KNR Constructions Ltd Management Discussions

<dhheadMANAGEMENT DISCUSSION AND ANALYSIS </dhhead>

GLOBAL ECONOMY

Global growth continues to encounter considerable challenges, with persistent trade frictions, heightened policy uncertainty and weak consumer sentiment weighing on the overall outlook. Although the recent pause in tariff escalations has offered temporary respite, the broader global scenario remains fragile.

According to the April 2025 World Economic Outlook, global GDP expanded by an estimated 3.3% in 2024. However, the IMF has revised its global growth forecast for 2025 downwards by 50 basis points to 2.8%, and for 2026 upwards by 30 basis points to 3.0%, compared to its January 2025 projections. This downward revision largely reflects the intensification of trade disputes, heightened geopolitical instability, ongoing military conflicts in West Asia and between Ukraine and Russia, and the implementation of widespread tariffs, particularly by the US.

Growth in advanced economies is now expected at 1.4% in 2025, a 50 basis point reduction from earlier projections. The US is projected to grow at 1.8%, down sharply by 90 basis points. Meanwhile, emerging market and developing economies are anticipated to expand by 3.7%, compared to the earlier estimate of 4.3%.

Amid these challenges, global supply chains are undergoing significant structural shifts. In response to geopolitical uncertainties, companies are actively adopting "de-risking" strategies. These include diversifying sourcing, near-shoring, friend-shoring, and establishing alternative supply networks. While these measures aim to enhance long-term resilience, they are also resulting in higher short-term costs and increased operational complexity.

OUTLOOK

The global economy is entering a period of slower, more uncertain growth, shaped by trade tensions, policy shifts, and structural changes. While some regions, notably India and parts of Asia, are expected to outperform, most economies face subdued prospects and heightened risks. Policymakers will need to balance support for growth with efforts to rebuild fiscal and monetary buffers, address structural challenges, and navigate an increasingly complex global environment.

INDIAN ECONOMY

India continues to stand out as a rare bright spot in an increasingly uncertain global landscape. The current growth rate of around 6.5% in 2024-25 is a significant achievement, particularly against the backdrop of persistent global headwinds.

As of 2025, India is the worlds fourth-largest economy and the fastest-growing among major nations. It is projected to become the third-largest by 2030, with a GDP of USD 7.3 Tn. With estimated growth in the range of 6.3% to 6.8% in 2025-26, India is poised to remain at the forefront of global economic expansion.

This economic transformation is the result of a decade of strong political leadership, institutional reforms, and deeper global integration under the stewardship of Prime Minister Shri Narendra Modi. Buoyant domestic consumption, a favourable demographic dividend, and continuous structural reforms have enabled India to expand its influence across global trade, investment, and innovation ecosystems.

At the heart of this progress is the vision of Aatmanirbhar Bharat, a national movement focused on fostering innovation, entrepreneurship, and technological self-reliance. Strategic measures such as the Production Linked Incentive (PLI) schemes, the revitalisation of MSMEs, and the expansion of digital infrastructure have strengthened the foundations for sustainable and inclusive growth.

Indias GDP has witnessed a significant transformation over the past decade. At current prices, it has grown from Rs. 106.57 Lakh Crores in 2014-15 to an estimated Rs. 331.03 Lakh Crores in 2024-25, a near threefold increase. In 2024-25 alone, nominal GDP grew by 9.9% year-on-year, while real GDP (at constant prices) rose by 6.5%. This growth underscores not only the economys momentum but also its deepening capacity and rising standard of living.

(Source: https://www.pib.gov.in/PressNoteDetails. aspx?NoteId=154660&ModuleId=3)

OUTLOOK

India continues to demonstrate remarkable resilience and sustained momentum in a challenging global environment. The economy is supported by stability across key pillars - monetary, financial, and political - along with consistent and transparent policymaking, a conducive business environment, and strong macroeconomic fundamentals. At a time when several advanced economies are grappling with economic headwinds and a deteriorating outlook, India remains a stable anchor and a key driver of global growth. Its robust domestic demand and comparatively lower reliance on exports offer a buffer against external shocks and global volatility.

The country offers a policy ecosystem that is transparent, rule- based, and forward-looking, one that actively incentivises longterm, productive investments. As the worlds fastest-growing major economy, India is increasingly being recognised not just as an investment destination, but as a reliable and strategic partner in global growth. With its expanding economic base, young and aspirational population, and continued focus on structural reforms, India is well placed to play a pivotal role in shaping the trajectory of the global economy in the years to come.

INFRASTRUCTURE SECTOR

Infrastructure is a critical enabler of economic development. Over the past several years, India, led by the central government, has significantly stepped up investments in physical infrastructure. The government is also actively incentivising capital expenditure by state governments, particularly in sectors such as urban development, power, and tourism. From highways and renewable energy grids to seaports, airports, and railways, India is methodically building the foundational architecture required to support long-term, sustainable and inclusive growth.

This focused infrastructure development is not only enhancing connectivity across regions but also creating strong multiplier effects by stimulating demand in allied sectors. At the same time, it is helping bring down logistics costs, thereby improving business productivity and boosting national competitiveness.

Over the past decade, the country has witnessed infrastructure development at an unparalleled scale, underpinned by a cohesive, integrated approach. Key policy reforms and mission-mode programmes such as PRAGATI, PM GatiShakti, the National Logistics Policy, Bharatmala, Sagarmala, and UDAN have played a vital role in shaping a connected and competitive India. Initiatives such as the expansion of highways and expressways, electrification of railways, development of greenfield airports, ropeway connectivity in hilly terrains, and the implementation of smart digital platforms demonstrate the governments long-term commitment to infrastructure transformation, aligned with the vision of a Viksit Bharat by 2047.

The Union Budget for 2025-26 places strong emphasis on infrastructure as a strategic lever for driving growth, improving competitiveness, and fostering inclusive development. A series of measures and allocations have been announced to boost capital expenditure, support states, and catalyse public- private partnerships across transport, urban infrastructure, energy, and housing sectors.

Capital Expenditure Highlights

Total capital expenditure has been set at Rs. 11.21 Lakh Crores, or 3.1% of GDR for 2025-26. This reflects a 10.1% increase over the revised estimate for 2024-25.

I nterest-free loans to states have been provisioned at Rs. 1.50 Lakh Crores in the form of 50-year loans, aimed at encouraging capital investment and reforms at the state level.

Major Infrastructure Schemes

Urban Challenge Fund: A Rs. 1 Lakh Crores fund has been launched to support projects aimed at transforming cities into growth hubs, fostering creative redevelopment, and improving water and sanitation infrastructure. An allocation of Rs. 10,000 Crores is proposed for 2025-26.

Jal Jeevan Mission: The Mission has been extended until 2028 with an increased budgetary outlay to achieve 100% rural tap water coverage. The renewed focus will be on ensuring high-quality infrastructure and strengthening operations and maintenance of rural piped water supply schemes through community participation (Jan Bhagidari). Dedicated Memoranda of Understanding will be signed with states and Union Territories to reinforce sustainability and ensure citizen-focused delivery of water services.

(Source: https://www.indiabudget.gov.in/doc/budget speech. pdf)

ROADS AND HIGHWAYS

India possesses the second-largest road network in the world, spanning over 63 Lakh km as of March 31,2025. This includes 1,46,204 km of National Highways (NHs), 1,79,535 km of State

Highways, and approximately 60,19,723 km of other roads. The scale, density, and reach of this network play a pivotal role in enabling connectivity, trade, and regional development across the country.

Over the past decade, India has witnessed robust growth and modernisation of its highway infrastructure. The length of National Highways has grown from 91,287 km in 2013-14 to 1,46,204 km in 2024-25 - a substantial increase of nearly 60%. During this 11-year period, 54,917 km were added to the NH network, underscoring the governments sustained emphasis on strengthening road connectivity.

The pace of NH construction has also accelerated meaningfully. From an average of 11.6 km per day in 2013-14, construction speed has increased to around 34 km per day in 2024-25. This nearly threefold improvement reflects notable gains in operational efficiency and execution capability.

Investment in the sector has kept pace with this expansion. Between 2013-14 and 2024-25, the Ministrys expenditure on road infrastructure has increased by 6.4 times. Additionally, there has been a 570% increase in the road transport and highways budget from 2014 to 2023-24. Work awards and actual construction activity for National Highways have risen by 108% and 150%, respectively, during the same period.

(Source: https://www.pib.gov.in/PressNoteDetails. aspx?NoteId=154624&ModuleId=3)

NATIONAL HIGHWAYS IN INDIA BY STATES (AS OF 2024) Top States with Most National Highway Networks

1. Maharashtra

2. Uttar Pradesh

3. Rajasthan

4. Madhya Pradesh

5. Andhra Pradesh

6. Karnataka

7. Gujarat

(Source: https://factodata.com/national-highway-in-indian-states/)

This strong momentum in the road and highway sector reflects a strategic commitment to building a modern, efficient, and inclusive transportation backbone for India, one that is poised to remain a critical enabler of economic growth and regional integration.

IRRIGATION AND URBAN WATER INFRASTRUCTURE Water

Water is essential for life. Access to clean and safe drinking water is crucial to advancing public health and improving quality of life.

To address this need, the Government of India launched the Jal Jeevan Mission (JJM) on August 15, 2019. The mission aims to provide every rural household with a functional tap connection.

On February 01, 2025, while presenting the Union Budget, Finance Minister Nirmala Sitharaman announced the extension of the mission until 2028. For FY 2025-26, a budgetary allocation of Rs. 67,000 Crores has been set aside to support the missions objectives.

(Source: https://www.indiabudnet.gov.in/doc/budnet speech.pdf) Irrigation

Irrigation is central to Indias agricultural system. It supports food security, improves climate resilience and helps stabilise farm incomes. To boost farm productivity, there is a strong need to build reliable infrastructure, upgrade irrigation systems and promote sustainable water use.

The Government of India has launched several initiatives to encourage efficient and modern irrigation methods. One of the key programmes is the Pradhan Mantri Kisan Sinchayi Yojana (PMKSY). It aims to improve irrigation coverage and promote better water management through a range of targeted components and schemes.

The Per Drop More Crop (PDMC) scheme was initially part of PMKSY. Since 2022-23, it has been implemented under the Rashtra Krishi Vikas Yojana (RKVY). PDMC promotes micro-irrigation and supports the adoption of water-saving technologies.

These efforts focus on broadening access to irrigation, increasing the share of irrigated land, improving on-farm water-use efficiency, and integrating modern technology into irrigation systems. Financial assistance is also extended to farmers to support the transition towards more sustainable and resource-efficient agricultural practices.

Top 5 Performing States in Terms of Area Covered under PDMC in 2024-25

State	Drip Irrigation (hectares)	Sprinkler Irrigation (hectares)	Total Area under Irrigation (hectares)
Karnataka	32,591.97	2,09,704.34	2,42,296.31
Gujarat	59,366.79	61,021.77	1,20,388.56
Andhra Pradesh	91,132.45	26,764.54	1,17,896.99
Uttar Pradesh	21,274.43	80,984.37	1,02,258.80
Tamil Nadu	63,502.61	27,337.68	90,840.29

(Source: Ministry of Agriculture and Farmers Welfare)

With the increasing focus on modernising irrigation systems, measurable improvements in water-use efficiency, paving way for sustainable irrigation in the country. Further, the adoption of cutting-edge technologies such as precision irrigation and IoT to optimise water use, promote water harvesting through rainwater collection and watershed management, and create awareness about the usage of treated water is expected to make the sector climate-resilient in the long-run.

Initiatives such as the irrigation census, regular monitoring and evaluation are also crucial to assess the impact of schemes and programmes and take data-driven decisions. As a stepping stone for maintaining accurate and reliable data of irrigation activities and tracking them, the Water Resource Census Application and Portal was launched in April 2025. This initiative is expected to aid in undertaking the Seventh

Minor Irrigation Census and the First Census of Major and Medium Irrigation Projects. This portal will facilitate data- backed planning and policy formulation, reinforcing impactful government interventions and a positive outlook for the sector.

(Source: https://indianinfrastructure.com/2025/05/07/strategic- interventions-government-schemes-promoting-water-efficient- irrigation-practices/)

COMPANY OVERVIEW

Established in 1995, KNR Constructions Limited (hereon referred to as KNRCL or The Company or We) is a leading infrastructure development company with a strong track record in Engineering, Procurement and Construction (EPC) services. Over the past three decades, the Company has built a reputation for high-quality execution, operational reliability, and adherence to timelines across a broad spectrum of infrastructure segments.

KNRCL specialises in delivering roads, highways, flyovers, bridges, irrigation systems, and urban water infrastructure projects. With 30 years of execution excellence, the Company has completed over 9,100 lane kilometres of road projects across 12 Indian states, consolidating its pan-India footprint and sectoral leadership.

Backed by engineering capabilities, efficient project management and a disciplined financial approach, KNRCL continues to contribute meaningfully to Indias infrastructure development story while creating long-term value for all stakeholders.

ORDER BOOK

As on March 31, 2025, KNR Constructions Limiteds order book stood at Rs. 50,518 Mn. It includes a balanced mix of project types and funding sources. Around 52% of the order book comes from State Government projects, reflecting the Companys strong institutional relationships. Captive Hybrid Annuity Model (HAM) projects account for 40%, Central Government projects constitute 7%, while others contribute the remaining 1%.

Project	Order Value ( Mn)
Mysore to Kushalnagara (Pkg V) (HAM)	6,250
Mysore to Kushalnagara (Pkg IV) (HAM)	5,750
Marripudi to Somvarappadu Project (HAM)	3,851
Bangalore-Mangalore Project (Periya Shanthi to Bntwal) (EPC)	2,961
Elevated Highway along Avinashi Road in Coimbatore City (EPC)	1,468
Top 5 Road Projects	20,280
Other Road Projects	5,331
Irrigation Projects	14,205
Pipeline Projects	10,702
Total Order Book (as on March 31, 2025)	50,518

In terms of segments, Road (HAM) projects comprise 40% of the order book, while other road projects account for 11%. Irrigation projects contribute 28%, and pipeline projects make up 21%. This diversified mix reflects KNRCLs growing presence across multiple infrastructure domains.

All ongoing projects are located in the southern region of India. The Companys deep-rooted presence and established operational base in the region enable efficient project execution and streamlined on-site coordination.

NEW DEVELOPMENTS DURING 2024-25

• During the FY 2024-25, KNRCL received the Appointed Dates for two Hybrid Annuity Mode (HAM) projects for the construction of access-controlled four-laning with paved shoulders from Mysore to Kushalnagara section of NH-275 under NH(O) in the State of Karnataka. Package IV, located near SH-117 Yelawala - KR Nagara Road Junction, received its Appointed Date on April 30, 2025, while Package V, near Paschima Vahini, received its Appointed Date on April 7, 2025.

• The Company also received the Provisional Certificate of Completion for the Chittoor-Thatchur Highway HAM project (Package III), implemented by KNR Ramagiri Infra Private Limited, a wholly owned subsidiary of the Company, under Bharatmala Pariyojana in the States of Andhra Pradesh and Tamil Nadu. The certificate is effective from December 16, 2024. The project was completed 40 days ahead of the scheduled completion date, entitling the Company to a bonus of Rs. 3.26 Crores plus applicable GST.

• Further, pursuant to a share purchase agreement dated October 29, 2024, KNRC Holdings and Investments Private Limited, a wholly owned subsidiary of the Company, transferred its entire shareholding in KNR Muzaffarpur Holdings Private Limited, receiving Rs. 1,00,000 from the transaction. On the same date, KNR Constructions Limited transferred its entire 0.65% shareholding in KNR Muzaffarpur - Barauni Tollway Private Limited, for which it received Rs. 45.9 Lakhs.

OPPORTUNITIES

Government Policy Support and Increased Capital Outlay

The Indian government continues to position infrastructure as a key driver of economic growth. In the Union Budget 2025-26, capital expenditure was increased to Rs. 11.2 Lakh Crores, underpinned by robust policy support and strategic frameworks. Major programmes such as the National Infrastructure Pipeline (NIP), Bharatmala Pariyojana, and the Gati Shakti National Master Plan are facilitating large-scale investment in roads, highways, expressways, flyovers, and bridges. The inclusion of private sector participants through extended access to tools and data on the PM Gati Shakti portal is expected to further streamline project identification, planning, and execution: enhancing coordination and operational efficiency across the EPC value chain.

(Source: https://www.indiabudget.nov.in/doc/budnet speech.pdf)

Urban Infrastructure and Smart Cities

The Smart Cities Mission and allied urban redevelopment initiatives are creating strong demand for integrated infrastructure, including urban water supply, sustainable transport, drainage systems, and smart mobility solutions. Rapid urbanisation is accelerating the need for affordable housing, improved municipal services, and urban renewal. Government-backed funds under schemes such as Cities as Growth Hubs and Creative Redevelopment of Cities are unlocking new avenues for project development through Public-Private Partnerships (PPPs) and innovative financing models, including bond-based mechanisms.

Rural and Regional Connectivity

The Pradhan Mantri Gram Sadak Yojana (PMGSY) has achieved substantial progress in connecting rural habitations. However, the ongoing need for road upgrades, maintenance, and last-mile access continues to create a steady pipeline of project opportunities. With rural development remaining a national priority, investment in regional transport infrastructure and feeder networks is expected to increase, particularly in underserved and remote areas.

Irrigation and Water Infrastructure

Government spending on irrigation is rising due to the focus on agriculture and rural development. Projects include canals, reservoirs, and water management systems. In cities, water supply, sewage, and treatment facilities are gaining priority. These projects are creating opportunities for companies with established expertise in EPC and water infrastructure.

THREATS

Regulatory and Policy Uncertainty

Frequent changes in environmental clearance norms, land acquisition rules, and tariff structures create uncertainty in project planning, particularly in sectors such as renewable energy. Differences between central and state-level regulations often result in legal disputes and delays.

Execution and Land Acquisition Delays

Securing the right of way, resolving legal issues, and gaining land possession remain ongoing challenges. These issues are common in road, rail, and transmission projects. Local resistance and complex land acquisition processes further slow down timelines.

Cost Inflation

Rising prices of steel, cement, and fuel continue to drive up construction costs. Project delays can reduce margins further. Fixed-price contracts are particularly susceptible to inflation- related risks, which can adversely affect project profitability.

Climate and Environmental Risks

Extreme weather events, including floods and heatwaves, are becoming increasingly frequent, posing significant risks to infrastructure development. These disruptions impact construction timelines and necessitate the adoption of stronger, more resilient design standards, often resulting in increased project costs. Additionally, the broader shift towards sustainable construction practices introduces greater design complexity and elevates regulatory compliance requirements.

RISK MANAGEMENT

At KNRCL, risk management is an integral part of strategic planning and operational execution. The Company identifies potential risks early and implements targeted mitigation measures to ensure project continuity, financial stability, and long-term growth.

Risk	Description	Mitigation Strategy
Labour Shortage	Challenges in hiring and retaining skilled workers can impact productivity and delay project delivery.	KNRCL fosters a people-first culture by offering competitive compensation, prioritising employee well-being, and investing in continuous learning, mentoring, and robust safety practices to attract and retain talent.
Environmental Risk	Natural disasters such as floods and earthquakes pose threats to project continuity and timelines.	KNRCL proactively conducts comprehensive risk assessments, enforces stringent safety protocols, and maintains advanced emergency response systems to ensure resilience against environmental disruptions.
Surge in Material Costs	Escalating input costs and supply chain disruptions can erode margins and threaten project viability.	KNRCL mitigates cost volatility by strategically procuring critical materials in advance, enhancing material efficiency, and implementing rigorous waste reduction measures.
Regulatory Clearances	Delays in obtaining necessary approvals from authorities can hinder or stall project execution.	KNRCL ensures timely project progress by maintaining proactive engagement with regulatory bodies and adopting a structured, systematic approach to expedite clearances and minimise hold-ups.
Competition Risk	Intensifying competition from domestic and international players may compress margins and reduce project awards.	KNRCL strengthens its market position by leveraging extensive execution experience, forming strategic alliances, and scaling operational capabilities to remain agile and competitive in a dynamic environment.
Technology Risk	Reluctance or delays in adopting new technologies can impede efficiency and future readiness.	KNRCL accelerates digital transformation by implementing SAP S/4HANA Public Cloud and empowers teams through training in advanced innovations such as GPS tracking and automation to drive operational excellence.

FINANCIAL OVERVIEW Revenues

On a standalone basis, KNRCL reported a total income from operations of Rs. 33,587 Mn in 2024-25, compared to Rs. 40,910 Mn in the previous year.

Profits

EBITDA for the year stood at Rs. 6,259 Mn, as against Rs. 7,010 Mn in 2023-24. Despite the moderation in operating profit, the Company recorded a significantly higher profit after tax of Rs. 7,257 Mn, compared to Rs. 4,938 Mn in the previous fiscal, driven by arbitration claims and prudent cost management.

Net Worth

The Companys Net Worth rose to Rs. 39,450 Mn in 2024-25 from Rs. 32,257 Mn in 2023-24, reflecting an increase of around 22%. Earnings per Share stood at Rs. 25.80, compared to Rs. 17.56 in the previous year.

Financial Ratios

Details regarding the financial ratios are given separately on page number 219.

Internal Financial Controls and Their Adequacy

KNRCL has established a robust internal control system aimed at ensuring efficient use of resources, strict compliance with policies, and adherence to statutory requirements. The controls are backed by clearly defined guidelines for approvals and authorisations, complemented by regular internal and external audits.

A comprehensive internal audit framework is in place, covering key financial and operational processes across all business units. This not only ensures accurate financial reporting but also drives continuous improvements in operational performance.

The Audit Committee periodically reviews the adequacy and effectiveness of the internal financial control systems to ensure they remain aligned with the Companys strategic goals and regulatory obligations.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

KNRCL is committed to the continuous development and enhancement of its workforce, ensuring that the employees are well-equipped to adapt to evolving technologies, processes, and industry practices. By the close of 2024-25, the Company employed a total of 2,750 permanent staff, excluding contract workers and trainees.

CAUTIONARY STATEMENT

This Management Discussion and Analysis contains forwardlooking statements, which may include terms such as plans, expects, anticipates, believes, intends, projects, estimates, and similar expressions, in accordance with applicable securities laws and regulations. These statements relate to the Companys future business outlook, strategic initiatives, product development, market positioning, financial performance, and expenditure plans.

Such statements are inherently subject to a range of risks and uncertainties that may cause actual results to differ materially from those expressed or implied. These include, but are not limited to, fluctuations in earnings, the ability to manage growth effectively, domestic and international competition, macroeconomic conditions in India and other key markets, challenges in attracting and retaining skilled professionals, delays or cost overruns in project execution, changes in government policies, regulatory developments, fiscal deficits, and prevailing interest rates and other financial costs.

Past performance is not necessarily indicative of future results. The Company undertakes no obligation to publicly revise or update any forward-looking statements in the event of any change in circumstances or expectations, unless required by applicable law.