markolines pavement technologies ltd share price Management discussions

Global Economy

Global growth is expected to have risen to 5.5% in 2021, the quickest since the Great Depression, thanks to the easing of pandemic-related restrictions in many countries. The COVID-19 pandemic resurgences and widespread supply shortages significantly hindered global activity in the second half of last year, despite this annual gain. The aforementioned worries are expected to cause the global growth to decelerate to 4.1 percent in 2022. Owing to a resurgence of pandemics, rising food and energy prices, and more damaging supply disruptions, the near-term outlook for global growth is somewhat weaker, and worldwide inflation is noticeably higher. As pent-up demand declines and supportive macroeconomic policies continue to be unraveled, the expected rate of global GDP in 2023 is 3.2%. Although output and investment in advanced economies are anticipated to resume their pre-pandemic patterns the following year, they are expected to remain significantly below average in emerging market and developing economies (EMDEs), particularly in small states and fragile and conflict-affected nations. This is due to lower vaccination rates, stricter fiscal and monetary policies, and more enduring pandemic scarring.

The conflict in Ukraine has sparked a costly humanitarian crisis that calls for a peaceful solution. In addition, the conflicts economic costs will cause inflation to rise and the global economy to grow far more slowly in 2022. Two difficult policy

trade-offs—fighting inflation and preserving the economy, as well as helping the weak and restoring fiscal buffers—have been made more difficult by the war.

Before the start of the conflict in Ukraine, the post- COVID-19 economic recovery was in varying phases in many nations and regions. There are a number of distinct, recurring themes and risks facing the world, despite the fact that GDP forecasts differs. With anticipated shortages in natural gas, metals, and grains, among many others, supply chain problems have transformed from a post-covid problem to a serious present one. While shortages will affect every region, it is projected that they will affect some of the worlds poorest regions and populations disproportionately, adding to the longterm difficulties for the planets overall recovery. Meanwhile, everyones focus appears to be shifting to inflation, heightening the possibility of a global cost-of-living disaster.

Indian Economy

In the final quarter of FY 2021-2022, the Indian economy maintained its recovery momentum. The recovery has been fueled by a consistent uptick in industrial output, growth in key industries, and a push of government initiatives and programmes. India has emerged as the economy with the fastest rate of growth in the world with a nominal GDP of 236.44 lakh crore in FY 2021-22, up from 198.01 lakh crore in FY 2020-21, reflecting a 19.4% rise. Real GDP is anticipated to increase to 147.72 lakh crore in FY 2021-22 from FY 2020-21s First Revised Estimate of GDP of 135.58 lakh crore. GDP growth is projected to increase from 6.6 percent in FY 2020-21 to 8.9 percent in FY 2021-22.

Recent improvements in high-frequency indicators have increased consumer and business confidence. A number of variables are increasing, including freight activity, passenger traffic, electricity use, electronic waybills, and GST receipts. Due to a better economic climate, investment has increased across all sectors and is expected to grow at a rate of 15% in FY 2021-22. More industrial operations should be revived as a result, and the industrial sector should increase from 7% in FY 2020-21 to 11.8 % in FY 2021-22.

The expanding trade deficit and inflationary pressures, on the other hand, continue to be a source of concern. The pressure from high commodity prices will increase production costs and fuel inflation. Inflation is fueled by interruptions in the banking system and supply chain because Russia and Ukraine are major suppliers of raw materials, especially for the semiconductor, food, and automobile industries. The Russian invasion of Ukraine would damage consumers, which will hurt growth, according to the International Monetary Fund (IMF), which recently decreased its prediction for Indias growth in 2022-23 by 80 basis points to 8.2 percent. Consumer Price Inflation (CPI) remained high in most quarters during the year, with 6.95% in March 2022 compared to 5.52% in March 2021, according to the Ministry of Statistics and Programme Implementation.

The Indian government has put in place a number of policies to aid in the recovery of the economy of the nation, including monetary policies that are benevolent, programs for the development of infrastructure, the Production Linked Incentive Scheme (PLI), facilitation of foreign direct investments, and loosening of Foreign Trade policy to encourage domestic manufacturing, foreign trade, and sustainable exports.

As the government and RBI work to balance the pressures on inflation, currency, external accounts, and fiscal deficit, Indias economy will face serious obstacles in the coming months. Nevertheless, India has emerged stronger and will continue to do so despite the pandemic lasting nearly two years and other geopolitical problems.

The government has implemented a number of beneficial policies and economic changes during the previous few years to stimulate the economy. Under the Aatmanirbhar Bharat vision, the government has launched a Production-Linked Incentive (PLI) scheme for 14 sectors, which is gradually being expanded to many more areas. The National Infrastructure Pipeline and the National Monetization Plan are two structural reforms that the government has put into place to encourage the development of infrastructure. The increase in MSPs and the improvement in procurement increased rural wages.

(Sources: 2nd Estimate National Income 2021-22, MOSPI - IIP, MOSPI - CPI, IBEF,

PIB - Foreign Trade, PIB - Economic Survey 2021-22)

Highlights of the budget: 2022-23

PM GatiShakti National Master Plan

? The seven engines that drive PM GatiShakti are Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure.

? The scope of PM GatiShakti National Master Plan will encompass the seven engines for economic transformation, seamless multimodal connectivity and logistics efficiency.

? The projects pertaining to these 7 engines in the National Infrastructure Pipeline will be aligned with PM GatiShakti framework.

Road Transport

? National Highways Network to be expanded by 25000 Km in FY 2022-23.

? ?20,000 Crore to be mobilized for National Highways Network expansion.

? Multimodal Logistics Parks

? Contracts to be awarded through PPP mode in FY 2022-23 for implementation of Multimodal Logistics Parks at four locations.


? One Station One Product concept to help local businesses & supply chains.

? 2000 Km of the railway network to be brought under Kavach, the indigenous world class technology and capacity augmentation in FY 2022-23.

? 400 new generation Vande Bharat Trains to be manufactured during the next three years.

? 100 PM GatiShakti Cargo terminals for multimodal logistics to be developed during the next three years.


? National Ropeways Development Program, Parvatmala to be taken up on PPP mode.

? Contracts to be awarded in FY 2022-23 for 8 ropeway projects of 60 Km length.

Road & Highway

Road transportation is a crucial component of a nations infrastructure for economic growth. It has an effect on the structure, rate, and pattern of development. With a total length of 6.37 million kilometers, India has the second- largest road network in the world. This comprises 1.40 million kilometers of National Highways, 1.71 million kilometers of

State Highway and 60.59 million kilometers of other roads. 64.5% of the nations total commodities are transported by road, while 90% of all passenger traffic in India travels by road. As the country becomes more connected & accessible, road transport has gradually increased over time. Under the Union Budget FY 2022-23, the Government of India has allocated f 199,107.71 crore (US$ 26.04 billion) to the Ministry of Road Transport and Highways.

The expenditure on roads and highways has increased at a CAGR of 21.63% in the last decade. This has been a remarkable growth over the previous decades.

The government is committed to expanding the national highway network across the country with the aim of constructing 18,000 km of highways in 2022-23 at a record speed of 50 km per day. Indias national highway construction slowed to 28.64 km a day in FY 2021-22 due to the COVID-19 pandemic-related disruptions and a longer-than-usual monsoon in some parts of the country. The pace of national highway (NH) construction in the country had touched a record 37 km per day in 2020-21.

Toll Operate Transfer (ToT)

Under the ToT, public-funded highway stretches are given on long-term lease against upfront payment. The operator recoups investment through collection of user fee on the stretches following the prescribed rates by the NHAI, but the operator has to operate and maintain the stretches during the entire concession period.

ToT mechanism started a few years ago and NHAI so far has successfully monetized 21 stretches with an aggregate length of 1,540 km for f23,000 crore from both domestic and international investors. The National Highways Authority of India (NHAI) is optimistic about meeting the asset monetization target of f20,000 crore in 2022-23 amid ongoing economic uncertainties and geo-political instability.

Bharatmala Pariyojana is Indias largest highway infrastructure program till date with development of 34,800 km of National Highway corridors at an investment of f5.35 lakh crore. Bharatmala Project will interconnect 550 District Headquarters (from current 300) through a minimum 4-lane highway by raising the number of corridors to 50 (from current 6) and move 80% freight traffic (40% currently) to National Highways by interconnecting 24 logistics parks, 66 intercorridors (IC) of total 8,000 km, 116 feeder routes (FR) of total 7,500 km and 7 north east Multi-Modal waterway ports.

Road Maintenance

In 2022-23, the Ministry has allocated f2,586 crore towards the maintenance of roads and highways (including toll bridges). The National Transport Development Policy Committee (2014) had noted that the amount spent on maintenance of roads is low. Apart from governments budget the maintenance budgets of private asset owners also adds to this budget & potential business opportunity.

Road Transport and Safety

In FY 2022-23, the Ministry has allocated f356 crore towards road transport and safety. This is a 56% increase over the revised expenditure of f229 crore on maintenance in FY 2021-22. The budgetary allotment for safety covers a variety of items, including road safety initiatives, the construction of NH facilities, the provision of aid to accident victims, the improvement of public transportation, research and development, and training. In addition to the governments budget, the maintenance budgets of private asset owners also contribute to this budget and potential business opportunity.

Company Overview

Markolines Pavement Technologies Limited engages in the operation and maintenance of highways in India. The Company has always believed in Innovation & strives to adopt new technology in pavement preservation. It has been pioneering in bringing various such latest technologies in India which offers Higher efficiency, Cost Effectiveness and are environment friendly. Owing to such technologies, the Company offers certain Specialized Maintenance Services that keeps it ahead of Competition and ultimately keeping the leadership position.

Business Overview

Looking at the adoption of technology in highway operations and growing potential in maintenance sector Markolines has strengthen its Highway maintenance vertical over last few years. In FY 2021-22, the highway maintenance vertical contributed 79% of the revenues and highway operations vertical contributed 21%.

The highway maintenance vertical delivered a growth of 17% and the revenue contribution stood at ^ 1,480 million in FY 2021-22 as compared to ^1,267 million in FY 2020-21. (Specialized maintenance services are the integral parts of this growth.) The company expects multifold increase in this vertical over the next few years.

Highway Operations

The highway operations vertical has also delivered a growth of 25% and the revenue contribution stood at ?387 million in FY 2021-22 as compared to ?310 million in FY 2020-21.

Financial Performance & Analysis

The Companys performance during the year has been exceptional driven by revenue growth with improved margins. The company has been focusing on conversion of order book and achieving operational excellence, cash conservation to maximize shareholder value.

Order Inflow and Order Book

As Markolines is the market leader and the only company in the country that provides entire gamut of highway O&M services, clients regard Markolines as its preferred partner which adds to its order book visibility.

The Company secured new orders worth f 1,817 Mn for the year 2021-22, reflecting an increase of 89.95% over the previous year. Unexecuted order book stood at f 3,837 Mn as on 31 March 2022 which is 2.06 times FY 2021-22 revenue and offers significant visibility for the coming year.

Revenue from Operations

The Company revenue rose by 18.35% y-o-y to ^ 1,866.43 Mn for the financial year 2021-22 from ^1,577.06 Mn for financial year 2020-21. The growth was largely contributed by contract revenue.

Operating Cost and PBDIT

Construction and Operating expenses increased by 13.65% y-o-y at f1,720.13 Mn, in line with revenue growth. These expenses mainly comprise change in inventories, employee benefit expenses, finance cost and other expenses. The increase in other expenses is mainly on account of subcontracting charges of a certain work.

Staff expenses for the financial year 2021-22 at f 400.97 Mn increased by 25.54% as compared to the previous year amounted to f319.39 Mn mainly due to Salaries, wages and bonus. (Looking at the potential and Orderbook company has employed more manpower to cater to the same which will give the growth in revenue subsequently)

Operating profit (PBDIT) grew by 71.56% y-o-y at f228.16 Mn for the financial year 2021-22 as compared to f 132.99 Mn in the previous year.

Depreciation and Amortization Expenses

Depreciation & Amortization charge for the financial year 2021-22 higher by 7.66% at f26.47 Mn as compared to f24.58 Mn in the previous year.

Other Income

Other income for the financial year 2021-22 remained almost flat with a slight decline by 1.47% at f2.55 Mn as compared to f2.59 Mn of the previous year.

Finance Cost

The interest expense for the financial year 2021-22 at f54.95 Mn was higher by 25.43% in comparison to f 43.81 Mn for the previous year with increase in the level of stamp duty and processing charges. The average borrowing cost for the year 2021-22 was contained at 15.85 % p.a. through effective financing and judicious selection of type & tenor of the fresh borrowings.

Profit after Tax

Profit after Tax (PAT) at f101.08 Mn for the financial year 202122 skyrocketed by 151.66% as compared to f40.17 Mn in the previous year.

Earning Per Share

Earnings per share (EPS) for the financial year 2021-22 at f6.08 recorded an increase of 111. 49% from f2.87 in the previous year.

Net Worth and Returns

The Net Worth of the shareholders stood at f710.31 Mn as at March 31, 2022. Return on Net worth (RONW) for the financial year 2021-22 is 14.23% as compared to 16.18% in the previous year.

Liquidity and Gearing

Total short term and long-term borrowings during the year stood at f268.39 Mn, out of total borrowings, non-current borrowings and current borrowings are amounting to f141.29 Mn and f127.10 Mn respectively. Cash balances increased to f 16.04 Mn in the financial year 2021-22 as compared to f3.25 Mn in the previous year.

Cash Flow Statement

Particulars 2021-22 2020-21
Net Profit Before Tax 146.74 64.60
Operating Profit Before Working Capital Changes 229.02 134.52
A. Operating Activities (195.53) 11.33
B. Investment Activities (15.18) (15.57)
C. Financing Activities 223.50 4.29
Cash & Cash Equivalents (A+B+C) 12.79 0.05
Add: Cash and Cash Equivalents at the beginning 3.25 3.20
Cash and Cash Equivalents at the end 16.04 3.25

The total borrowings as at March 31, 2022 stood at f268.39 Mn as compared to f355.28 Mn. in March 2021. The gross Debt Equity ratio is 0.38:1 as at March 31, 2022 as compared to 1.43:1 at March 31, 2021.


The government has lined up opportunities worth trillions of dollars for the roads & highway construction sector on the Public-Private-Partnership (PPP) mode for the years to come. The PPP Vertical is steering the recycling and monetization of various core infrastructure assets. To date, significant progress has been made in developing a sustainable asset pipeline and rolling out structured and risk-managed transactions. PPP models used in road projects include BOT toll, TOT, and HAM. By monetizing highway assets under TOT and InvIT, the government has already begun developing new, flexible policies to create investor-friendly highway development initiatives. Similarly, Infrastructure companies sell their assets to InvITs as a means to monetize their cashgenerating infrastructure assets.

Investors looking for long-term annuity income on their investments, including several foreign investors, have acquired road assets and are operating it successfully. For these investors, road construction, highway maintenance, toll collection, and allied activities are not part of their core business and hence they look to outsource these activities to O&M players. This opens new doors for O&M companies and which will continue to grow over time.

There has been a lot of merger and acquisition activity in the highway and other infrastructure companies recently. Some of the reasons for this M&A activity include the need for companies to consolidate in order to reduce costs, the desire to expand into new markets, and the need to acquire new technology and expertise. These activity are expected to continue in the future as companies strive to remain competitive.

Markolines has adequate resources with all the equipment and manpower to smoothly manage all kinds of highway O&M work. The company is backed by technocrat promoters and has a team of experts & professionals who understand the industry well and are aware of the pain points of road operations and the maintenance industry. To stay ahead of the competition and preserve our leadership, we also consider expanding our product line to include a few more specialized operations in the highway sector.

The company intends to enter the specialized field of tunnel construction. Tunnel Boring has a big potential in India due to the diversified terrain and ease of traffic movement. In India, there arent many players engaged in tunnel boring activities which makes it an enticing opportunity for the Company to explore. The company is also promoting the highway base stabilization technology in Maharashtra as an effort to improve the quality of roads in the state by strengthening the foundation and thus improving the load-bearing capacity as well as the resistance to stress & strain that could result in road deformations and loss of road materials. The UP government has already adopted a similar program and many other states are following the same. Given the vast road network in the country this has enormous potential in the coming years and we are looking forward to seize this opportunity.

Having started with just one product, the company has since grown to offer a complete bouquet of services, becoming the market leader in the Highway O&M sector. We hope to further solidify our position in the near future.

Risk & Concern

Capital Intensive

Risk: Your company operates in an industry that is very capital-intensive in nature. It requires significant amounts of capital for equipment, employee and also a huge amount of debt financing. It also requires working capital to finance its daily operations, purchase of raw materials, mobilization of resources, and other project work before receiving payment from clients.

Mitigation: The company has optimized its working capital cycle and is also constantly working to improve its cash flows from operations. Also, due to its strong track record, the Company is able to raise funds at competitive rates.

Rising Competition

Risk: Your Company operates in a highly competitive market and attractive growth opportunities in the sectors may further increase the number of players in the market.

Mitigation: Your Company is confident about maintaining its leadership position in the market and continuously focuses on building competitive moats in its core business to ensure being ahead of the curve.

Input Cost

Risk: The industry is battling input cost pressure due to a considerable rise in major commodity costs, particularly steel, bitumen, cement and fuel. The current geopolitical situation that has led to supply chain disruption can cause sudden cost escalations & raw material shortages which can directly impact the margins.

Mitigation: Your Company incorporates an escalation clause in all its contracts that provide a pass-through for input cost escalation, thereby leaving the margins unaffected.

Availability of skilled workforce

Risk: Your Company operates in an industry that relies heavily on the availability of a skilled workforce and ground staff. Unavailability of the workforce can severely impact operations.

Mitigation: The Company is committed to maintain and foster an efficient & professional work environment for all its employees. As a Company, we place a great deal of value on our workforce.

Internal Control and Risk Management

Your Company operates its business in an environment with some inherent risks. This requires identifying, monitoring, and mitigating risks predominantly in the areas of business, operations, finance, unauthorized use of assets and compliance. The Company addresses such risks through a system-based approach of risk management. This involves the mitigation of risks on a continuous basis. The Internal Control Systems of the Company appropriately correspond with the nature of its business and the size and complexity of its operations. These risks are regularly tested and certified by the Statutory and Internal Auditors. The Audit Committee reviews the adequacy and effectiveness of the internal control process and systems. It also monitors the implementation of audit recommendations, with the perspective of strengthening the Companys risk management systems. A management team additionally conducts reviews at a regular interval. It assesses the internal control environment, checks the adequacy concerning the business and make relevant recommendations.

Material developments in Human Resources

Human Resources has always been a core component for your Company. The Company employed 1,459 permanent employees as of March 31, 2022. Our continuous objective is to invest in people and people processes to improve human capital for the organization and to provide better service to stakeholders. Markolines constantly thrive to keep its employees updated with latest technologies, and technical training related to the construction of roads & highways, toll operations, collection processes and road maintenance activities. The management at your Company strives to create a conducive and supportive work environment so that employees can learn through various employee engagement programs. It strengthens human capital by making available better processes, technology, and techniques at the work place to exploit the best as it has always aimed at improving individual and group performance.

Cautionary Statement

Statements made in this Management Discussion and Analysis Report may contain certain forward-looking statements based on various assumptions about the Companys present and future business strategies and the environment in which it operates. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India and abroad, volatility in interest rates and in the securities market, new regulations and Government policies that may impact the Companys businesses as well as the ability to implement its strategies. The information contained herein is as of the date referenced and the Company does not undertake any obligation to update these statements. The Company has obtained all market data and other information from sources believed to be reliable or its internal estimates, although its accuracy or completeness cannot be guaranteed.

Notice is hereby given that the 20th Annual General Meeting

of the Members of the Company Markolines Pavement Technologies Limited will be held on Friday the 30th September 2022, at 11.00 a.m. at the Registered Office of the Company situated at 502, A Wing, Shree Nand Dham, Sector 11, CBD Belapur, Navi Mumbai - 400 614, via Video Conferencing (VC) or Other Audio Visual Means (OAVM), to transact the following businesses:

Ordinary Businesses:

1. To consider and adopt the Audited Financial Statements of the Company for the Financial Year ended 31st March 2022, along with the reports of the Board of Directors and Auditors thereon;

2. To consider the appointment of Ms. Kirtinadnini Patil (Din No.09288282), Director of the Company, who retires by rotation and is eligible offers herself for re-appointment;

3. To consider and declare the final dividend on Equity Shares @5% i.e. 0.50/- (Rupee Fifty Paise) per Equity Shares of the face value of 10/- each, for the financial year ended 31st March 2022;

Special Businesses:

4. Approval of Related Party Transactions under section 188 of the Companies Act, 2013:

To consider and if thought fit to pass, with or without modification(s), the following resolution as an Ordinary Resolution:

"RESOLVED THAT pursuant to Section 188 and other applicable provisions of the Companies Act, 2013 read with the Companies (Meeting of Board and its Power) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (including any amendment(s), modification(s) or re-enactment(s) thereof), consent of the members of the Company be and is hereby accorded for the transactions hitherto entered or to be entered into by the Company in the ordinary course of business and at arms length price with the following related parties up to the maximum amount as mentioned herein below for the financial year 2022-2023 and for every financial year thereafter on such terms and condition as may be mutually agreed between the company and the related parties:

Sr. No. Name of Related Party Name of Interested Party Nature of Relationship Particulars of Contract/ Arrangement Amount ()
1. Mr. Sanjay Patil Self Key Managerial Person Loans Received Up to Rs 20,00,00,000/-
2. Mr. Karan Bora Self Key Managerial Person Loans Received Up to Rs 5,00,00,000/-
3. Markolines Infra Private Limited Sanjay Patil, Karan Bora & Vijay Oswal Group Company Receipt of Advances Up to Rs 20,00,00,000/-
4. Markolines Technologies Private Limited Sanjay Patil, Karan Bora & Vijay Oswal Group Company Consultancy Fees payable Up to Rs 5,00,00,000/-

RESOLVED FURTHER THAT the Board of Directors of the Company (which term shall be deemed to include any Committee of the Board of Directors which may have been constituted or hereinafter constituted to exercise the powers conferred on the Board by this resolution) be and are hereby severally authorised to do all acts, deeds, matters and things as may be considered necessary, proper and desirable to give effect to above resolution."

5. Rectification in an application made to the BSE Limited for the name change of the Company from "Markolines Traffic Controls Limited" to "Markolines Pavements Technologies Limited", approved by shareholders before listing of the Company on BSE SME and approved by Registrar of Companies, Mumbai, Maharashtra, post listing of the Company BSE SME. Accordingly,