The construction sector in India, which employs more than 35 million people, is the
second largest employer, next only to agriculture. Therefore, any improvements in the
construction sector affect a number of associated industries such as cement, steel,
technology, skill-enhancement etc. In India, over 50% of the demand for construction
activity comes from the infrastructure sector; the balance comes from industrial
activities, residential and commercial development etc. As per the government reports, the
sector is valued at over USD 126 Billion. It also accounts for more than 60% in total
infrastructure investment.
In the past few years, activity in the construction sector appears to be relatively
slow due to funding constraints, slow policy reforms, weak currency and the prolonged real
estate market slowdown has resulted in a lot of unsold commercial & housing inventory
across India. Simultaneously, severe shortage of skilled workforce as well as raw
materials especially sand was acting as growth deterrents.
Going forward, Indias construction industry is expected to pick up pace due to
investments in residential, infrastructure and energy projects, corporate capex
improvement, urbanization, a rise in disposable income and population growth. Also,
Governments serious efforts to enhance infrastructure investments, increase affordable
housing and improve transport and logistics support systems will support growth for
construction sector.
OPPORTUNITIES AND THREAT
The government plans to focus on the following five major areas for infrastructure
developments Railways, Roads, Sagarmala project (for ports and coastal development),
Housing for All and Inland water ways. A pentagon of industrial corridors is being
engineered to facilitate manufacturing and to project India as a global manufacturing
destination. Government of Indias strategic move of increasing budget allocation in
defence sector is giving much required momentum to ‘Make in India initiative. We
believe that all these sectors have enough potential to grow at a considerably faster
pace.
The link between the economic performance of cities and the national economy gets
stronger as the rate of urbanization increases. Housing and Urban Area Development are key
priorities of the government. The effect of urbanization rates on housing demand is most
profound in the Tier 1 cities, where a large influx of migrants is causing housing demand
to surge. The socio-cultural shift towards nuclear families is also providing an
additional impetus to housing demand in India.
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
The Company is setting up what Directors believe is the Worlds Largest and Indias
First Steel Modular Building Factory Modulex. The project aims to harness the potential of
an emerging, dynamic market like India, and support its growing need with profitable
and proven technology solution for its practical, construction. Modulex will bring
highly advanced and sophisticated technologies from the developed half of the world and
apply it to growth markets. We believe that Modulex also has the unique ability to place
the investor at a vantage point, and successfully tap the pulse of the Indian market. This
is an exciting time and a great opportunity for all investors looking to make an impact in
the worlds second fastest growing economy.
OUTLOOK
Modulex is Indias first and the worlds largest steel modular manufacturing facility
with an annual capacity of 2, 00,000 sqm. The salient features of the same are mentioned
below:
1. The four production lines will have annual capacity of 2, 00,000 sqm operating on
8-hour shift 5 days a week for eleven months.
2. Illustrative annual output: twenty 100 rooms hotels plus a thousand residential or
office buildings of 1,000 sq. ft each or accommodation for 2,000 hospital beds.
3. Set in 40-acre site in Indapur, Pune District, 250 Kms from Mumbai.
4. Land bought from Maharashtra Industrial Development Corporation, a state run
developer of industrial estates with guaranteed water and electricity.
RISKS AND CONCERNS
The industry in India faces challenges alongside a general situation of socio-economic
stress, chronic resource shortages, institutional weaknesses etc. The industry is
fragmented with a handful of major companies involved in the construction activities
across all segments; medium-sized companies specializing in niche activities; and small
and medium contractors who work on the sub-contract basis and carry out the work in the
field.
Another problem, still being faced by some of the construction financing institutions
is of stalled or delayed projects. Projects worth several billion rupees are still
stalled, due to delays in project approvals, financing issues and raw material
non-availability etc. Further delays in restarting stalled projects have strained some of
the infrastructure companies ability to meet their debt obligations, leading to a surge
in banks gross Non-Performing Assets (NPA).
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Board of Directors is responsible for ensuring that internal financial controls
have been laid down in the Company and that such controls are adequate and is functioning
effectively. Company has policies, procedures, control framework and the management
systems in place that map into the definition of Internal Financial Controls as detailed
in the Companies Act, 2013. These have been established at the entity and process levels
and are designed to ensure compliance to internal control requirements, regulatory
compliances and appropriate recording of financial information. Internal financial
controls that encompassed the policies processes and monitoring systems for assessing and
mitigating operational, financial & compliance risks and controls over related partys
transactions substantially, exists. The senior management reviews and certifies the
effectiveness of the internal control mechanism over financial reporting adherence to the
code of conduct and Companys policies for which they are responsible and also compliance
to establish procedures relating to financial or commercial transactions.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Your Companys Present performance vis-a-vis the financial performance for the previous
year as given below in tabular format.
Particulars |
FY 2022-23 |
FY 2021-22 |
| Total revenue including other income |
20.12 |
27.37 |
| Total Expenditure |
176.97 |
105.29 |
| Profit / (Loss) before tax |
(156.85) |
(77.92) |
| Tax Expenses |
- |
1.48 |
| Profit / (Loss) after tax |
(156.86) |
(79.40) |
| EPS Weighted Average |
|
|
| -Basic |
(0.31) |
(0.15) |
| -Diluted |
(0.31) |
(0.15) |
RISK MANAGEMENT IDENTIFICATION AND MITIGATION
Construction industry is highly risk prone, with complex and dynamic project
environments creating an atmosphere of high uncertainty and risk. The industry is
vulnerable to various technical, socio-political and business risks. As a diversified
construction entity, your Company continues to focus on a system-based approach to
business risk management. Accordingly, management of risk has always been an integral part
of your Companys strategies and includes various functions such as planning, execution,
measurement systems & reporting processes. Your Company acknowledges risk as the
critical function that influencesthe objectives of all project and processes. Following
are some of the construction related risks and exposures:
1. Financial risk is the totality of all risks that relate to financial
developments external to the project that are not in the control of the contractor or the
project developer. This results from consequences that may have adverse economic effects.
2. Political risk is the risk that a contracting company encounters in project
execution through undesirable regime acts such as change in law, payment failure by
government, increase in taxes and change in government etc.
3. Legal risks arise through non-compliance with legal or regulatory
requirements or excessive exposure to litigations & non-observance of laws such as
employment law, health and safety, environmental legislation, stipulations for minimum
wages etc.
4. Sub-contractors Default Risks & Management is far different and severe
than the work that is self-performed. In most projects, monitoring of sub-contractors
performance and payment is the responsibility of your Company, being the main contractor.
The active management of subcontractor default risk begins with sub-contractor
pre-qualification, based on financial strength, safety & quality performance etc. and
continues with active monitoring of sub-contractor performance and payments.
5. Techno-managerial risks are the risks arising out of inadequate management of
technicalities involved such as management of engineering & technology, logistics
options, uncertain productivity of resources, insufficient skilled staff etc.
6. Environment risks relating to occurrence of environmental incidents during
the pendency of the project & mitigation strategies. This risk has increased
substantially due to the presence of strict legal liability in relation to such
environmental incidents.
7. Force majeure risks are regarding the events that are outside the control of
any party and cannot be reasonably prevented/avoided by them. These include natural force
majeure events, direct or indirect political force majeure events.
HUMAN RESOURCES
Our employees are the most valuable assets and we endeavour to provide our employees a
professional, congenial, safe working environment coupled with opportunities for personal
growth and development. Your Company has put in comprehensive system in place for
identifying and addressing the competency requirement and fulfilling the same through
various training programs at all the levels in the organization. Through various
Organizational Development (OD) interventions, we are enhancing the competency of our
employees to work in challenging environment & empower them at work place with
cultivation of culture of dedication, ethics & values. Your Company has been
successful in cultivating culture of dedication, work ethics & values in the
organization. Employees are provided with training on behavioral aspects, such as
personality development, leadership development through self-awareness etc. to help to
achieve higher level of performance.
SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS
Types of ratios |
2022-23 |
2021-22 |
Significant Changes |
| Debtors Turnover ratio |
NA |
NA |
- |
| Inventory Turnover Ratio |
NA |
NA |
- |
| Interest Coverage Ratio |
NA |
NA |
- |
| Current Ratio |
0.01 |
0.02 |
|
Debt Equity Ratio (In Times) |
0.01 |
0.01 |
The change in the ratios is because of loan taken and increases in the
net loss during the year. |
| Operating Profit Margin (%) |
NA |
NA |
- |
| Net Profit Margin (%) |
NA |
NA |
- |
Since the Company does not have any revenue from operations and inventories, the
relevant ratios pertaining to it is not worked out.
Caution: The views expressed in the Management Discussions and Analysis is based on
available information, assessments and judgment of the Board. They are subject to
alterations. The Companys actual performance may differ due to national or international
ramifications, government regulations, policies, Tax Laws, and other unforeseen factors
over which the Company may not have any control.
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