energy Outlook 2020, Southeast Asia needs to increase investment in electricity transmission networks by USD 350 billion between 2025 and 2030 to achieve clean energy targets. This is to better integrate renewables and meet sustainability, access, and energy security goals.17

Central Asia has the potential to become a hub for a clean energy transition to meet regional energy demand, which is expected to increase by more than 30% by 2030. The regions governments also recognize the need for greater cooperation, trade, and investment. Building trust in electricity trade requires reforms to improve sector governance and transparency, strengthen the planning framework, gradually remove fossil fuel subsidies, and expand generating and grid capacity. The World Bank estimates that investments of at least USD 20 billion would be needed to expand Central Asias renewable energy supply and modernize national and regional grids for improved trade and interconnectivity within the next 5 to 10 years.18

Australia

The Australian Governments has set emissions reduction targets to 43% by 2030 and net zero by 2050. In the same context, the Australian Energy Market Operator (AEMO) released the Integrated System Plan (ISP) in 2022 to ensure the supply of reliable and secure energy. The plan recommends investing around A$19 billion under the Rewiring the Nation initiative as the country will need to install more than 10,000 kms of new transmission to connect consumers with renewable energy. AEMO has forecasted a nine-fold increase in grid capacity, from 16GW of large-scale renewables in 2022 to 44GW in 2030 and 141GW by 2050 given that the countrys ageing and congested electricity grid is not well equipped with the dynamics of distributed energy generation. KPIL has a well-established presence in Australia and supplies transmission towers to leading utilities. Additionally, KPIL is exploring EPC opportunities in Australia.19

Infrastructure and civil construction Sector

The past few years have seen an unprecedented focus on infrastructure development in India as an increase in infrastructure investment provides a critical push to the potential growth of the economy. Thus, the infrastructure sector has been recognised as a key driver for achieving the governments goal of a USD 5 trillion economy by FY 2027-28. Recognising the need to lay a solid infrastructure foundation, the Government of India increased infrastructure spending to 3.3% of GDP for FY 2023-24, nearly trebling its expenditure in 2019-20. Capital expenditure budgeted for the current fiscal year accounts for nearly 22% of total expenditure, making it the highest in the last 15 years. One of the key initiatives undertaken has been the National Infrastructure Pipeline (NIP). It targets investments of C111 trillion between 2019- 20 and 2024-25. Another key policy intervention is the Gati Shakti Master Plan which aims to provide integrated and multimodal connectivity infrastructure to various economic zones.

India will spend nearly C143 lakh crore on infrastructure in seven fiscals through 2030, more than twice the ~C67 lakh crore spent in the previous seven years starting fiscal 2017 Of the total, ~C36.6 lakh crore will be green investments, marking a 5x rise compared with fiscals 2017-2023.

The construction sector has been the key beneficiary of the rising infrastructure spending by the government. Indias construction industry is to grow at a CAGR of 9.5%-10.0% from C21.8 trillion in FY23 to C34.4 trillion in FY28. Near-term growth will be supported by a strong government push in the form of infrastructure development projects such as the National Infrastructure Pipeline, Smart Cities Mission, Gati Shakti, UDAN, Bharatmala Pariyojana, Sagarmala and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) etc. These government programmes aim to enhance connectivity, upgrade urban infrastructure, develop transportation networks and foster the overall construction sector of India.

Growth drivers for the Construction Sector in India - Major opportunities for transport infrastructure

The transport sector has been a focus area for the government over the past years and is also expected to receive significant investments going forward. According to India Investment Grid (IIG), ongoing projects in the transport infrastructure sector are valued at ?69 lakh crore, across stages of development. Among these, the top three sectors by value are Roads and Highways (48%), Railways (30%) and Urban Public Transport (12%).21

Indias transportation and logistics sector is poised to grow at a compounded annual growth rate (CAGR) of around 4.5% from 2022 to 2050 under the infrastructure umbrella, which includes roads and highways, railways, ports, airports, urban public transport, and logistics parks. This growth will align with the governments targets to reform and develop the transport sector of the country, from capacity expansion of ports to building greenfield airports and expressways.

Businesses Plans & Outlook Key Enabling Policy Framework
Roads, Elevated Expressways, Bridges & Tunnels Indias national highway network is expected to grow to 200,000 km by 2025. As part of Bharatmala Pariyojana, a total of 27 greenfield expressways and access-controlled corridors, spanning over 9,000 km, are planned in the next five to six years. Bharatmala Pariyojana
Airports The target is to increase the total number of airports from 140 in 2022 to 220 in 2025 The government plans to spend ?98,000 crore by 2025 on modernizing existing airports and constructing new ones to cope with this traffic and provide enhanced connectivity UDAN Scheme
Railways The Indian Railways is set to receive a capex push of H 2.52 lakh crore for FY25, an increase of 5% YoY The funds will be spent on building railway tracks, wagons, trains, electrification, signalling, and developing facilities at stations while focusing on safety. National Rail Plan (NRP) is a roadmap to create a future-ready railway system by 2030. The objective is to create capacity ahead of demand and increase the share of railways in freight operations to 45% from 27% in 2023. The Indian Railways intends to double its cargo loading to 3,000 million tonnes (mt) by 2027 It is widely understood that DFCs will play a key role in this endeavour. Three new DFC (Dedicated Freight Corridor) cover the east coast route, the north-south trail and an east-west one, covering a total length of 4,300 km, with the estimated project cost being ? 2,00,000 crore. India is currently constructing its first HSR (High-speed rail) project linking Mumbai to Ahmedabad. Another twelve projects (7396 km) requiring an investment of around ?15 trillion are in various stages of planning. The government is also expected to invite tenders to cover 4,000-5,000 km of railway tracks with its collision prevention system, Kavach. The station redevelopment program aims to transform existing railway stations into city centres with state-of-the-art facilities. Around 400 railway stations will be redeveloped at an investment of over ?1 trillion. National Rail Plan Vision -2030
Urban Transport - Metro Rail Indias metro rail network has grown remarkably since 2014. It started from a network spread across five cities and 229 km and has grown to over 900 km across 20 cities in March 2024. Additionally, the introduction of Indias first State of Art Namo Bharat train, operating on the Delhi-Meerut RRTS (Regional Rapid Transit System) corridor, further underscores the nations commitment to enhancing regional connectivity and modernizing its transportation infrastructure. Approved additional metro rail network of 1,032km will expand the reach of metro systems up to 27 cities. In addition, lighter urban rail systems such as Metrolite and Metro Neo are being conceptualised and developed by many small and medium-sized cities. India is set to increase its metro network from an existing operational 851 km to a planned 1,985 km over the next five to seven years. This will take Indias investment in metros to ?6,838 billion.22 Atal Mission for Rejuvenation and Urban Transformation -AMRUT
Ports The target is to increase ports handling capacity from 2,600 million tons per annum in FY23 to 10,000 MTPA by 2047 The government aims to operationalize 23 waterways by 2030. The capital outlay in the port industry is projected to increase at a CAGR of 4.5% from C10.7 billion in the Financial Year 2024 to C12.7 billion in the Financial Year 2028. There are 802 projects worth investment of ?5.40 trillion for implementation under the Sagarmala Programme by 2035, out of which, 220 projects worth C1.12 trillion have been completed and 231 projects worth C2.21 trillion are under implementation. In addition to the above, 351 projects worth ?2.07 trillion are under various stages of development. Sagarmala National Logistics Policy

Oil and Gas Sector

Globally, a total of 228,700 km of gas transmission pipelines are in development (projects that have been proposed or are under construction) with a total price tag of US$723 billion, and 69,700 km of this length is under construction for US$193.9 billion. The amount under construction globally represents nearly an 18% increase from the end of 2022, suggesting a very active 2023 and an uptick in pipeline projects.23

The investment sums involved - which have been committed to projects that are underway or are planned for the near future - reveal the powerful momentum that remains in traditional fossil fuel industries even as clean energy supplies are deployed at an accelerating rate. Once completed, the pipelines and LNG import terminals will extend the use of natural gas for years to come and guarantee that fossil fuels will retain a critical role in key power systems well beyond 2030. The total length of global oil and gas trunk pipelines is 2.15 million km in 2023 and is expected to grow by more than 5% by 202724

: Focus markets

India

India is the third-largest energy and oil consumer in the world. The countrys oil demand is expected to increase by 40% to 6.7 mb/day by 2030 and further to 8.3 mb/day by 2050.26 The capital

outlay for the MoPNG (Ministry of Petroleum and Natural Gas) has seen a fluctuating trend in the past five years. The actual capital outlay has increased to C19.1 billion in the Financial Year 2019 from C 11.3 billion in the financial year 2018. It has further increased to C23.1 billion in the Financial Year 2021 from ?5.7 billion in the Financial Year 2020. The actual capital outlay has dropped to ?3.5 billion in the Financial Year 2022. The capital outlay in the MoPNG is projected to increase at an average CAGR of approximately 4.0% from the Financial Year 2024 to ?415.4 billion in the Financial Year 2028. ONGC, IOC and other oil PSUs will invest about C1.2 lakh crore in the coming fiscal starting April 24 in oil and gas exploration, refineries, petrochemicals and laying pipelines to meet the needs of the worlds fastest-growing energy-consuming nation. The investment proposed in 2024-25 is 5 per cent higher than C1. 12 lakh crore spent by the State-owned oil firms in the fiscal year 2023-24, according to Budget 2024-25 documents.27

Middle East

The Middle-East Oil and Gas Line Pipe Market size is estimated at USD 5.5 billion in 2024 and is expected to reach USD 6.73 billion by 2029, growing at a CAGR of 4.12%. Factors such as increasing development of gas infrastructure, growing investments, and increasing capacity of desalination plants are expected to drive the market.

EH Water Supply and Irrigation

India has made considerable progress in providing drinking water and safe sanitation to urban and rural households. As of January 2023, all households in urban areas and about 60% of rural households have access to tap water connections. The target is to ensure water tap connection to every rural household.

The budgetary allocations have more than doubled from H140bn in 2014 to H 301bn in 2020 and then further tripling to H 984bn in 2025BE. Opportunities in the water sector are diverse, encompassing initiatives such as the Jal Jeevan Mission, Namami Gange, water treatment, irrigation, and more. The emphasis on developing robust water infrastructure stems from the pressing need to address the depletion of freshwater resources. The government recognizes that treating water is not only a crucial long-term solution but also imperative in the face of a growing population.

Additionally, Irrigation projects under the Pradhan Mantri Krishi Sinchayee Yojana with an outlay of over ?93,069 crores are also gaining traction. Similarly, capital expenditure on waste and wastewater treatment is estimated to be USD 2.3 billion between 2023 to 2027.28

EH Buildings and factories

India has seen tremendous urban progress. It is estimated that by 2030, more than 400 million people will be living in cities in India. The demand for residential, commercial and institutional properties has been fuelled by Indias expanding urban population, rising household incomes, and decade-long low loan rates, which have increased sales volume. Secondly, the governments focus on affordable housing and its vision to boost investment will have a positive impact on the construction sector. Moreover, the industry has benefited from the push for policy that has resulted in legislation like the Real Estate Regulatory Authority (RERA), the introduction of Real Estate Investment Trusts (REITs), and SWAMIH (Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects). It is anticipated

that increased spending on residential projects by the state and central governments will continue to boost industry growth over the forecast period in the nation.

By 2040, the real estate market will grow to ?65,000 crores (US$ 9.30 billion) from ?12,000 crores (US$ 1.72 billion) in 2019. The real estate sector in India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021 and contribute 13% to the countrys GDP by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing the much- needed infrastructure for Indias growing needs. The Production Linked Incentive (PLI) scheme will drive industrial capital expenditure (capex) of ? 3-3.5 lakh crores over its duration. It will constitute 8-10% of total capex in key industrial sectors over the next 3-4 years.

The Indian data centre sector is currently in a dynamic phase, marked by impressive growth and substantial government support. The India data centre construction market was valued at USD 1.52 billion in 2022 and is expected to reach USD 3.46 billion by 2028, growing at a CAGR of 14.76% during the forecast period. India is the fastest-growing country, with increased investments from global and local data centre operators worldwide.30 31 With the construction of additional data centres, local data centre providers in each state are also increasing their presence, thus boosting the growth of the Indian data centre construction market. This provides significant impetus for the growth of the construction of residential, commercial and institutional buildings in India.

Company overview

KPIL is one of the largest specialised engineering, procurement and construction (EPC) companies with extensive global footprints that are well-diversified and high-growth businesses. The unified entity enhances the foundational EPC business, presenting a comprehensive range of services across diverse sectors such as Power Transmission and Distribution (T&D), Buildings and Factories (B&F), Water, Railways, Oil & Gas and Urban Infrastructure. This consolidated business will wield substantial influence with a notable presence, currently executing over 250 projects across more than 30 countries.

Financial highlights

Standalone & Consolidated key figures

Particulars

Standalone

Consolidated

FY2022-23 FY2023-24 % Change FY2022-23 FY2023-24 % Change
Revenue 14,337 16,760 + 17% 16,361 19,626 +20%
Core EBITDA 1,278* 1,366 +7% 1,481 1,628 + 10%
Core EBITDA Margin (%) 8.1% 8.2% 8.4% 8.3%
PAT 532 533 +0.2% 435 516 + 19%
PAT Margin (%) 3.7% 3.2% 2.7% 2.6%

*Core EBIDTA includes the amount of H109 crores shown as an exceptional item with respect of an award obtained by an erstwhile power transmission subsidiary and is contractually receivable by the company.

Key financial ratios

There is no significant change (i.e. change of 25% or more as compared to the FY 2022-23) in any key financial ratios.

Particulars

Standalone

Consolidated

FY2023-24 FY2022-23 FY2023-24 FY2022-23
Debtors Turnover (No. of Days) 116 120 106 114
Inventory Turnover (No. of Days) 59 57 57 61
Interest Service Coverage Ratio 3.68 3.83 2.91 2.79
Current Ratio 1.27 1.27 1.24 1.25
Debt Equity Ratio 0.57 0.55 0.76 0.78
Operating Profit Margin (%) 8.2 8.1 8.3 8.4
Net Profit Margin (%) 3.2 3.7 2.6 2.7
RONW (%) 9.3 10.0 10.0 9.2

Note: The decrease in standalone RONW is mainly due to lower growth in profitability compared to net worth. Conversely, the increase in consolidated RONW is driven by the improved performance of subsidiaries.

30https://www.jll.co.in/content/dam/jll-com/documents/pdf/research/apac/india/jll-q4-2023-residential-market-update-final.pdf

31Business wire

Business highlights and reviews

KPIL demonstrated exceptional performance in FY2023-24, achieving its highest ever revenue and EBITDA. The Companys revenue surged by 20% year-over-year (YoY) to C19,626 crores, driven by robust execution and a diversified business mix. EBITDA also reached a record high of C1,628 crores, marking a 19% increase YoY with an EBITDA margin of 8.3%. Profit before tax (PBT) grew by 27% to C701 crores and profit after tax (PAT) rose by 19% to C516 crores. KPILs order book expanded significantly to ?58,415 crores, bolstered by strategic order wins in sectors such as Oil & Gas, Transmission and Distribution (T&D) and Civil Construction. This growth is reflected in the ?30,022 crores of new orders secured during the year, a 19% increase compared to FY2022-23.

The Company also made substantial progress in improving its financial health. Efficient working capital management limited the net debt increase to just H14 crore, despite a 20% rise in revenue, bringing the total net debt to H2,591 crore. The net debt in the core EPC business stood at C2,017 crores as of March 31, 2024. KPILs strategic focus on high-growth sectors such as urban infrastructure and renewable energy is expected to drive future growth.

Operational highlights Manufacturing updates

During FY2023-24, KPIL made significant strides in its manufacturing capabilities. The Company continued to enhance its production facilities and, focusing on efficiency to meet the growing demand across various sectors. Notably, KPILs manufacturing plant in Raipur, Chhattisgarh played a crucial role in supporting the Companys robust project execution. The Company invested in upgrading its equipment and technology to maintain its competitive edge in the market.

Order book

KPIL achieved a new all-time high order book value of ?58,415 crores as of March 31, 2024. The Company secured orders worth ?30,022 crores in FY24. This impressive growth was driven by large and strategic order wins across various sectors, including Oil & Gas projects in the Middle East, Power Transmission and Distribution (T&D), underground metro rail tunnelling, airports, data centres, industrial, and residential townships.

Geographical updates

KPIL continued to expand its global footprint, with operations spanning 73 countries over 250 live projects in more than 30 countries as of March 31,2024. The Companys international order book is currently over ?26,300 crore, highlighting its successful expansion and diversification strategy. International subsidiaries such as LMG (Sweden) and Fasttel (Brazil), significantly contributed to this global presence. LMG (Sweden) achieved a revenue of C 1,028 crores for FY24, with an order book of ?2,062 crores, strengthening its presence with new clients and improved capabilities in the substation business. Fasttel recorded a revenue of ? 696 crores for FY24, with an order book of ?1,479 crores. KPILs strategic focus on expanding its regional transmission networks in Africa, SAARC and CIS countries supplemented domestic demand and presented substantial business opportunities.

Business-wise performance Consolidated business revenue

Businesses FY23 FY24 Growth
T&D * 6,016 7827 +30%
B&F 4,136 4,790 + 16%
Water 2,622 3,511 +34%
Oil & Gas 985 822 -17%
Railways 1,652 1,425 -14%
Urban Infra 403 705 +75%
Total Core business 15,814 19,080 +21%
Others# 547 546 -0.3%
Total Consolidated Revenue 16,361 19,626 +20%

* T&D business includes LMG (Sweden), Fasttel (Brazil) & Other International Subsidiaries / JVs

# Others mainly includes Shree Shubham Logistics (SSL), Road SPVs, Saicharan (Indore Real Estate) etc.

Power Transmission and Distribution (T&D)

The T&D sector witnessed a significant revenue growth of 30% year-over-year (YoY), reaching ?7827 crores in FY24, up from C6,016 crores in FY23. This growth was driven by robust execution and a healthy order book. There was a substantial increase in T&D capital expenditure in regions such as India, Europe, Africa, Latin America, and the CIS. Indias T&D order inflows increased by 48% YoY to ?4,344 crores, with an additional L1 position of approximately ?1,350 crores. The subsidiary LMG (Sweden) achieved revenue of C1,028 crores for FY24 with an order book of ?2,062 crores, strengthening its presence with the addition of new clients and improved capabilities in the substation business. Fasttel (Brazil) recorded a revenue of ?696 crores for FY24 with an order book of ?1,479 crores.

Building & Factories (B&F)

The B&F business experienced revenue growth of 16% YoY reaching ?4,790 crores in FY24, up from ?4,136 crores in FY23. The growth was led by robust project progress and a healthy project mix. The portfolio was strengthened with large-size B&F projects, data centres and industrial plants. This business added new clients and strengthened its portfolio in design-built projects, securing an L1 position in an integrated airport EPC project in India.

Water

KPILs Water sector experienced substantial growth, with revenue increasing by 34% year-on-year to C3,511 crore. This growth was primarily driven by the successful execution of various water supply projects. The Companys capabilities in this sector have been bolstered by its involvement in key initiatives such as the Jal Jeevan Mission and other significant water treatment and supply projects.

Oil & Gas

The Oil & Gas sector faced challenges during FY2023-24, resulting in a 17% decline in revenue to ?822 crore. The reduction in revenue was largely due to decreased business activity within India. Despite these challenges, KPIL made significant breakthroughs in the Middle East Oil & Gas market, which is expected to bolster future performance in this business.

Railways

The Railways business saw a revenue decline of 14% YoY with revenue decreasing to C1,425 crores in FY24 from C1,652 crores in FY23. The decline was due to a focus on project closure and lower ordering.

Urban Infra

The Urban Infra sector experienced a significant revenue growth of 75% YoY reaching ?705 crores in FY24, up from ?403 crores in FY23. We have made substantial progress in our Urban Infra business by securing two underground metro rail tunnel projects.

EU Environmental Health and Safety (EHS)

As part of its commitment to promote a safe working environment, the Company has established a world-class practice for reinforcing and maintaining the highest level of EHS standards with a dedicated approach and strong demonstrative commitment across all the verticals. It has incorporated international EHS practices in business operations with proactive EHS monitoring for the prevention of OSH injuries and illness to protect its employees, contractors, visitors and others in and around the projects.

It has set the benchmark of its EOHS performance by adopting the best practices with a commitment to comply with the applicable statutory obligations and laws of the land. It has also adopted the digitalization in EHS systems to track, manage, analyse and report the EHS performance data. Additionally, it has designed a system to capture unsafe work practices through Artificial intelligence techniques.

ZERO harm

The Company has been consistently encouraging its employees to practice and integrate EHS at all levels of the organisation and motivate them to adopt it into their business operations to achieve the organisational goal of ZERO harm with a focused approach to EHS policies, procedures, guidelines, robust review mechanism, engineering control mechanism, administrative EHS processes and various training tools.

EHS excellence journey

EHS Business Excellence
Management Control Monitoring and Measurement Training and Development
• World-class user-friendly EHS operational control procedure for a safe work system • 3-layer EHS audit to understand the common challenges and expectations on existing systems • State-of-the-art learning centre to develop the aspirants who could translate their potential power of knowledge into actual work practice.
• Integration of EHS in the planning and designing stage of a new project • Quantitative rapid EHS performance assessment for monitoring and measuring EHS performance. • Site-based safety park for live demonstration and hands-on experience
• Reporting and in-depth incident investigation guideline • Formation of EHS steering committee at business/site levels • EHS LMS module on different topics for effective learning
• EHS reward and recognition policy to encourage and appreciate the performance of employees • EHS walk round of project site by business unit head/project site line management team around the sites to resolve the EHS issues • Virtual Reality training for an immersive learning experience that recreates real-life settings.
• EHS enforcement and work stoppage guideline • Fortnightly, EHS review with business unit heads or regional officer EHS heads • EHS induction movie of live working practices
• EHS Journal - to handle the emergency crisis and also to establish collaborative efforts towards positive EHS culture and spread awareness across the organization • Customer feedback form for measuring the satisfaction levels for EHS standard • Weekly EHS webinar for all levels of employees.
• Innovative engineering control mechanism. • Job-specific training/induction and refresher training
• Leadership EHS workshop
• Workshop for leadership team
• Emergency evacuation drill

EHS excellence awards

The Company has been honoured with the most prestigious and well-deserving awards during the year, some of which are elaborated hereunder:

Sr. No. Institute Business Unit Name of Project Site Award Category
1 British Safety Council Award SIO Birla Tisya - Bangalore Merit Category
2 British Safety Council Award SIO Infosys Software Park - Hyderabad Winner Category
3 British Safety Council Award SIO Hanimaadhoo International Airport - Maldives Winner Category
4 British Safety Council Award SIO Techno Data Centre - Chennai Winner Category
5 RoSPA Award TLI WO-397 Kalpataru IBN Omairah Company Ltd, Saudi Project Site Silver Category
6 RoSPA Award TLI WO350 Tajikistan Transmission Line Project Project Site Silver Category
7 RoSPA Award RAILWAY Bhopal Metro Rail Project (Bh-08), Bhopal Gold category
8 RoSPA Award NIO DLF- Economically weaker Section, Delhi (DEWD) Silver Category
9 RoSPA Award WATER Jharkhand Shikaripada Dumka Rural Water Supply Project (JSDR) Silver Category
10 RoSPA Award SIO DLF Infor park developers, Chennai Gold Award
11 RoSPA Award SIO KDPL Mall Project Gold Award
12 The Director of Factorys and Boilers Govt of Karnataka on Best SIO Birla Tisya Residential Project, Agrahara Dharsarhalli, Bengaluru First Place
13 Safety practices Brigade Eldorado, Devanahalli, Bengaluru Second Place
14 15th CIDC Vishwakarma Awards 2024 WATER Jal Jeevan Mission Pratapgarh (JJMP), Pratapgarh CIDC - Trophy + Certificate
15 15th CIDC Vishwakarma Awards 2024 WATER Jal Jeevan Mission Lalitpur (MSWS), Lalitpur Certificate
16 15th CIDC Vishwakarma Awards 2024 WATER 7026-OSGR Odisha Sundargarh Rural Water Supply Project, Sundargarh Certificate
17 15th CIDC Vishwakarma Awards 2024 WATER JSDR - 7033, Munger Certificate
18 15th CIDC Vishwakarma Awards 2024 WATER Odisha Cuttack District Rural Water Supply Project (OCDR)-7025 Athagarh, Cuttack Certificate
19 15th CIDC Vishwakarma Awards 2024 SIO Bagmane Capital - BARM - TROY & APOLLO Project, Bengaluru CIDC - Trophy + Certificate
20 15th CIDC Vishwakarma Awards 2024 SIO Hulhumale Social Housing Project, Maldives CIDC - Trophy + Certificate
21 15th CIDC Vishwakarma Awards 2024 SIO Redevelopment of Hanimaadhoo International Airport (HIAM), Maldives CIDC - Trophy + Certificate
22 15th CIDC Vishwakarma Awards 2024 SIO DLFT- Downtown, Chennai CIDC - Medal + Certificate
23 15th CIDC Vishwakarma Awards 2024 SIO Techno Data Centre Project, Chennai CIDC - Medal + Certificate
24 15th CIDC Vishwakarma Awards 2024 SIO Isp1, Infosys Sez, Pocharam; Ghatkesar Mandal, Hyderabad CIDC - Medal + Certificate
25 15th CIDC Vishwakarma Awards 2024 SIO PBEL City, Hyderabad Certificate
26 15th CIDC Vishwakarma Awards 2024 RAILWAY Bhopal Metro Rail Project (Bh-08), Bhopal CIDC - Medal+ Certificate

Human resource

KPIL values its employees as the cornerstone of its success. The Company is committed to equipping them with the necessary tools, resources and support to thrive in a competitive environment. Through various initiatives, it cultivates a culture of continuous learning and development, while also promoting diversity and inclusion. Efforts to attract, retain, and develop top talent have resulted in a strong talent pipeline, driving the Companys growth and success. The Company has a talented and experience employees strength of 8,441 as of 31st March 2024.

n Learning and development

The Company is committed to fostering a workplace culture that prioritises continuous learning and personal growth. Recognising the significance of investing in employee development, it has taken measures to improve the frequency and quality of learning and development opportunities. To accomplish this objective, it has established a comprehensive Learning and Organizational Development (L&OD) framework, targeting four key strategic areas.

Training sessions for employees and workers

KPILs commitment to employee development is unwavering, as reflected in its comprehensive training programmes. The focus is on enhancing functional, technical, management and leadership skills to ensure the workforce is equipped to excel and innovate.

Through targeted training initiatives, KPIL fosters a culture of continuous learning and professional growth.

Functional training

Functional training at KPIL enhances job-specific skills and knowledge, crucial for project management. The shift to integrated project management is supported by the project management certification with S P Jain School of Global Management, covering design thinking, crisis leadership, and budget management. Virtual series with JK Technosoft targets key performers in project management, risk management and strategic cost management.

Technical training

Technical training at KPIL ensures workforce development through on-the-job practical skills, a custom Learning Management System with technical modules and assessments and external certification programmes. This approach helps employees gain hands-on experience, reinforce learning outcomes and stay updated with industry standards, fostering a culture of continuous technical improvement.

Management training

Management training at KPIL equips employees with skills for leading teams and projects. Programmes cover strategic planning, stakeholder engagement, resource allocation and team leadership. These comprehensive programmes prepare employees to handle project dynamics, ensuring KPILs leaders can drive organisational success and innovation.

Leadership training

Leadership training at KPIL identifies and develops individuals with high leadership potential through a three-tiered approach, including Elevate, LEAP and the Senior Leadership Development Programme (SLDP). Partnerships with institutions like Development Dimension International and the Indian Institute of Management, Ahmedabad, enhance leadership skills through classroom sessions, peer interaction and self-paced learning.

Diversity and inclusion

The Company operates globally and it is dedicated to fostering diversity of demography, gender and age within the organisation. It takes pride in the fact that it has people from different nationalities representing its workforce.

The Company is committed to increasing the representation of women in our workforce, with a current representation of 3.2%. It is constantly increasing womans representation in senior leadership positions and aims to further enhance their representation in such roles. Its initiatives, including cross- functional exposure and grooming programmes, are dedicated to empowering women to exceed their full potential. Going forward, it aims to increase the representation of women in the workforce to 5% by FY 2025.

1:1

Gender pay ratio across all levels

Employee engagement, wellness and recognition

The Company prioritises the well-being and togetherness of its workforce, which it fondly refers to as the Kalp-Parivar or KPIL family. It upholds values of business ethics, customer centricity, pride, quality, respect, and teamwork and strives to create an employee-friendly environment.

It regularly reviews policies to ensure they align with the best interests of its employees. Through initiatives like KALPA GAURAV, Employee Bills of Right (EBR), PARICHAY, MAGIC, KALPOTSAV AROGYAM, and recognising bright students of employee children, alongside school fee reimbursement, it aims to capture the Hearts and Minds of its people.

Rewards and recognition

The Company as one integrated Kalpataru Parivar is committed to values and recognises its peoples hard work and dedication through multiple rewards and recognition initiatives.

The tenure-based recognition programme includes the following milestones:

• 5 Years: Recognition by the CHRO.

• 10 Years: Recognition by the MD and celebration across regions. •

• The Zenith Award is also given for exceptional individual contribution.

EH Corporate Social Responsibility (CSR)

KPILs long-term vision focuses on empowering marginalised and vulnerable communities to enable them to improve their quality of life. To do this, it has established a structured approach towards implementing need-based social interventions under its CSR.

Its CSR efforts are based on partnerships to strive towards achieving long-term social impact for the larger community covering all segments of the society. These initiatives are based on community engagement, and sustainability and are driven transparently and ethically by complying with the applicable laws and regulations.

Healthcare

Kalpa AaRogya sEva (KARE)

Project KARE aims to promote access to basic healthcare facilities under preventive, promotive and curative interventions.

Kalpa Seva Aarogya Kendra

The flagship initiative of running subsidised dispensaries, Kalpa Seva Aarogya Kendra (KSAK) in Gandhinagar, Gujarat and Khorpa, Chhattisgarh supported the medical needs of 48,012 beneficiaries from surrounding villages and towns. The OPD facility complements the government healthcare system by providing specialised interventions in Dentistry, Gynaecological, Orthopaedic and mental well-being amongst others.

48,000+

Beneficiaries Diagnostic MRI

The MRI Centre has continued to provide scan services to marginalised communities and villagers around Gandhinagar since 2021. This centre has been a big boon to the community catering to more than 9000 patients in the year, with the highest number of patients scanned in a month touching 962.

Other projects

As a part of other community healthcare interventions, 600 cataract surgeries were supported through the Vision Foundation of India and more than 230 patients with Parkinsons were covered in partnership with Parkinsons Disease and Movement Disorder Society. The Company has endeavoured to support persons with disability (PWDs) in rural areas through the donation of motorised tricycles. During the year, it has supported 10 such rural beneficiaries near its Uniara Biomass Plant.

Donation of ambulances

In its endeavour to reach needy patients in remote locations, three ambulances have been donated that will provide access for patients to be timely ferried to nearby hospitals around Khorpa, Chhattisgarh, Jodhpur and Sawai Madhopur in Rajasthan. The ambulance in Sawai Madhopur is equipped with a technologically advanced portable breast cancer detection device which will support in early detection of cancer amongst women who lack access to such diagnostic facilities.

Menstrual health management project

The Company has initiated the menstrual health management project under which two sanitary napkin-making machines have been donated. The project aims to provide healthy and safe menstrual hygiene options to young adolescent girls and women from marginalised communities while breaking the stigma around the topic.

Sanitation facilities

To provide clean and hygienic sanitation facilities, three public toilets have been constructed near plant and site locations in Gandhinagar, Munger, Bihar and Kotpad district in Odisha. The Gandhinagar toilet is built in a bustling vegetable market that has a daily footfall of more than 100 people & small shop owners. The toilets in Munger and in Kotpad are aimed towards reducing the problem of open defecation.

EH Education and Skilling

Kalpa Vidya Kalpa Kaushal Education

Education has been a critical area of CSR implementation for KPIL. The Company believes, that education is a process through which an individual or communities full potential can be achieved. It is the most important pillar through which right values, discipline, knowledge and effective decision-making in the long run can be attained.

Its focus has been on bridging the equity gap in terms of access to basic education. This has been achieved through targeted interventions in setting up Digital Smart Classrooms, promoting STEM education, setting up Computer Labs, making classrooms student-friendly by providing adequate furniture, beautifying walls with educational paintings and providing interactive learning spaces. The construction of additional classrooms and installing solar panels have also helped schools to enable more needy students to be enrolled and move towards using renewable energy to save on electricity expenses. The teachers training too has played a crucial role in bringing about a pedagogical change in teaching. This has ensured the long-term sustainability of its interventions.

More than 27000 students have benefitted across 67 educational institutes that include tribal ashramshalas, government schools, orphanage for special children and residential schools for hearing impaired students covering geographies in Assam, Chhattisgarh, Jharkhand, Uttar Pradesh, Telangana, Punjab, Odisha, Karnataka, Tamil Nadu, Maharashtra, Rajasthan & Madhya Pradesh.

27,000+

Students benefitted

Skilling

While KPIL has been working towards strengthening early education for children across various States, there is still a large number of youngsters who have either dropped out of the formal education system or are unable to cope in the higher education system.

Understanding these challenges prevalent in society and aligning the same with the skill gap in the EPC industry, the Company has supported the training of more than 650 youth. The technical training has been imparted in partnership with Pan IIT Reach for India Foundation and technical training centres set up in government Industrial Training Institutes (ITI) across Jharkhand, Maharashtra, Gujarat and Chhattisgarh, and the various site locations covered through National Apprentice Promotion Scheme. KPIL has endeavoured to align the Government of Indias Skill India Mission with a vision to bridge the skill gap and provide economic empowerment to youth.

650+

Youths trained and supported

EH Animal Welfare and Environment

SAVe our animals save OUR environment ("SAVIOUR") Animal Welfare

KPIL is dedicated to supporting various initiatives for animal welfare. During the year, it collaborated with Trees of Life for Animals (TOLFA) in Ajmer, Rajasthan, and successfully rescued and treated animals in distress.

It also supported Federation of Indian Animal Protection Organisations (FIAPO)s project aimed at advocating policy changes concerning the welfare of bovines in India while conducting a comprehensive study covering 50 dairies, potentially benefiting over 2200 cattle. It also provided a temporary shelter for stray cattle in Rewa, Madhya Pradesh and a gas cremation furnace for an animal hospital in Delhi run by People For Animals.

5,100

Animals rescued and treated Environment

The Company recognises the crucial importance of water resources for local communities. Through its CSR initiatives, it has facilitated access to sustainable water solutions for four villages in Maharashtra. These interventions include the construction of farm ponds, restoration of existing water bodies such as wells, and area treatment to enhance water table levels. Additionally, the implementation of solar-powered community drinking water systems has addressed health concerns in these villages, benefiting over 5,800 villagers.

With improved access to water, the project has also encouraged farmers to adopt sustainable livelihood practices, reducing dependency on single-crop cycles. Notably, the intervention has harvested more than 1489 cu.m. of rainwater. Each village has established a women-led water committee trained to oversee the maintenance and monitoring of these initiatives, thereby fostering community participation and empowerment.

The Afforestation project implemented at Lalitpur, Uttar Pradesh in 2022 is a fully grown self-sustained forest. In addition to 10000 saplings planted, 800 more saplings with native species were planted in this ecosystem. The flora and fauna along with biodiversity have flourished in that region.

Need-Based Community Development

Kalpa Gramodaya

KPIL supports the various needs of the communities around its facilities and site locations across the country. To strengthen its social footprints and improve the overall quality of life, KPIL through Kalpataru Foundation has constructed a Community Centre Asmita Kendra in a village near Pune, Maharashtra. This community centre has been constructed to provide a common place for villagers to congregate for celebrations, trainings for women, community awareness sessions and so on. This will benefit the entire village of Varawadi that has a population of more than 2000 villagers. Infrastructure development like the construction of boundary walls and providing furniture and so on in schools, was also supported under this project near the Biomass plant at Padampur, Rajasthan during the year.

2,000+

People benefitted

Sustainability

KPIL has made notable progress in reducing environmental impact across all operational facets. It has set clear benchmarks and diligently implemented control measures to enhance resource efficiency and minimise its carbon footprint. By undertaking consistent tracking and evaluation, it ensures a reduction in the environmental impact of its operations. Additionally, it collaborates with suppliers, particularly in sourcing raw materials like cement and steel, to ensure sustainability throughout the value chain.

u Sustainability goals

During the financial year 2023-24, the Company has established a set of comprehensive sustainability goals aimed at reducing its environmental footprint. These goals encompass various aspects, including reducing carbon emissions, efficient water and waste management, and implementing sustainable supply chain practices among others. By committing to these objectives, it aims to align its business practices with responsible and ethical principles, thereby driving long-term value creation while minimising its environmental footprint.

For more information about the Companys endeavours and ESG performance, refer to the Integrated Report Section, Business Responsibility and Sustainability Report (BRSR) and CSR Report (Annexure A of Boards Report).

Risks and concerns

The Company is primarily engaged in executing large and complex EPC projects in domestic and international markets. Because of the nature of its business, it faces different types of risks. To deal with these risks, the Company has a risk management committee. This committee reviews all kinds of risks including financial, operational, sectoral, sustainability (including ESG-related risk), informational, cyber security and other threats.

The committee is responsible for monitoring and directing the application of the risk management policy. This includes assessing the effectiveness of risk management processes and systems for risk reduction, as well as methods and procedures for internal control of identified risks. Additionally, it ensures that the right procedures, systems and methodologies are in place to identify and evaluate risks related to the Companys operations. The risk management committee aids the Board in the risk management process by identifying and assessing any changes in risk exposure, reviewing risk control measures and approving remedial actions wherever appropriate.

Risks/Threats Risk Description Mitigation Strategy
Environment, Health and Safety (EHS) Risks As a diversified company operating across multiple sectors of infrastructure development, it is exposed to complex Environment, Health and Safety (EHS) risks. The broad scope of its projects, spanning various geographies and often challenging terrains, escalates these risks. It must continually adapt to rigorous EHS laws, regulations and standards that vary by location and evolve with changing global mandates and stakeholder expectations. Non- compliance could lead to increased costs, legal challenges, or potentially jeopardize the viability of its operations. Understanding the critical nature of these risks, especially given the Companys global presence and the challenging environments in which it operates, robust EHS risk mitigation is pivotal. Below is its approach:
• Legal and regulatory compliance: Adherence to both international and local EHS regulations and standards is a cornerstone of its strategy. This ensures the safety and health of not only the workforce but also the communities it operates in while safeguarding the environment and maintaining uninterrupted business operations.
• Governance and oversight: Its stringent governance mechanism effectively manages EHS risks, enforcing policies to minimize incidents. This framework ensures accountability and supports the implementation of EHS standards.
• Continuous Improvement: It employs customised safety processes, systematic monitoring, and a robust review mechanism to mitigate EHS risks. Comprehensive training and compliance reporting pre-empt potential issues, allowing for strategic responses.

Through these efforts, it aims to uphold its commitment to EHS excellence, ensuring that projects meet all the required safety and environmental standards.

Loss of Biodiversity Risk The global risk of loss of biodiversity is a growing concern that directly impacts business operations. As an EPC company, its activities potentially affect natural habitats, leading to the endangerment of various species of flora and fauna. Such impacts on biodiversity are not only ecological but also regulatory, as they can provoke stringent policies that may disrupt business operations. Recognising the critical importance of biodiversity conservation, the company has established a comprehensive framework for biodiversity management.
• Preliminary screening of project areas and operations to assess and mitigate potential impacts before any project commencement and assessment of the regulatory requirements.
• Beyond compliance, it is actively engaged in plantation activities and water conservation efforts, aimed at promoting and enhancing local biodiversity.
These initiatives contribute positively to ecological health and ensure that its business practices align with global environmental stewardship standards.
Solid Waste Management Risk Proper disposal of solid waste from operations is critical for environmental protection and safety. As waste management rules become increasingly stringent, the challenges associated with securing sufficient land for waste storage intensify. The risks of storing waste are compounded by the need for expansive, secure areas, making land availability a growing concern. The tightening regulations highlight the importance of evolving the Companys waste management practices to stay compliant and mitigate potential environmental and operational hazards. • The Companys approach to solid waste management is guided by the principles of reduce, reuse and recycle, which encompass both hazardous and non-hazardous waste.
• It has developed and implemented robust processes aimed at improving the recycling and proper disposal of waste.
• To ensure the effectiveness of these mechanisms, regular meetings are convened, involving key stakeholders to review and refine its waste management practices.
• This structured approach ensures that its waste disposal processes remain efficient and compliant with the latest standards.
• In alignment with evolving environmental standards, it has adopted sustainability targets for the fiscal year 2023-24, aiming to achieve circularity of Construction and Demolition (C&D) waste by 2035. This commitment involves transforming how it handles waste, prioritising the circular economy to reduce the environmental impact of projects and ensuring compliance with statutory waste management criteria.
Financial Risk Interest rate risk, exchange rate risk and liquidity risk are the three major financial risks. Exchange rates and interest rate fluctuations impact the Companys finances and profitability. The Company faces project delays and adverse contractual payment terms leading to increased working capital requirements. The Company uses a variety of fund-raising products with a range of maturities to manage interest rate risks dynamically.
• It uses a mix of its domestic and international order books scattered across several locations as a technique for reducing currency risk.
• To reduce the exposure to foreign exchange-related risk, it also uses currency-forward contracts.
• It has access to well-diversified sources of liquidity through various consortium banking arrangements and institutions.
• Beyond this, the Company relies on access to trade finance and capital markets. It also continuously examines its liquidity levels, as well as the state of the economy and capital markets.
• The Company also deploys specific cash flow management strategies and processes to monitor and review regularly and takes corrective actions, as may be required to manage the working capital.
Commodity Price Variation and Currency Fluctuations The Company deals with a variety of commodities, including cement, steel, copper, aluminium and zinc. Commodities are a significant part of the direct cost incurred by it for business activities including fabrication of towers and erection of the transmission lines and substation. Due to factors such as supply-demand mismatch, competition, production levels and taxation, they may have varying prices and supplies. If input costs increase without adequate hedging measures, fixed pricing contracts may adversely impact the Companys profits. Also, with businesses spread across various nations, unfavourable currency fluctuations can affect the Companys financials. As a part of the broader Risk Management Policy, the Company has a dedicated framework to manage commodity risk.
• The Companys business is significantly dependent on the availability, cost and quality of raw materials and fuels for the construction and development of projects undertaken.
• It currently manages such risk through the price escalation clause in some of the Contracts whereby the fluctuation in the input cost is passed on to the Client.
• In the case of firm price contracts, it enters into a commodity forward contract to hedge its price risk or pass on back-to- back firm price contracts to its vendor/contractor.
• It addresses the risk of fluctuation in commodities which cannot be hedged by building adequate contingencies based on market trends.
Cyber security risk The Company has invested in Digitization and Automation across all functions. Globally cybersecurity has become a key concern for the continuity of business. • Cybersecurity practices are being implemented under the guidance of the Risk Management Committee of the Company. These practices are grouped into people, process and technology control areas under the company- wide Cyber Security Assurance Framework.
• Employee awareness of cybersecurity is being enhanced through initiatives such as online cybersecurity awareness campaigns on phishing and e-mail security.
• Network devices, server operating systems and hardware are upgraded periodically.
• Online Information Security certification is mandatory for all new joiners and annual re-certification is done for all employees.
• New applications are deployed after adequate testing and additional certification in the case of external applications. It also actively monitors security logs to detect any malicious attempts and takes the necessary measures to mitigate the risk. Adequate data safety is ensured during its creation, storage, transit and retrieval.
Operational Risk The Company operates in the EPC industry and is exposed to a variety of operational risks that cause unexpected project delays and interruptions in operations, negatively affecting the Companys top and bottom lines. • To reduce the operational risk involved various risk mitigating projects, the Company has established policies and procedures.
• Projects are analysed within the operational risk spectrum using best practices to enable timely execution and optimum value generation for all stakeholders.
Client Counterparty Risk This risk pertains to the counterparty defaulting on its contractual obligations resulting in financial loss to the Company. • The Companys major customers include government bodies and public sector undertakings. Majority of the International projects are funded by multilateral agencies.
• For other customers, it evaluates the creditworthiness based on publicly available financial information and the Companys historical experiences.
• The Companys exposure to counterparties is continuously reviewed and monitored and appropriate measures are adopted based on the outcome of the analysis.
People Risk The need to maintain employee relations, attract and retain talent, and create an engaged set of employees has become important in an environment where talent is becoming scarce. • The Company actively engages with the workforce regularly to learn about their requirements, objectives and any potential problems. Based on ongoing employee feedback, policies, practices, remuneration and developmental interactions are adjusted.
• It employs a methodical hiring process to attract the best candidates in the industry.
• To cultivate future leaders within the organization, it offers periodic training and mentoring, grooming and provides growth opportunities.

Internal Control

The Company maintains adequate internal controls, appropriate to the nature and size of the business, and commensurate with the scale and complexity of its operations. The Company has implemented robust policies and procedures, which inter alia, ensure integrity in conducting its business, safeguarding its assets, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records and prevention and detection of frauds and errors. At the heart of the processes is the extensive use of technology. This 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. It has continued its efforts to align all its processes and controls with global best practices.

The Company has aligned its internal controls with the requirements of the Companies Act, 2013.The statutory auditors of the Company have issued an attestation report on the Companys internal control over financial reporting (as defined in section 143 of the Companies Act, 2013). The Board of Directors and management at all levels of the Company demonstrate through their directives, actions and behaviours the importance of integrity and ethical values to support the efficient functioning of the system of internal control. The same 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 concerning Internal Controls, Statutory Compliances and Assurance etc.

The Company has a Group Assurance department besides an external firm acting as an independent internal auditor that reviews internal controls and operating systems and procedures. A dedicated Legal Compliance division ensures that the Company conducts its businesses with the highest standards of legal, statutory and regulatory compliance. The Audit Committee of the Board reviews the annual internal audit plan prepared by the Group Assurance department, covering core business operations, corporate departments as well as support functions. Corporate Audit Services conducts independent internal audits and the significant audit observations are presented to the Audit Committee every quarter along with an update on the implementation of recommended remedial measures and agreed actions by the management. The effectiveness of internal controls was tested during the year by the Statutory Auditors as well as by the internal audit firm and no reportable material weaknesses either in their design or operations were observed. The evaluation included documentation review, enquiries, testing and other procedures considered to be appropriate in the circumstances. The Company also has an institutionalized mechanism of dealing with complaints of sexual harassment through a formal committee constituted in line with the Companys Policy on the Anti Sexual Harassment policy.

Cautionary statement

This report includes facts, figures, assumptions, strategies, goals, and intentions of the Company, which may be forward-looking. The actual results and performance of the Company may differ significantly from those presented herein. The Companys performance depends on global and national economic conditions, commodity prices, business risks, changes in government rules and regulations, and other factors.

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