knr constructions ltd share price Management discussions


The outlook for the global economy took a positive turn in the first half of 2023 as inflationary pressures began to ease, but ongoing geopolitical tensions and domestic challenges in key markets have slowed down any return to sustained growth. Global energy prices returning to levels last seen prior to the invasion of Ukraine, combined with easing commodity and food prices, have helped put further downward pressure on inflation for the rest of 2023. Despite the positive news, major economies throughout the world are facing their own domestic pressures, delaying any hopes of improving market conditions and a drop in inflation. Globally it is forecasted that GDP growth of 2.1% in 2023 and 2.6% in 2024 with inflation forecast at 5.3% in 2023 and 3.2% in 2024, and global unemployment levels of 5.2% in 2023 and 5.4% in 2024. The global economy has been through a series of significant shocks over the past three years - the COVID-19 pandemic and the Russia-Ukraine conflict and saw a major expansion to government debt and a significant hike in policy interest rates by central banks. The ramifications of some of these headwinds may not have surfaced yet and we are still to see their full impact and how they interact.

Indian Landscape

The Asian Development Bank (ADB) projects growth in Indias gross domestic product (GDP) to moderate to 6.4% in fiscal year (FY) 2023 ending on March 31,2024 and rise to 6.7% in FY 2024, driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem. Despite the global slowdown, Indias economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand. The Government of Indias strong infrastructure push under the Prime Ministers Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth. Improving labour market conditions and consumer confidence will drive growth in private consumption. The central governments commitment to significantly increase capital expenditure in FY 2023, despite targeting a lower fiscal deficit of 5.9% of GDP will also spur demand. Helped by recovery in tourism and other contact services, the services sector will grow strongly in FY 2023 and FY 2024 as the impact of COVID-19 wanes. However, manufacturing growth in FY 2023 is expected to be tamped down by a weak global demand, but it will likely improve in FY 2024. Recent announcements to boost agricultural productivity, such as setting up digital services for crop planning and support for agriculture startups will be important in sustaining agriculture growth in the medium term. Inflation will likely moderate to 5% in FY 2023, assuming moderation in oil and food prices, and slow further to 4.5% in FY 2024 as inflationary pressures subside. In tandem, monetary policy in FY 2023 is expected to be tighter as core inflation persists, while becoming more accommodative in FY 2024. The current account deficit is projected to decline to 2.2% of GDP in FY 2023 and 1.9% in FY 2024. Growth in goods exports is forecasted to moderate in FY 2023 before improving in 2024, as production-linked incentive schemes and efforts to improve the business environment, such as streamlined labour regulations, improved performance in electronics and other areas of manufacturing growth. Services exports growth has been robust and is expected to continue to strengthen Indias overall balance of payments position.


Government is emphasising infrastructure development through various initiatives such as National Infrastructure pipeline (NIP), Make in India, Smart cities mission, PM Gati Shakti with a view to upgrade existing infrastructure and develop new projects across sectors like transportation, energy, water and housing. The Government has allocated substantial funds for infrastructure development, and private players are encouraged to actively participate to reach its 2025 economic growth target of USD 5 tn. Under Budget 2023-24, capital investment outlay for infrastructure is being increased by 33% to Rs 10 Lakh Crores (USD 122 bn), which would be 3.3% of GDP and almost three times the outlay in 2019-20.

Under Budget 2023-24, Infrastructure Finance Secretariat is being established to enhance opportunities for private investment in infrastructure that will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power. Government has decided to continue the 50-year interest free loan to state governments for one more year to spur investment in infrastructure and to incentivise them for complementary policy actions, with a significantly enhanced outlay of Rs 1.3 Lakh Crores (USD 16 bn).

Started with 6,835 projects, the NIP project count now stands at 9,142 covering 34 sub-sectors, as per news reports. Under the initiative, 2,476 projects are under development phase with an estimated investment of USD 1.9 tn. Nearly half of the under-development projects are in the transportation sector, and 3,906 in the roads and bridges sub-sector.

The Indian Railways expects to complete total revenue of Rs 2,35,000 Crores (USD 28.3 bn) by the end of fiscal year 2022-23. The overall revenue of Indian Railways at the end of AugustRs 22 was Rs 95,486.58 Crore (USD 11.5 bn), showing an increase of Rs 26,271.29 Crore (USD 3.1 bn) (38%) over the corresponding period of last year. A capital outlay of Rs 2.40 Lakh Crore (USD 29 bn) has been provided for the Railways, which is the highest ever outlay and about 9 times the outlay made in 2013-14.

Indias logistics market is estimated to reach USD 410.75 bn in 2022 and is expected to reach USD 556.97 bn by 2027, growing at a CAGR of 6.28%. The 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified and will be taken up on priority with investment of Rs 75,000 Crores (USD 9 bn), including Rs 15,000 Crores (USD 1.8 bn) from private sources.

In December 2022, AAI and other Airport Developers have targeted capital outlay of approximately Rs 98,000 Crores (USD 11.8 bn) in airport sector in the next five years for expansion and modification of existing terminals, new terminals and strengthening of runways, among other activities. 50 additional airports, heliports, water aerodromes and advance landing grounds will be revived for improving regional air connectivity in five years.

India currently has the fifth-largest metro network in the world and will soon overtake advanced economies such as Japan and South Korea to become the third-largest network. Metro rail network reached 810 kms and is operational in 20 cities as of September 2022.

At almost 20 kms, Mumbai monorail is the third largest route in the world after China with 98 kms and Japan with 28 kms. India plans to spend USD 1.4 tn on infrastructure through National Infrastructure Pipeline in the next five years. In FY 2021, infrastructure activities accounted for 13% share of the total FDI inflows of USD 81.72 bn. India will need to construct 43,000 houses every day until 2022 to achieve the vision of Housing for All by 2022. As of August 22, 2022, 122.69 Lakh houses have been sanctioned, 103.01 Lakh houses have been grounded, and 62.21 Lakh houses have been completed, under the Pradhan Mantri Awas Yojna scheme (PMAY-Urban). Hundreds of new cities need to be developed over the next decade. Over the next 10 years, demand for urban freight is predicted to increase by 140%. Final-mile freight transit in Indian cities accounts for 50% of the total logistics expenditures in the countrys increasing e-commerce supply chains. India is expected to become the third-largest construction market globally by 2022. Indian logistics market is estimated to touch USD 320 bn by 2025. The overall infrastructure capex is estimated to grow at a CAGR of 11.4% over FY 21-26 driven by spending on water supply, transport and urban infrastructure. Investment in infrastructure contributed around 5% of the GDP in the 10th five-year plan as against 9% in the 11th five year plan. Further, USD 1 tn investment in infrastructure was proposed by the Indias planning commission during the 12th five-year plan, with 40% of the funds coming from the private sector.

Road construction sector

NHAI has awarded a total of 6,003-kilometre projects in FYRs 23, which fall short of the target of 6,500-kilometre. Total value of projects awarded by NHAI worth Rs 1.26 tn in FY Rs 23, down 15% year-on-year. NHAIs highway construction pace increased 13% year-on-year to 4,882 kilometres in FY 22-23. In FY Rs 23, a significant 54 percentage of the total project value was awarded to 5 states, namely AP Bihar, UP Jharkhand and Telangana. Capital expenditure for 2023-24 is estimated to be incurred at Rs 2,58,606 Crores, while revenue expenditure is estimated at Rs 1 1,829 Crores. National Highways Infra Trust (NHAI InvIT), the infrastructure investment trust sponsored by National Highway Authority of India (NHAI) to support Government of Indias National Monetisation Pipeline, has raised a sum of Rs 1,430 Crores (USD 172.6 mn) from domestic and international investors through placement of its units, for part funding its acquisition of three additional road projects from NHAI. During 2022-23, NHAI inaugurated 7 National Highway projects worth Rs 2,444 Crores (USD 295 mn) with total length of 204 km in Rewa, Madhya Pradesh, 8 National Highway projects of 226 km length worth Rs 1,800 Crore (USD 217.4 mn) at Igatpuri, Nashik, Maharashtra, road projects worth over Rs 2,200 Crores in Telengana, road and ropeway projects worth more than Rs 3,400 Crores (USD 410 mn) in Mana, Uttarakhand.

India being a developing nation is set to take full advantage of the opportunity for the expansion of the infrastructure sector, and it is reasonable to conclude that Indias infrastructure has a bright future ahead of it. The government thrust, and a slew of policy reforms have put road sector investments in the fast lane.


The road sector in India is on the brink of an exciting era of growth and transformation. With a strong focus on connectivity, infrastructure development, technology adoption, and sustainable practices, this sector is primed to take center stage in driving economic development, revolutionising mobility, and elevating the overall transportation experience throughout the country. KNRCL is well-positioned to harness these opportunities and contribute significantly to the advancement of the road sector, bringing forth innovative solutions and delivering sustainable infrastructure that will shape the future of Indias transportation landscape.


KNR CONSTRUCTIONS is a leading player in the countrys infrastructure sector, where it mainly focuses on providing infrastructure services for Highways, Flyovers &Bridges, and Irrigation sectors. It participates in all the formats of Bids including Item Rate Contracts, EPC Contracts, BOT (Toll/ Annuity), and HAM mode. With equipment block of over Rs 14,000 Million the company has put to use state of art machinery to execute quality construction. KNRCL s name is reckoned as reputed developer of Highways in HAMs BOT , Annuity Models. KNRCL, developer of 2 BoT, 2 Annuity projects and 11 HAM projects of Highways in Telangana, Andhra Pradesh, Karnataka, Tamilnadu, Kerala and Bihar states. Successfully monetised 1 BOT and 3 HAM projects till date. KNRCL continued to be financially stronger by adopting asset light policy by monetising the BOT, HAM projects in time. Executed over 8,700 lane Km Highways across 12 States in India.

KNRCL is continuously focussing on business sustainability with infrastructure investment, innovation to add new business verticals and also Inclusive Infrastructure that enhances positive outcomes in social inclusivity, and ensures that no individual, community or social group is left behind or prevented from benefiting from improved infrastructure.

Order Book

As of March 31, 2023, the company has an outstanding orderbook position of Rs 70,921 Million. EPC Road Projects and HAM projects constitute 77% of the total order book, while irrigation projects constitute the remaining 23%. Client wise, 50% of the orderbook is from third-party clients and balance 50% is from captive HAM projects. The third-party order book is non-captive orderbook which accounts for 50% of the total order book position is skewed between state government contracts with 36%, whereas 11% is from Central Government and balance 3% order book is from other private players.

The current order book position remains healthy and provides a clear visibility of execution over the period of next 2 years.

In Million
Ramanattukara to Valanchery bypass project (HAM) 13,169
Valanchery Bypass to Kappirikkad project (HAM) 11,734
Development of Six lane Chittoor-Thatchur Highway (HAM) 7,650
Bangalore-Mangalore Project (Periya Shanthi to Bntwal) (EPC) 7,187
Elevated Highway along Avinashi Road in Coimbatore City (EPC) 6,433
Top 5 Road Projects 46,174
Other Road Projects 8,823
Irrigation Projects 15,924
Total Orderbook as on March 31,2023 70,921


1. Development of six lane access-controlled Greenfield Highway from Marripudi (ch. 285+500) to Somvarappadu (ch. 314+600) of [NH-544G] Bengaluru-Vijayawada economic corridor on HAM Mode under Bharatmala Pariyojana Phase-1 in the state of Andhra Pradesh (Package 13) EPC - 5,800 Million.

2. Construction of Access Controlled four laning with paved shoulder from Mysore to Kushalnagara Section of NH- 275 on Hybrid Annuity Mode under NH(O) in the State of Karnataka (Package IV) EPC - 5,750 Million.

3. Construction of Access Controlled four laning with paved shoulder from Mysore to Kushalnagara Section of NH- 275 under NH(O) in the State of 6,250 Karnataka (Package V) EPC - 6,250 Million.


Infrastructure is universally acknowledged as a key driver of growth. Indias infrastructure sector is essential to the nations economic growth.

The governments decision to initiate the National Infrastructure Pipeline, which will involve USD 1.4tn in investments between 2020 and 2025, could provide the infrastructure with the necessary boost. The National Infrastructure Pipeline includes the Vadhavan Port project, Indias first ultra-deepwater port, metropolitan rail projects to increase the penetration of urban mass transit, and other projects to build a modern infrastructure commensurate with Indias aspiration to become a great power.

The government has given a massive push to the infrastructure sector by allocating Rs 10 Lakh Crores (USD 130.57 bn) to enhance the infrastructure sector.

The government allocated Rs 134,015 Crores (USD 17.24 bn) to National Highways Authority of India (NHAI).

In the FY 2023 Union Budget announced, the Government has focused on enhancing investment in infrastructure as the latter speeds up economic growth.


KNRCL acknowledges that every business has some inherent risks and thus, the Company adopts timely measures to understand the internal and external environment so that these risks can be identified and adequate measures can be taken to mitigate them. The Company has in place Enterprise Risk Management System (ERMS), which decides the possible mitigation plans for all risks and embeds them in the strategic plans of the Company.

Labour Shortage

Construction companies have been struggling to fill positions and keep up with the growing demand for their services. Thus, not having enough workers available to complete a project or hit productivity goals poses a huge risk when taking on new projects.

Risk Mitigation: To combat labour shortage, the Company is offering competitive wages and benefits and also developing a strong company culture that values its employees and rewards dedication and hard work. To retain the labour force, the Company also provides opportunities for training, mentoring and continuous education courses so that they are prepared for all the challenges, while also ensuring that their safety is not compromised.

Environmental Risk

The construction industry is heavily dependent on the environmental conditions. It is hard to predict a natural disaster and one must always be prepared for any such disaster. There is a constant fear of disasters like earthquakes, floods, hurricanes, tornadoes and fires among others as these can adversely affect the performance on existing sites and lead to a negative scenario.

Risk Mitigation: The Company takes adequate measures to assess environmental risks and manage them by studying various reports and adopt various safety measures to minimise accidents. Also, the Company has emergency response plans in place to deal with a situation that affects the environment.

Surge in Material Costs

The cost of raw materials and cement is on a constant rise. Consequently, buyers are less interested to invest in the construction sector. Moreover, there is also a shortage in supply of materials to the sector due to a disruptive supply chain. Additional cess on taxes is being introduced thereby spurring up the cost of raw materials.

Risk Mitigation: The Company tries to stock the raw materials well in advance for all its upcoming projects so that the surge in prices does not majorly affect the Company. Moreover, optimum utilisation of materials is done to avoid wastage and ensure ultimate sustainability.

Need for Multiple Clearances

The completion of any construction is largely dependent on multiple clearances from various authorities. The construction sector has to work in liaison with the electricity department, pollution control board and also focus on environment conservation, land, services, utilisation etc. It may also happen that the construction may be completed within the designated timeframe. However, approvals and clearances various bodies and authorities may delay the project as a whole.

RiskMitigation:The Company maintains harmonious relations with all the regulatory and approval bodies to obtain approvals in a short span of time. The Company also ensures that the process of obtaining approvals is systematically planned so that unnecessary delay is not caused in the final delivery of any project.

Pandemic Risk

Recent pandemic have been experienced by contractors, developers, workers and owners. There have been slow movement of supplies and some projects have also seen the plight of termination.

Risk Mitigation: The Company is in a constant process of completing the underlying projects well in time. The Company is also implementing new strategies and preparing its employees to tackle challenges. Additionally, we also encourage all our employees always to follow social distancing norms, and regularly follow hygienic norms.

Competition Risk

There is an increased risk of competition from domestic and international players due to increased project awarding by the

Government. This subsequently leads to price cut and low operating margins and lower market share of project awards. Risk Mitigation: The Company has more than two decades of industry experience and utilises it to its best advantage. The Company believes that it will be able to attain the desired level of success and financials and enjoy continued growth. To mitigate the risk of competition, the Company also forms strategic partnerships and joint ventures with many quality players of the industry. In this way, synergies of both companies can be utilised and it gets easier to compete with large players in the market.

Slow Technology Adoption

While technology is a boon for all the industries, numerous surveys and studies have proven that the construction industry has been slow in adopting technological changes. There are various technologies like fleet management telematics, GPS tracking, geofencing, monitoring worker hours which can provide immense benefits and also safeguard the interest of all employees. The construction industry has reached a point where adopting technological advancements is the only way forward. However, industry players are still taking their time and are not speedy enough to adopt changes.

Risk Mitigation: The Company is active in adopting any new trend that comes in the market and automate as many processes as possible and also trains employees to implement automatic processes. In the coming years, the Company will prudently accept all changes in the technological field to conquer the challenges faced by the industry.

Financial Resources

The total income from the operations posted by the company on standalone basis for the year ended March 31, 2023 is Rs 37,438 Million as against Rs 32,726 Million during the same period in the last financial year thereby recording an Increase in turnover of Rs 4,712 Million (about 14.40%)

PAT for the current year ended March 31, 2023 is Rs 4,988 Million as against Rs 3,818 Million.

The Net Worth has gone up from Rs 22,419 Million to Rs 27,343 Million in the current year thereby recording an increase of about 21.96%.

Earnings per Share is up from Rs 13.58 to Rs 17.74 in the current year.

Loan Funds

The Debt-Equity ratio is at Nil.


KNRCLs external assessment of internal control systems ensure efficient use of resources and compliance with established policies, procedures and statutory requirements. The Company has in place well-documented guidelines, procedures for authorisation and approvals, including regular audits. The Company has a well-established internal audit framework that covers all aspects of financial and operational controls, across units, functions and departments. It also has an efficient financial reporting systemin place. The Audit Committee of the company evaluates the internal financial control system of the company periodically.

Cautionary statement

The Management Discussion and Analysis contains forwardlooking statements, identified by words like plans, expects, will, anticipates, believes, intends, projects, estimates and so on within the meaning of applicable securities laws and regulations concerning the Companys future business prospects and business profitability. All statements that address expectations or projections about the future, the Companys strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. All these prospects are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, ability to manage growth, competition (both domestic and international), economic growth in India and the target countries worldwide, ability to attract and retain highly skilled professionals, time and cost overruns on contracts, ability to manage international operations, Government policies and actions with respect to investments, fiscal deficits, regulations, interest and other fiscal costs generally prevailing in the economy etc. Past performance may not be indicative of future performance. The Company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect in future nor shall the Company update any forward-looking statements made from time to time by or on its behalf.