Kaushalya Infrastructure Development Corpn Ltd Management Discussions

ECONOMIC OVERVIEW Global economy

The IMFs World Economic Outlook forecasts global GDP growth to remain steady at 3.2 percent in both 2024 and 2025. Median headline inflation is projected to ease from 2.8 percent at end 2024 to 2.4 percent by end 2025. After peaking at 8.8 percent in 2022, inflation moderated to 6.9 percent in 2023 and has continued to decline as central banks approach the end of their tightening cycle. Although the outlook suggests a soft landing, persistent geopolitical tensions are disrupting supply chains and dampening international trade. Climate-related pressures are also prompting a shift in global growth strategies. Elevated inflation since 2022 has restrained consumer spending, forcing central banks to enact aggressive interest rate hikes actions that, while curbing inflation, have subdued investment. Nonetheless, resilient labor markets and ongoing business innovation have underpinned economic momentum.

Indian economy

India maintained its status as the fastest-growing major economy in FY 2023-24, with GDP expanding by 8.2%, and continued strong momentum through FY 2024-25. The IMF raised its growth forecast from 6.8% to 7.0%, citing robust domestic demand and a growing working-age population. Official data for the April-June quarter of FY 2024-25 showed growth sustained at around 7.4%, led by manufacturing and construction, pointing to continued resilience.

Private consumption remained a cornerstone of growth·rural household spending surged ~7%, while urban consumption also picked up. FDI inflows held steady near Rs. 1.57 lakh crore (FY 2023-24), and the rupee was classified by the IMF as under a “stabilised” regime through November 2024, supported by measured RBI interventions. Headline inflation softened to within RBIs comfort zone (~4-5%), enabling gradual rate cuts and reinforcing investor confidence.

Looking ahead, growth in FY 2025-26 is expected to settle around 6.5-6.8%, with inflation moderating further, as domestic demand remains robust and macroeconomic policies stay supportive. However, risks from volatile crude prices, global trade uncertainty, and supply chain disruptions persist, requiring continued vigilance.

INDUSTRY REVIEW

In FY 2024-25, Indias infrastructure sector continued its strong momentum, underpinned by sustained government investment and a strategic focus on connectivity and sustainability. The federal government allocated a record Rs. 11.11 lakh crore (~ 3.4% of GDP) toward infrastructure capital expenditure, powering flagship programs like the National Infrastructure Pipeline (NIP) and PM Gati Shakti, alongside the ramp-up of the National Monetisation Pipeline (NMP). These initiatives accelerated project rollouts across roads, railways, urban development, and power, drawing in increased private sector participation.

Sustainability was front and center: infrastructure projects embedded green features, renewable energy

integration, and eco-friendly materials. Digitalization also advanced rapidly platforms like 5D-BIM, GIS/LiDAR, and IoT were adopted across major projects (e.g., Jewar and Bengaluru airports), improving cost accuracy, quality control, and execution timelines. Early exploration of digital twin frameworks signalled a push toward real-time infrastructure monitoring and smart operations.

However, project execution faced notable constraints. Rising raw material costs·particularly steel, cement, and bitumen·added financial pressure, while ongoing supply chain delays and skilled labor shortages tightened timelines and impacted margins. Addressing these bottlenecks remains essential to sustain industry growth.

Overall, the outlook for FY 2025-26 is optimistic. With strong policy support, expanding public- private partnerships, and deeper digital and sustainable integration, Indias infrastructure development is poised for continued expansion provided the industry can effectively tackle material, labor, and logistical challenges.

BUSINESS STRATEGY

The infrastructure sector forms the backbone of the Indian economy, acting as a key catalyst for inclusive growth and national development. Recognizing its critical importance, the Government continues to accord it high priority through sustained policy support and investment.

During FY 2023- 24, the Company achieved a significant milestone in its financial restructuring journey by successfully settling its outstanding obligations toward Indian Overseas Bank (IOB) and State Bank of India (SBI). These debts, which had been assigned to Alchemist Asset Reconstruction Company Limited - Trust VII on March 24, 2017, and December 29, 2017, respectively, were resolved in accordance with the agreed terms. The Company completed all payments under the restructured IOB loan, as per the sanction letter dated March 29, 2018, and received a No Due Certificate on March 27, 2024. Earlier, the SBI-assigned debt had been fully discharged, with the No Due Certificate received on June 1, 2018. These developments underscore the Companys commitment to prudent financial management, improved credit discipline, and long-term financial sustainability. The resolution of these legacy obligations strengthens the Companys balance sheet and enhances its strategic flexibility moving forward.

As part of a strategic joint venture initiated earlier, our Company had acquired a commanding 90% stake to lead the development of a 2-megawatt hydroelectric power project for Uttarakhand Jal Vidyut Nigam Ltd (UJVNL). Unfortunately, complications during the projects execution led to its termination. To recover the costs incurred and the anticipated profits lost due to the termination resulting which the matter went into arbitration. The arbitration proceedings culminated in a favorable verdict in April 2022, awarding the joint venture compensation. However, UJVNL has challenged this decision, and the matter is currently under appeal before the Dehradun Commercial Court (2) in Dehradun.

The case remains sub-judice, with hearings ongoing to reach a final resolution.

The arbitation award of Rs. 1,306.16 lakhs plus interest granted in favour of the company against West Bengal Small Industries Development Corporation Limited, is under challenge before the Honble High Cout at Calcutta.

The case remains sub-judice, with hearings ongoing to reach a final resolution.

The Company operates in two segments: 1) Construction and 2) Hotel Construction:

The Company remains committed to identifying new avenues for growth and is actively engaged in exploring potential projects that align with its core competencies and strategic vision. It is vigorously pursuing new construction contracts while exploring untapped opportunities within the sector, with confidence in its ability to secure forthcoming projects that will contribute to industry growth and deliver sustainable, long-term value to stakeholders.

Hotel:

Our hotel business segment has maintained its performance. Recognizing the immense potential for further growth, we are actively exploring avenues to elevate this segment. Our plans include extensive renovations, upgrading our facilities, and investing in cutting-edge amenities to enhance the overall guest experience. We are also thinking to explore the cultivation in the adjacent land to the hotel premise to increase the revenue.

As part of its revenue enhancement initiatives, the Company is evaluating the feasibility of cultivating the vacant land adjacent to the hotel premises. This initiative aims to optimise the utilisation of available resources while increasing the income stream. The productions from this cultivation could also support in-house requirements, thereby reducing procurement costs. This step aligns with the Companys broader strategy of diversifying operations and improving profitability.

SWOT ANALYSIS

Strength:

In FY 2024-25, the Company faced continued liquidity challenges, primarily due to funds locked in ongoing project-related disputes. To improve cash flow and financial flexibility, we are actively pursuing out-of-court settlements to accelerate resolution and reduce litigation costs. Unlocking these resources is key to enhancing our ability to respond to growth opportunities and operational needs.

At the same time, we are modernizing our operations by upgrading our aging fleet. These efforts are aimed at sustaining competitiveness in a demanding market.

We remain vigilant of broader macroeconomic risks, including fluctuations in GDP, interest rates, inflation, and tax policies, all of which can impact project viability and cost structures. The Company continues to adopt a flexible and proactive approach to navigate these uncertainties and drive longterm performance.

Weaknesses:

Our Company continues to face liquidity challenges, with a considerable portion of funds tied up in project-related disputes. This has limited our financial flexibility and ability to respond swiftly to new opportunities or unforeseen obligations. To address this, we are actively pursuing out-of-court settlements to accelerate dispute resolution and unlock blocked capital, thereby strengthening our

financial position and supporting future growth.

Simultaneously, we are advancing our operational modernization efforts, with a key focus on upgrading our aging fleet and adopting new technologies to enhance efficiency and service delivery. While these initiatives aim to improve internal capabilities, we remain attentive to external macroeconomic factors·such as fluctuations in GDP growth, interest rates, and regulatory changes·that could influence our cost structure and overall performance. Maintaining agility in response to these dynamics is essential for sustaining long-term profitability and resilience.

• Opportunities:

The infrastructure sector remains a key focus area for the Government of India, offering significant growth potential for companies in the construction and engineering space. With our proven capabilities, sectoral expertise, and strong execution track record, our Company is well- positioned to capitalize on these emerging opportunities and translate them into profitable, value- driven projects.

While we continue to address internal challenges and operational constraints, our management remains confident in the Companys ability to pursue and deliver new projects effectively. The governments sustained emphasis on infrastructure development aligns well with our strategic roadmap, reinforcing our growth outlook.

Our past success in executing complex projects not only enhances our credibility but also provides a competitive edge in securing new contracts. As we actively evaluate fresh opportunities and engage in project discussions, we remain committed to steering the Company toward a renewed phase of growth and stability. Leveraging our core strengths and aligning with national infrastructure priorities, we aim to create a strong, sustainable future for our stakeholders.

• Threats

The infrastructure sector continues to face external threats, including economic slowdowns, project approval delays, and rising raw material costs, all of which impact profitability and execution timelines. The unorganized real estate sector, along with the absence of a single-window clearance system, further contributes to inefficiencies and cost overruns.

At the company level, prolonged litigation, overturned arbitration awards, and adverse tax rulings continue to tie up critical funds and strain liquidity. Potential tightening of real estate lending by banks may also affect our borrowing capacity and increase financing costs.

To manage these risks, we are actively pursuing out-of-court settlements and have engaged experienced legal professionals to ensure efficient dispute resolution and protect our financial stability.

Discussion on Financial Performance of the Company Revenue

For the financial year ending 31st March 2025, our Company experienced a substantial increase in total income of Rs. 32.63 lakh from Rs. 1,664.37 lakh in the previous year. During 2023-24 the surge was due to primarily attributed to the write-back of loan liability, resulting from the successful settlement of our loan with Indian Overseas Bank.

Expenditure

For the financial year ending 31st March 2025, our Companys total expenditure, covering contract and site expenses, employee benefit costs, depreciation, materials consumed, and other expenses, totaled Rs. 177.66 Lakhs. This represents a significantly decreased compared to the previous years total expenditure of Rs. 316.98 Lakhs.

Interest

For the financial year ending 31st March 2025, our Companys interest expenses amounted to Rs. 69.81 Lakhs, while in the previous year, it was Rs. 61.53 Lakhs.

Profit Before Tax (PBT)

For the financial year ending 31st March 2025, our Companys Profit Before Tax (PBT) was Rs. (145.03) Lakhs, compared to the previous year PBT which was Rs. 1,347.40 Lakhs. The significant profit in FY 2023-24 was primarily due to the one-time gain arising from the settlement of a loan with Indian Overseas Bank.

Profit After Tax (PAT)

For the financial year ending 31st March 2025, our Companys Profit After Tax was Rs. (74.68) Lakhs compared to the previous year PAT of Rs. 1,082.86 Lakhs. The significant profit in FY 2023-24 was primarily due to the one-time gain arising from the settlement of a loan with Indian Overseas Bank.

Earnings Per Share (EPS)

The earnings per share for the current year is Rs. (21.56) as compared to Rs. 312.69 per equity share in the previous year. The significant change in EPS was primarily due to the one-time gain arising from the settlement of a loan with Indian Overseas Bank.

Consolidated Financial Statements

The Consolidated Financial Statements of the Company are prepared in accordance with the relevant Indian Accounting Standards issued by the Institute of Chartered Accountants of India and forms an integral part of this Report. In accordance with Section 129(3) of the Companies Act, 2013, and Rule 5 of the Companies (Accounts) Rules, 2014, a statement encompassing the significant features of the financial statements of Subsidiaries, Associate Companies, and Joint Ventures is provided in Form AOC-1, which is an integral part of this Report.

The Companys results are consolidated with its subsidiaries, associates and Joint Venture.

Human Resources

We see Human Resources as our most valuable asset, focusing on efficiency, fairness, and continuous investment in employee welfare. Our collaborative environment encourages empowerment through decentralized decision-making, allowing individuals to take initiative and grow as leaders. We provide competitive compensation and actively support professional development through skill enhancement and external training. This people-centered approach has cultivated a highly skilled, motivated workforce and maintained a high employee retention rate, strengthening our organizations long-term success.

Other Disclosures

During the financial year 2023- 24, our Company successfully completed all payments related to the restructured loan from Indian Overseas Bank, in accordance with the terms outlined in the sanctioned letter dated March 29, 2018. The Company had earlier settled its outstanding dues with the State Bank of India and had received a No Due Certificate on June 1, 2018.

Regarding the ongoing sub judice matter under the Prevention of Money Laundering Act, 2002, initiated by the Enforcement Directorate (ED) involving the attachment of certain bank accounts of the Company, its subsidiary, and associate entities, as well as specific land parcels owned by associates, the Company, subsidiary and its associates had filed an appeal before the Appellate Tribunal.

As of FY 2024-25, the matter continues to remain under adjudication, and the legal proceedings are ongoing.

Cautionary Statement

The Management Discussion and Analysis section of this report includes forward-looking statements regarding the Companys objectives, expectations, and predictions, in accordance with applicable securities laws and regulations. However, actual outcomes may vary significantly from these statements. Factors such as intense competition, fluctuations in the prices of key inputs like steel, cement, building materials, and petroleum products, changes in government regulations and tax laws, economic conditions, and issues related to litigation and industrial relations could all impact the Companys operations. The Company recognizes the uncertainties and risks these factors pose and is dedicated to addressing them proactively to ensure ongoing success and growth.