MBL Infrastructures Ltd Management Discussions.

Indian Economic Overview

The Indian economy continues to be one of the fastest growing and least affected by global turmoils such as the escalation of US-China trade tensions, tighter credit policies in China, and financial tightening alongside the normalisation of monetary policy in the larger advanced economies. However, Indian economic growth has slowed down in 2018-19 primarily on account of declining growth of private consumption, tepid increase in fixed investments and muted exports. The Indian rupee suffered because of crude price and conditions exacerbated as recovery in some advance economies caused faster investments outflows. The effects of the external factors were contained in part by Indias strong macroeconomic fundamentals and policy changes.

The structural initiatives identified by the government in improving ease of business and fostering greater value addition within the country would be important to boost the performance of the economy and realise its full potential. The continued implementation of structural and financial sector reforms and easing of infrastructure bottlenecks are expected to brighten the prospect of economic growth. With structural drivers of growth, favorable demographics, rapid urbanisation, accelerated digitalisation and improvement in infrastructure -- firmly in place, the pace of Indian economy is expected to pick up over time.

Even in comparison to other emerging economies, the outlook of the Indian economy looks robust. The government has launched various initiatives with an aim to boost the manufacturing sector of the Indian economy and to increase purchasing power which should further boost demand and spur development. Private investment while carefully managing public finances could help the economy go a long way. The Indian economy has made rapid progress over a decade and emerged as the engine of economic growth in Asia.

Road Sector

Roads play a key role in the social and economic growth of any country. It forms a part of the critical infrastructure sector for economic development of a country. Roads influence the pace, structure and pattern of development. Development and maintenance of the road infrastructure sector is a priority of the government. India boasts of the second largest road network in the world. Creating better road and rail network and water transport system among others is expected to make the Indian economy grow faster in future. The sector has received strong budgetary support over the years as road infrastructure has been a key government priority. There is now a growing participation of the private sector through Public- Private Partnership. Fiscal spending on infrastructure and the rural economy should continue to support economic growth.

Road infrastructure has seen consistent improvement in the last few years. Roads are providing better access to services, ease of transportation and freedom of movement to people. Recognizing the significance of a reliable and swift road network in the country and the role it plays in influencing its economic development, the Ministry of Road Transport and Highways (MORTH) has taken up the responsibility of building quality roads and highways across the country. The government aims to boost corporate investments in the road sector along with introducing business- friendly strategies that are expected to balance profitability with effective project execution. India has become the fastest highway developer in the world with nearly 30 kms of highway being built on an average every day during the financial period under review, while the target is to bring the pace up to 40 km per day. Between 2009 to 2019 the budgets outlay for road and highway construction has increased at a robust CAGR of 16.82%. Bharatmala, a centrally sponsored road and highway project with a target of completing 83,667 kms of new highways at an estimated cost of RS 5.35 trillion crores, had started in 2017.

As the infrastructure sector is a key driver for the Indian economy, increasing impetus to develop infrastructure in the country is attracting major global player. The country is witnessing significant interest from institutional investors in the infrastructure sector. India has the largest road network globally and carries almost 90% of the countrys passenger traffic. To increase private sector participation in the road sector, the government has laid down comprehensive policy guidelines for private sector participation. Over the years, the speed of road construction had become the benchmark for a countrys infrastructure creation. The new integrated infrastructure programme which involves building of roads, railways, water ways and airports will play a pivot role in leveraging cost and facilitate in achieving the growth of infrastructure sector.

Some of the key developments/incentives taken by the government in road sectors are: (i) The Government has allocated RS 1.12 trillion under Ministry of Roads & Highways

(ii) PM Gram Sadak Yogna (PMGSY) is the scheme for the development of rural roads. The government has allocated RS 19,000 crores under PMGSY.

(iii) The government has set up the India Infrastructure Finance Co. to provide long term funding for infrastructure projects. (iv) A total length of 34,800 kms road projects is proposed to be constructed with an estimated cost of RS 5.35 trillion under Bharatmala Praiyogna Phase-II.

(v) The government has allowed 100% FDI under the automatic route in roads and highways, subject to applicable laws and regulations.

(vi) The government is taking major steps in upgrading highways and expressways.

(vii) Government is encouraging the development of this sector by providing subsidies, tax exemptions and duty free imports of high- capacity road construction equipment.

(viii) Effective steps have been taken for the revival of languishing stalled projects (ix) Government is monetizing road assets constructed using public funds by way of the Toll-Operate-Transfer (ToT) scheme. (x) The government has taken many e-initiatives such as Project Monitoring Information System (PMIS), Electronic Toll Collection to simplify the processes in the roads and highways sector and to bring transparency.

(xi) Value engineering programmes have been implemented to promote the use of new technologies, materials and equipment in highway projects executed either under PPP or public funding mode.

Advantage India: Key Strengths and Opportunities

Robust India

The countrys road network has significantly improved over the years, leading to greater connectivity between cities, towns and villages. An improved road network has also facilitated the growth in automobiles and freight movement. An increase in road traffic has further led to a rise in the number of 2 and 4 wheelers.

Attractive Opportunities

The Central Government plans to offer a bonus of 10% of the total project costs to firms that construct and deliver highway projects before the deadline.

Higher Investments

The growing participation of the private sector through Public-Private Partnership (PPP) has considerably accelerated infrastructural growth in this country.

Policy support

Road infrastructure being a key government priority, the sector has received strong budgetary support over the years. Over and above that,

FDI is allowed under automatic route subject to applicable laws and regulations.

Key catalysts behind increasing demand for roadways

• Rising income leading to increasing number of vehicle owners.

• Growing movement of goods within the country due to economic integration

• Better quality roads enable cheaper and safer road travel, attracting more users.

• Increasing roadways leads to greater connectivity between different cities/towns/villages

• Growth in small and medium enterprises in India.

Industry Structure & Development

A key driver for the Indian economy, the infrastructure sector is responsible for propelling Indias overall development. The sector also enjoys keen attention from the government that initiates policies to ensure time-bound construction of world class infrastructure in the country.

Civil Engineering Projects

Our Company is engaged in the execution of various Civil Engineering Projects. It provides integrated Engineering, Procurement and Construction (EPC) services for civil construction and infrastructure sector projects.

Highway Construction EPC

In recent years the Company has executed and commenced a number of prestigious and praiseworthy projects in the states of West Bengal, Madhya Pradesh, Maharashtra, Assam, Uttar Pradesh, Delhi, Rajasthan, Karnataka, Haryana, Odisha, Andhra Pradesh, Bihar and Uttarakhand.

Immense opportunities are available to Company in its core competence area of civil engineering projects particularly in the roads and highways sector.

Highway -BOT Projects

The Company was an early entrant in the BOT space from 2002 onwards. MBL has an integrated business model to execute the BOT projects which includes Design and Engineering, In-house Construction Equipment Bank, Toll Collection and O&M, and Traffic Estimation. NHAI pre- qualified for single BOT (Toll & Annuity) project up to RS 1105.71 crore.

Highway –O&M

The Company was awarded the first ever contract for comprehensive maintenance of Inner & Outer Ring Road of NCT, New Delhi in 2005.

The Companys road maintenance attracted public appreciation; this encouraged the government to award more maintenance contracts to the Company

Building, Housing & Urban Infrastructure

The Company is also engaged in industrial and urban infrastructure development projects across the country. With its impeccable track record, the Company gets good order flow from authorities such as PWD Haryana, MP Housing & Infrastructure Board, etc. The Company has executed several housing / building projects PanIndia as an EPC contractor.

Railways/Metro & Other Infrastructure

In the railways, the Company has primarily executed railway over- bridge, railway under- bridge works and civil works. The Company has completed two RUBs at Narela and Badli, a ROB at Faridabad and three ROBs at Sonepat.

Other Significant Highlights

1. The Company was among the first batch of contractors to be awarded the contracts of the prestigious North- South- East- West Corridor by NHAI and was the first to complete the project.

2. The Company was among the first batch of contractors to be awarded the contract for the maintenance of National Highways by the NHAI.

3. The Company was awarded the first ever contract for comprehensive maintenance of the inner and outer Ring Road of NCT, New Delhi.

4. The Company has over two decades of experience in executing infrastructure projects (especially of Highways) as the Prime Contractor and has established its reputation for delivering quality jobs within the budget and schedule.

5. The Company clientele includes the NHAI, MoRTH, MPRDC, SAIL, CPWD, DMRC, PWD (NCT New Delhi, Haryana, Rajasthan, Assam, UP, Uttarakhand, West Bengal), RCD (Bihar), HUDA, M.P. Housing Board, NBCC, and RITES among others

6. The Company possesses acumen in sourcing and maintaining supply chain of raw material and achieving benefits of backward integration.

7. The Company has witnessed a continuous growth in bid capacity and pre-qualification capability.

8. The Company has been prequalified by the NHAI for single PPP (BOT & OMT) project up to RS 1105.71 crores and for HAM projects up to RS 1187.13 crores.

The Company has a large fleet of sophisticated equipment, including hot mix plants, sensor pavers, tandem rollers, soil compactors, stone crushers, loaders, excavators, tippers, motor graders, concrete batching plants, transit mixers, concrete pumps, dozers cranes, etc. The Company enters into contracts primarily through a competitive bidding process. It executes most of the projects solely as the prime contractor. To encash its experience it also enters into project specific joint ventures. However, as a normal business practice, and depending on business needs, The Company sometime out- sources some of its work to subcontractors.

9. The Company is certified for the execution of civil engineering projects under the following categories:-a) ISO 9001: 2008-in recognition of the Organizations Quality Management System b) ISO 14001: 2004-in recognition of the Organizations Environment Management System c) OHSAS 18001:2007-in recognition of the Organizations Health and Safety Management System

Despite the emerging trends and enormous demand for physical infrastructure, the sector also faces significant challenges in the form of stalled projects, non-performing loans and widening gap between performance and targets. The slowdown in construction activities has adversely affected Engineering, Procurement and Construction (EPC) companies across the country.

Risk Management

Strategic risk

A limited business strategy could affect the Companys ability to capitalise on opportunities in a growing market.


The Company enjoys a rich experience of construction under EPC/ BOT projects. The Company has executives tracking developments within the industry, allowing the Company to capitalise on emerging opportunities. Though the Companys thrust area remains roads and highways, to de-risk from an overt exposure to the road sector, the Company has extended into segments like railways, urban infrastructure and industrial infrastructure to de-risk from an over-exposure to the road sector.

Competition risk

More opportunities have attracted numerous mid-sized players in the infrastructure sector. Increased competition could threaten the Companys growth ambitions.


Entry barrier is less for small sized road and highway projects whereas there are only a limited number of players for the execution of large projects. The Company is considered one of the most reputed in the infrastructure sector with a respectable order book size which inspires trust in the Company as a reliable partner for new projects. The Companys ability to execute large size projects across the length and breadth of the county has helped the Company emerge as one of the renowned road developers in India.

Financial risk

Inadequate financial management might result in the Companys inability to secure funding for projects and to control cost which might affect profitability.


The Company has years of experience in the infrastructure sector with a robust financial management to ensure that productivity is maintained while with keeping project costs in check.

Execution risk

Inability to secure projects and successfully execute large projects within project timelines could lead to stalled projects and stuck funds.


The Company always bids for projects within its core competence, which allows it to leverage its technical expertise to achieve timely project execution. It also has a strong order book, ensuring adequate revenue visibility. It also has standalone bitumen, concrete, quarrying and mining divisions which provide raw material security.

Economic risk

Any adverse change in governmental policy could affect the entire industry.


India displayed impressive growth during the year under review to become the fastest growing economy in the world. The Central Governments emphasis on road infrastructure, energy, railways and affordable housing is expected to create numerous opportunities for the Company. The Company has displayed an inherent ability to explore and exploit opportunities presented by the entire infrastructure spectrum.

Industry risk

A downturn in the road sector can potentially impact sustainability.


The road sector enjoys priority in India. The Central Government announced a slew of initiatives to kick-start growth, supported by various policy changes. The Companys presence in all segments of infrastructure development significantly mitigates this risk.

Business model risk

In new business models like BOT, revenues accrue to the contractor at a later date in the form of user-fees or toll. It is risky if the toll collected is insufficient to compensate the contractor with reasonable profits.


The Company takes due caution before taking up any such project; estimates of toll revenues are made with utmost diligence, considering all practical constraints and realistic view points to arrive at a reasonably accurate figure of future revenues to be earned through collection of user fees. The quality of its project is always maintained at the highest level, which should attract higher traffic intensity.

Input risk

The availability of the right quality and quantity of resources (raw material and finances) is critical for the timely completion of infrastructure projects. Besides, cost escalation could affect profitability.


The Company controls its projects directly – as opposed to sub- contracting core infrastructure assignments – enabling it to ascertain when material would be required in what quantity and where. It procures key raw materials (steel and cement) directly from leading manufacturers for a more timely access. Moreover, most of the Companys contracts are protected with input escalation clauses, which protect profitability.

Manpower risk

Since people represent the most valuable asset in the business, any attrition could lead to a valuable loss of competitive edge. Recruitment and retention of specialised professionals is an industry wide problem.


The Company maintains a cordial and informal working environment. It delegates authority at all levels through a defined system of the scope of work, responsibility and reporting structure which results in leaders being grown at every tier. It remunerates employees according to the prevailing industry standards and conducts in-depth training – functional and attitudinal, leading to a low attrition rate.

Quality risk

For an infrastructure Company, product quality needs to withstand the test across time. Any failure could effectively invite negative publicity affecting the Companys prospects.


MBL Infrastructures Limited procures raw material from reputed brands (SAIL, TISCO, RINL, Ultratech, ACC, IOCL, HPCL, BPCL, among others) only, minimizing much of the risk. The Company has in-house laboratories and engineers for quality checks. Work-in-progress checks are carried out during execution. The Company has its own quarrying and crushing, concrete and bituminous divisions and engineering personnel to ensure quality execution. Finished quality checks are carried out post-execution to ensure quality of the final product before handing over the works to the clients.

Financial Overview

Sales & Other Income

The revenue from operation during the period under review was RS 22,831.93 lakhs against RS 54,535.03 lakhs in previous on standalone basis and RS 24,098.51 lakhs on consolidated basis against RS 57,669.57 lakhs in previous year. The financial cost was RS 10,602.88 lakhs during FY 2018-19 as against RS 24,596.62 lakhs on standalone basis during FY 2017-18 and RS 12,539.72 lakhs during FY 2018 as against RS 24,985.77 lakhs during FY 2017-18 on consolidated basis. The profit during the period was RS 148.33 lakhs against loss of RS 16,976.03 lakhs on standalone basis during FY 2017-18 and loss of RS 2,182.88 lakhs against loss of RS 15,175.68 lakhs on consolidated basis during the period.

Key Ratios

Key financial ratios are given below:

Year ended

2018-19 2017-18
Debtors Turnover 1.68 5.30
Inventory Turnover 25.37 77.28
Interest Coverage Ratio 1.01 0.31
Current Ratio 1.08 1.14
Debt Equity Ratio 3.32 2.58
Operating Profit Margin (%) 1.01 (34.88)
Net Profit Margin (%) or sector-specific equivalent ratios, as applicable. 0.29 (0.34)
(j) Details of any change in Return on Net Worth (0.33) 0.27

Internal Control Systems & their Adequacy

The Company has an adequate system of internal controls to ensure that transactions are properly authorized, recorded, and reported apart from safeguarding its assets. The internal control system is supplemented by well-documented policies, guidelines and procedures. The Company has also installed an extensive CCTV Surveillance system to cover all the project sites of the Company. All these measures are continuously reviewed by the Management and as and when necessary improvements are implemented.

Material Developments in Human Resources/ Industrial Relations Front, including – Number of People Employed

The Company recognizes the importance of human values and ensures that proper encouragement, moral and financial, is extended to the employees to motivate them. The senior management team consists of experienced professionals with diverse skills. This is true across all cadres and geographical locations. The total number of employees as on 31st March, 2019 was 306.

Health, Safety and Environment

The Company has framed a Health, Safety and Environment Policy (HSE). The key objective of the HSE Policy is to empower employees to attain a healthy and safe work place with emphasis on zero injury along with environmental protection. The Company is giving regular training to its employees, conducting regular audits and has taken ISO 9001, ISO 14001 and OHSAS 18001 to ensure proper working of its HSE Policy. The HSE Policy as enunciated by the Management lays emphasis on health, safety and environment through a structured approach, and a well-defined system and procedure have been established for implementing the requisites at all stages of construction.

The safety and health of the employees, partners, service providers and the public are a priority at MBL. Well being of stakeholders and minimising impact on the natural environment are also important. The HSE Policy ensures that site operations meet legal requirements and cause minimal visual impact or nuisance to the public. Efforts to achieve safety awareness and eliminate unsafe practices are made through employee involvement.

Cautionary Statement

The statements in the Management Discussion and Analysis Report with regard to projections, estimates and expectations have been made in good faith. The achievement of results is subject to risks, uncertainties and even less than accurate assumptions. Market data and information are gathered from various published and unpublished reports. Their accuracy, reliability and completeness cannot be assured.

By Order of the Board
For MBL Infrastructures Ltd
Date: 30.05.2019 Anjanee Kumar Lakhotia
Place: New Delhi Chairman & Managing Director