Nila Infrastructures Ltd Management Discussions.

(MDA) Report

1. ECONOMIC SCENARIO:

One year ago economic activity was accelerating in almost all regions of the world and the global economy was projected to grow at 3.9% in 2018 and 2019. One year later, much has changed: the escalation of US-China trade tensions, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, tighter credit policies in China, and financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018.

Global growth, which peaked at close to 4% in 2017, softened to 3.6% in 2018, and is projected to decline further to 3.3% in 2019. Although a 3.3% global expansion is still reasonable, the outlook for many countries is very challenging, with considerable uncertainties in the short term, especially as advanced economy growth rates converge toward their modest long-term potential. While 2019 started out on a weak footing, a pickup is expected in the second half of the year. This pickup is supported by significant policy accommodation by major economies, made possible by the absence of inflationary pressures despite closing output gaps. The US Federal Reserve, in response to rising global risks, paused interest rate increases and signaled no increases for the rest of the year. The European Central Bank, the Bank of Japan, and the Bank of England have all shifted to a more accommodative stance. China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for US-China trade tensions has improved as the prospects of a trade agreement take shape. These policy responses have helped reverse the tightening of financial conditions to varying degrees across countries. Emerging markets have experienced a resumption in portfolio flows, a decline in sovereign borrowing costs, and a strengthening of their currencies relative to the dollar. While the improvement in financial markets has been rapid, those in the real economy have yet to materialize. Measures of industrial production and investment remain weak for most advanced and emerging economies, and global trade has yet to recover.

With improvements expected in the second half of 2019, global economic growth in 2020 is projected to return to 3.6%. This return is predicated on a rebound in Argentina and Turkey and some improvement in a set of other stressed emerging market and developing economies, and therefore subject to considerable uncertainty. Beyond 2020 growth will stabilize at around 3.5%, bolstered mainly by growth in China and India and their increasing weights in world income. Growth in advanced economies will continue to slow gradually as the impact of US fiscal stimulus fades and growth tends toward the modest potential for the group, given ageing trends and low productivity growth. Growth in emerging market and developing economies will stabilize at around 5%, though with considerable variance between countries as subdued commodity prices and civil strife weaken prospects for some.

While the overall outlook remains benign, there are many downside risks. There is an uneasy truce on trade policy, as tensions could flare up again and play out in other areas (such as the auto industry) with large disruptions to global supply chains. Growth in China may surprise on the downside, and the risks surrounding BREXIT remain heightened. In the face of significant financial vulnerabilities associated with large private and public sector debt in several countries, including sovereign-bank doom loop risks (for example, in Italy), there could be a rapid change in financial conditions owing to, for example, a risk-off episode or a no-deal BREXIT.

With weak expansion projected for important parts of the world, a realization of these downside risks could dramatically worsen the outlook. This would take place at a time when conventional monetary and fiscal space is limited as a policy response.

The Indian economy started the FY2019 with a healthy 8.2% growth in the first quarter on the back of domestic resilience. Growth eased to 7.3% in the subsequent quarter due to rising global volatility, largely from financial volatility, normalized monetary policy in advanced economies, externalities from trade disputes, and investment rerouting. Further, the INR suffered on wake of the crude price, and conditions exacerbated as recovery in some advanced economies caused faster investment outflows. Despite softer growth, the Indian economy remained one of the fastest growing and possibly the least affected by global turmoil. In fact, the effects of such external shocks were contained in part by Indias strong macroeconomic fundamentals and policy changes (including amendments to the IBC, bank recapitalization, and FDI). The improving macroeconomic fundamentals have further been supported by the implementation of reform measures, which facilitated an environment to boost investments and ease banking sector concerns. Together, these augur well for a healthy growth path for the economy.

In 2019, the Indian economy is expected to continue to be the global outperformer at a relatively stable pace in terms of economic growth with 7.3%. While high by international standards, this growth rate is at or slightly below Indias potential. While not immune, India is less exposed to a slowdown in global manufacturing trade growth than other major Asian economies and emerging markets. Growth will be supported by favourable fiscal and monetary policies. In India, government spending announced ahead of elections this year will support near-term growth. RBI is also likely to be able to maintain its current monetary policy stance after some tightening last year. Indian household spending growth will remain stable. A recent positive development is a pickup in investment spending and exports, after weak growth in 2017. In fact, with range-bound oil prices, export growth has outpaced import growth for the last two years. Fiscal spending on infrastructure and the rural economy should continue to support domestic activity. Ahead of the upcoming elections and amid financial distress among small farmers from prolonged low food price increases, the government included a special relief package for farmers in the interim budget. The budget also includes tax breaks for middle-class earners through tax rebates and an increased standard deduction. Together, the direct cash transfer program for farmers and the middle-class tax relief measures will contribute a fiscal stimulus of about 0.45% of GDP. These measures will support growth through consumption over the near term, albeit at a fiscal cost. The RBI cut its benchmark policy rate in February and changed the policy stance to "neutral" from "calibrated tightening." Inflation measures have steadily declined since the middle of 2018. The headline inflation rate declined to only 2.04% in January, largely because of declining food prices, even though core inflation at 5.6% remains only slightly below the RBIs target. Although the overall strength of the banking system is improving, it remains a constraint on the economy. In February 2019, the government provided further capital infusions to public sector banks. These measures, combined with the application of the PCA framework, which requires timely recognition of bad loans, and resolution of bad loans through the IBC, are helping to address solvency and asset quality challenges. However, a complete turnaround of the banking system requires more time amid slower-than-expected resolution of legacy problem loans. According to the RBI, NPA declined to 10.8% in September 2018 from a peak of 11.5% in March 2018. The central bank expects this ratio to improve further to 10.3% in March 2019. Meanwhile, bank credit has also started to flow, with growth of outstanding credit from commercial banks at 12.8% in December 2018. Nevertheless, there are substantial downside risks as well, such as elusive outcome of the general elections, an escalation of the trade tensions between China and the US and a more rapidly cooling down of the global economy than expected.

It may be noted that India has already surpassed France to become the sixth-largest economy backed by gradual revival in investments, especially with a greater focus on infrastructure development.

With this backdrop, infrastructure remains a key tool to address developmental gaps as it is considered a catalyst to lift the economy out of the financial turmoil. Every year, there is about USD 10,00,000 crore in construction-related spending globally, equivalent to 13% of GDP. This makes construction one of the largest sectors of the world economy. The sector employs 7% of the worlds working population and, by building the structures in which we live and work, which create our energy, materials, and goods, and on which we travel, has an impact well beyond its own boundaries. Construction matters. The governments around the world are pumping money to generate demands for goods and services by creating jobs through higher spending into public and social infrastructure. Indias emergence as an economic superpower is predicated upon transforming its basic infrastructure (power, bridges, dams, roads and urban infrastructure development - including Affordable Housing). The impetus is now towards rapid industrialization and infrastructure development where the government and the private sector players are looking to work in a cohesive manner. Apropos, the Indian government has taken concrete steps to revive the sector at a quickened pace. Increased impetus to develop infrastructure in the country is attracting both domestic and international players. Private sector is emerging as a key player across various infrastructure segments, ranging from roads and communications to power and airports. Infrastructure combined index measures the performance of eight core industries with aggregate weightage of 40.27% in the IIP i.e. refinery production (28.04%), electricity generation (weight: 19.85%), steel production (17.92%), coal production (10.33%), crude oil production (8.98%), natural gas production (6.88%), cement production (5.37%) and fertilizers production (2.63%). The cumulative growth in the index of eight core industries was 4.2% in 2017-18 and 4.3% year-on-year in Apr-Mar 2018-19. While, the combined output index for Infrastructure during FY2019 is depicted further.

2. THE INDUSTRY SCENARIO:

a. Infrastructure:

Any highly-populated country needs a robust infrastructure and India is no exception to the rule. A key driver of the economy, Infrastructure is highly responsible for propelling Indias overall development. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. It is a major contributor towards Indias GDP, both directly and indirectly. Its contribution to GDP in India has stayed fairly constant at around 7-8% for the last five years.

GDP from Construction in India averaged Rs. 2,18,400 crore from 2011 until 2019, reaching an all-time high of Rs. 2,75,600 crore in the Q4-FY2018 and a record low of Rs. 1,86,137 crore in the Q3-FY2012. The latest estimate of Indias GDP from Construction is quarterly Rs. 2,58,600 crore, while the forecast is Rs. 3,34,604 crore by 2020. It employs 4,350 lakh people, and any improvements in the construction sector affect a number of associated industries such as cement, steel, technology, skill-enhancement, etc. Low entry and technology barriers make the industry highly fragmented. While low fixed costs narrow the entry barriers, uncertainties on payments drives up working capital requirements. Entities in a contracting process of infrastructure and industrial projects include the owner (project implementer), contractors, consultants, process licensors and suppliers of raw materials and equipment. The industry is regulated and implemented by different apex authorities of the various segments. It encompasses different types of contracts (EPC, EPCM, BOT, BOOT, etc.), depending on the nature of project. Each contract has certain features which draw interest of players and aim at enhancing overall efficiency. Revenues in construction contract are recognised as per Ind-AS 115 i.e. the revenue is recognised to depict the transfer of goods or services to customers at an amount that is expected to be entitled to in exchange for those goods or services. Contract costs that meet certain criteria will be capitalised as an asset and get amortised as revenue is recognised.

Infrastructure accounts for nearly 40% of Indias industrial output. Hence, it enjoys intense focus from the Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. For the purpose, Rs. 50,00,000 crore is required by 2022 to have sustainable development in the country. India is witnessing significant interest from international investors in the infrastructure space with many MNCs keen to collaborate on infrastructure, high speed trains, renewable energy, developing smart cities, etc.

The Government of India is keen on developing the infrastructure sector in the country. This is clearly evident through the numerous initiatives announced for this sector as part of Interim Budget 2019-20 e.g. allocation of Rs. 4,56,000 crore for the sector, with road transport and highway Rs. 83,016 crore; post and telecommunications development Rs. 38,637 crore; Telecom infrastructure Rs. 8,350 crore; Railways Rs. 6,677 crore; Green Energy Corridor Project Rs. 3,900 crore; upgradation of state government medical colleges (UG seats) Rs. 1,361 crore; medical colleges (PG seats) Rs. 888 crore. While, the government has already conferred the coveted "Infrastructure" status to the "Affordable Housing" sector.

Overall construction spends in key infrastructure sectors has gathered further pace, aided by a slew of recent policy reforms. Roads would drive majority construction spends while investments in urban infrastructure and railways are expected to grow at a faster pace with the governments increased focus on schemes such as HFA by 2022, Smart cities, AMRUT, Swachh Bharat, Clean Ganga Mission, WSS projects and metro construction in major Indian cities are expected to boost urban infrastructure investment in the years to come.

b. Logistics:

The presence of a robust logistics-related infrastructure and an effective logistics management system facilitates seamless movement of goods from the point of origin to that of consumption, and aids an economys movement to prosperity. The progress of logistics sector holds an immense value for India as well; as such advancement would increase exports, generate employment and give the country a significant place in the global supply chain. Indian logistics industry is a sunshine sector. The Indian logistics sector provides livelihood to about 220 lakh people. Improving the sector would facilitate a 10% decrease in indirect logistics cost, leading to a growth of 5-8% in exports.

The industrial warehousing segment in India is highly fragmented, with the unorganised players have aggregated 83-85% share of the total warehousing space. As a consequence, there is severe price competition among players. The industrial warehousing segment witnesses intense competition on account of unorganized nature of the industry. The other challenges hindering its growth include high cost, underdeveloped material handling infrastructure, fragmented warehousing, presence of multiple regulatory and policy making entities, lack of seamless movement of goods across modes, and poor integration with modern information technology. These challenges, particularly the ones pertaining to procedural complexities, redundant documentations and involvement of several agencies at our ports and borders, severely dent our performance in international trade, resulting into about 70% of the delays.

There are several policies aimed at encouraging investment in the sector, including free trade warehousing zones and logistics parks. Selecting the right location, optimal usage of storage facilities, providing value-added services, and achieving scale are the key success factors for the warehousing industry. The government has laid an emphasis on infrastructure growth with plans to develop highways, railways and rural roads, and revive unused airstrips and airports. The government also announced the revival of the Sagarmala project for port modernisation and port automation, development of multimodal logistics parks, and dedicated freight corridors. The successful and timely completion of these proposed projects can help ensure cost effectiveness and operational efficiencies.

The GST regime has expedited the freight movement at interstate borders due to dismantling of check posts by upto 20%. The rollout of GST has started to improve supply-chain effectiveness and reduction in consolidation costs by promoting hub-and-spoke model (have a large warehouse in a strategic location instead of numerous small ones) resulting in a reorganised industry. There is a target to reduce the logistics cost in India from the present 14% of GDP to less than 10% of it, by 2022. Warehousing space in India is expected to grow at a healthy pace up to 2020 i.e. about Rs. 1,50,000 crore at CAGR of 10.5%. The industrial warehousing segment is driving growth, led by the organised segment (largely third-party logistics players) fuelled by value-added services. The growth of logistics is two sided - led by demand and supply. The demand-led growth is mainly strengthened with the economic recovery, and implementation of GST. The supply-led growth drivers include improvement in logistics infrastructure, integrated logistics and birth of numerous logistics start-ups, especially tech led start-ups. Such significant development is reflected in improvement in the global rankings i.e. 44th out of 167 countries in World Banks Logistics Performance Index (LPI) 2018.

The Indian government has announced that it is working at the policy in order to set up new logistics plan in the country. The intention is to devise the most cost-effective method to transport goods by the year 2035. The policy aims at preparing a proper integrated logistics plan. The new logistics division within the department of commerce is working on this national integrated plan, with the objective to identify and iron out any existing bottlenecks and gaps in the industry. It will also encourage tech-enabled startups in the logistics sector as they will be able to provide seamless movement of goods across the country.

The industry is attracting a lot of investment and as a result of the transformations and changes led by these investments, the industry will stimulate job creation. The experts predict that it can be the largest job creator by 2022. Some of key investors include Ascendas-Singbridge, Morgan Stanley, and Warburg Pincus, beside others. The investment burst in the sector is leading to development of new and better warehousing facilities. The future for the Indian logistics industry is going to shine even brighter. It will enhance our trade competitiveness, create jobs, shoot up countrys performance in global rankings and pave the way for India to become a logistics hub. Such measures will also contribute to creation of a New India by 2022.

3. NILA:

A. In retrospect:

The Company commenced its business operations from 1990 and operated profitably, mainly as a city-based realtor. The Company executed several housing projects successfully and developed land bank at economic rate during the recessionary phase. The Company gained momentum in FY2007 when the flagship company of the Group Sambhaav Media Ltd was awarded construction of decorative AMTS bus stands in the city of Ahmedabad. NILA entered into urban infrastructure project through the development of unique bus stands of AMTS on behalf of Sambhaav Media Ltd. In FY2008 the Company launched its ambitious residential project "Asmaakam". The project received overwhelming response even during the period of global meltdown in FY2009. However, with limited resources, the Company was not able to work at its full potential, while it was strategized to transform the Company to a meaningful infrastructure player. Thus, the Company initiated amalgamation of Pearl Stockholdings Pvt. Ltd (PSPL) during 2009-10. PSPLs sound financials prepared a strong platform for the Companys growth and transformation. This strengthened the Companys eligibility with respect to "financials" parameter for certain civic urban infrastructure construction contracts by various government bodies/agencies. With such backdrop the Company has since transformed into a specialist in civic urban infrastructure contractor.

Post successful consolidation of resources, the Company concentrated on sustainable growth in civic urban infrastructure segment. Planning an effective vision at the right time and efficient implementation of the strategy transformed the Company. During FY2017, about 86% revenue of the Company was derived from Affordable Housing and civic urban infrastructure projects on EPC/LSTK, and PPP basis. While, the Company initiated to create avenues for growth and seizing such growth opportunities, it was thought prudent to demerge the real- estate undertaking into a separate entity viz. Nila Spaces Limited (NSL - earlier known as Parmananday Superstructure Ltd) and operate on a Lighter, Fitter, and Faster model.

B. The Demerger of Real Estate Undertaking:

The Company presented a Scheme of Arrangement whereby the real estate undertaking is transferred to and vested in NSL, issue of equity shares by NSL to the shareholders of the Company and subsequent listing thereof. In this connection NCLT had sanctioned the the Scheme with Appointed Date of April 1,2017.

C. In prospect:

The Company has started experiencing the benefits of recent initiative to have a Lighter, Fitter and Faster model by demerging the erstwhile real estate undertaking. The Company is working hard to reap the full benefits of this and is convinced about the impetus that it will provide for growth. The Company envisions to become a pure-play Civic Urban Infrastructure contractor. To achieve this, the Company works on AH Infrastructure and civic urban infrastructure projects by leveraging its core competency. The management is optimistic towards the growth of the economy in general and construction sector in particular. The Company has since secured meaningful EPC Construction Projects of Affordable Housing and envisage that, on back of enhanced pre-qualifications/bidding capacities, its business will grow sustainably. The Company has also built significant PPP based order book where the remuneration is superior for a long-term sustainable growth. The Company is now a sort of a Specialist in AH Infrastructure and pure-play Civic Urban Infrastructure player.

4. STRATEGIC FOCUS OF NILA:

A. Unique Business Model - Diversified and Flexible:

The company has developed a unique business model of construction contracts on EPC/LSTK, EPC+PPP and PPP mode for AH projects as well as Civic Urban Infrastructure Projects. Your Company holds commercial properties in the prime location of Ahmedabad and lease rent from that ensures continues revenue. Your Company has successfully leveraged the construction expertise to grow into construction contracts from government authorities and reputed corporates. An integrated well balanced business model of construction and development of government and private projects and contracts provides hedging.

This diversified model of business has shown great strength and resilience in the past years of challenging business environment. Leasing ensures steady cash flow income while construction contracts of Government assure timely and confirmed recovery of dues, whereas the PPP projects ensure better profitability margins. Your Company has developed in-house expertise in the entire gamut of construction and execution - including design, planning & estimation, project preparation, project execution, interior designing, integration of project management.

B. Project Selection and Execution:

Your Companys comprehensive evaluation of opportunities in infrastructure projects includes the following parameters:

• Principal: Constitution, financial strength, bureaucratic structure, involvement of any bilateral/multilateral agency, track record on other projects, contract management strength, appropriateness of design for local market, etc.

• Pre-development: Financing flexibility to fund the early design work, community/political participation/opposition, government stability over the life of the project, environmental problems, site selection and regulatory approval delays, land acquisition, etc.

• Finance: Commercial viability of the project, capacity of the lender to evaluate and speed in providing the credit lines, repayment mechanism, credit availability on viable terms, etc.

• Construction: Viability of the design/technology, availability of labour and raw-material, outlook of raw- material cost, contractor failure, developers access to funds on a timely basis for construction, etc.

• Market: Local economic conditions, demand-supply outlook, interest/inflation rate scenario, etc.

Throughout this process, your Company has to identify and mitigate inherent risks that can adversely affect the project. It is broadly evaluated in three parts: 1) preliminary considerations, market analysis, financial analysis, and strategic marketing; 2) site selection and due diligence, land acquisition, deal structure, entitlements, permissions, etc.; and 3) planning and design, construction management, operations and property management. Hence, with sufficient due-diligence the project is selected and execution is carried-out accordingly by your Company. Your Companys Quality Management System is ISO 9001 : 2015 accredited by INTERCERT that include Project Management, Site Development and Construction activities for Infrastructure, Industrial, Residential and Commercial projects.

C. Project Management and Monitoring:

Your Company has adopted an integrated system for planning, scheduling, monitoring and control of the approved project under implementation. To coordinate and synchronise all the support function of Project Management it relies on an Integrated Project Management Control System which integrates its project management, contract management and control function addressing all stages of project implementation from concept to commissioning.

AH projects have project monitoring centres which facilitate monitoring of key project milestones and also act as a Decision Support System for the management. It is used as integrated web based collaborative system to facilitate consolidation of project related issues and its timely resolution. Various features for information delivery of ERP facilitate project tracking, issues resolution and management interventions on a regular basis. Integrated ERP platform for monitoring and controlling of critical project activities spread across various functions - projects, contracts, finance and execution. This helps in decision support through timely identification of critical input and provide a holistic approach towards project implementation and major project milestones.

D. Financial Resources:

The foremost source of finance of your Company has traditionally been internal accruals and borrowings from banks. Your Company has made financial arrangement with banks and financial institutions for its various long-term and working capital requirements. During the year your Company has successfully contracted/renewed substantial credit limits at competitive terms. Such negotiations will enhance the overall financial flexibility.

E. Joint Ventures:

In order to share risk and cost, experience and expertise your Company develops certain projects in association with other renowned corporates and has formed associates and joint ventures. This provides a larger scale to your Company to work on specific operations. In such a scenario, the construction work is invariably carried-out by your Company. Your Company looks upon them as partners in its progress and shares with them the rewards of growth. It is the Companys endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and cooperation with each other, consistent with consumer interests.

5. OPPORTUNITIES AND OUTLOOK:

A. Gujarat - The Growth Engine of India:

The organisation of "Vibrant Gujarat" at every two-years has been instrumental to make Gujarat a corporate hub with the entry of national and multinational companies which has led to rising employment. Gujarat is one of the leading industrialised states in India. As of February 2019, Gujarat had a total installed power generation capacity of 31,579 megawatt (MW). Gujarat is considered the petroleum capital of India due to presence of large refining capacity set up by private and public sector companies with total refining capacity of 102 MMTPA, accounting for 42% of the countrys capacity. The state is the worlds largest producer of processed diamonds, accounting for 72% of the worlds processed diamond share and 80% of Indias diamond exports. With a contribution of 65 to 70% to Indias denim production, Gujarat is the largest manufacturer of denim in the country and the third largest in the world. There are 42 ports, 18 domestic airports and one international airport. There are 106 product clusters and 60 notified special economic zones (SEZs). Large scale investment is expected in Gujarat as part of the USD 9,000 crore DMIC.

Advantages

High economic growth and industrial development

• One of the most industrially developed states. Contributes about a quarter of Indias goods exports

• Gross State Domestic Product (GSDP) of Gujarat

grew at a rate of 13.47 per cent during 2011 -12 to 2016-17. ‘

Rich labour pool

• Good educational infrastructure with premier institutes in management, fashion, design, infrastructure planning & pharmaceuticals.

• Industrial training institutes in each district to train manpower for the shop floor level.

Policy incentives

• The state government has framed policies in almost all key sectors such as industry, power, ports, roads, agriculture & minerals.

• Garment & Apparel policy was announced in October 2017 with the aim of creating 100,000 jobs in the state.

Facilitating infrastructure

• The state has developed 42 ports, 18 domestic airports & 1 international airport.

* A 2,200 km gas grid supplies gas to the industrial areas.

Further, it may be noted that Gujarat ranked 5th (97.99%) in the recent EODB Combined Score Card of Reform Evidence and Feedback; 4th (99.73%) in Reform Evidence Score Card for Business Reforms Action Plan of Department for Promotion of Industry and Internal Trade by the Ministry of Commerce & Industry, GoI. There are about 248 Infrastructure projects with total outlay of Rs. 1,68,700 crore under implementation at Gujarat. Hence, your Company foresees ample opportunities in infrastructural development. The rapid urbanisation is likely to boost metaphorical growth in years to come. All these would ultimately generate a demand to develop infrastructure that shall offer opportunity to the developers to grow in years to come. The envisaged opportunities are discussed further. Your Company is favourably placed to participate in the opportunities arising from the home-state that is considered the "Growth Engine of India".

B. Rajasthan - The Sunrise State for Civic Urban Infrastructure:

Rajasthan is Indias largest state by area and it is bordered by the other important Indian states: Punjab to the north; Haryana and Uttar Pradesh to the northeast; Madhya Pradesh to the southeast; and Gujarat to the southwest. Thus it is a natural corridor between the wealthy northern and the prosperous western states, making it an important trade and commerce centre.

The population of Rajasthan stands at about 680 lakh (2011 census), making it the eighth most populated state in India (5.6% of the countrys population). Globally, the urban areas are becoming centres of economic growth. Due to the rapid growth and urbanization, there has been an increased pressure on the urban infrastructure facilities. Rajasthan is also in accordance with such global phenomenon and has recorded 29% urbanisation growth rate during 2001-2011 as per the Census (refer the below chart):

Meanwhile, the Urban infrastructure and Public Services for Rajasthans burgeoning urban population is inadequate. On a conservative basis, an investment to the tune of Rs. 10,000 crore would be required in the next 10 years to adequately address the infrastructure needs of various urban centres in Rajasthan.

The natural resources, policy incentives, strategic location and infrastructure in the state are favourably suited for investments in sectors such as cement, IT and IteS, ceramics, tourism, automotive and agro-based industries.

Rajasthan is the largest producer of oilseeds, seed spices and coarse cereals in India. Tremendous opportunities exist in the areas of organic and contract farming as well as in infrastructure developments. Rajasthan accounts for 17.5% of the total cement grade limestone reserves in India and is the largest cement producer with 21 major cement plants having a total capacity of 55 MTPA. A SWC System for investment approvals is operational in the state and BIP is a nodal agency of the GoR that facilitates investments in various sectors in the state.

The state has undertaken a series of labour and industry reforms in recent past. It has also opened many sectors for PPP; earning favourable response from residents, activists and industrialists. The GoR is committed to providing a significantly better and more prosperous life to all the citizens of the State. For people of Rajasthan to realise their dream of a much better life for themselves and their children, it is creating an entire ecosystem of opportunities including a slew of measures, which gets reflected as Rajasthan ranked 9th (95.70%) in the recent EODB Combined Score Card of Reform Evidence and Feedback; 6th (99.46%) in Reform Evidence Score Card for Business Reforms Action Plan of Department for Promotion of Industry and Internal Trade by the Ministry of Commerce & Industry, GoI. There are about 274 Infrastructure projects with total outlay of Rs. 93,100 crore under implementation at Rajasthan. Hence, your Company foresees ample opportunities in infrastructural development and has built a propitious order-book (as detailed further).

C. Infrastructure:

i. Affordable Housing:

Right to adequate housing is a basic human right as shelter is a basic human need. Provision of adequate housing is emerging as a major thrust area for Government and the government accords a very high priority to this task. With all round increase in the cost of land, building materials, labour and infrastructure, affordable housing has become a distant dream for the economically weaker, low income groups, and middle income groups. Hence, the role and intervention of the Government has become all the more important. Sustainable human development cannot be achieved without adequate & affordable housing. Affordable shelter for the masses or creation of productive and responsive housing for all is not a simple technological issue or a mere problem of finance. It is a complex amalgam of a host of factors, which need to be tackled at all levels and in a synchronised manner. Due to rapid pace of urbanisation, increasing rural to urban migration and the gap between demand and supply, there is a growing requirement for shelter and related infrastructure in urban areas of the country.

The latest mission of the MHUPA i.e. "Pradhan Mantri Awas Yojana - HFA by 2022" offers a considerable opportunity. It aims to build about 200 lakh houses across the length and breadth of the country for EWS, ST, SC, and women (irrespective of caste and religion). HFA alongwith the "100 Smart Cities" will be a major game changer for the industry. While, the most coveted "Infrastructure" tag to AH has already initiated change in the rules - of - the - game among s t e ve n t h e established and branded real-estate players.

A demand for 250 lakh homes is estimated (4x of the entire current stock) upto FY2022 in the MIG and LIG categories.

A combination of factors such as: 1) government financial and policy thrust, 2) regulatory support, 3) rising urbanisation, 4) increasing nuclearisation of families, and 5) increasing afford ability is converting latent demand into a commercially lucrative business opportunity. The AH finance sector alone will attract over Rs. 20,000 crore of equity inflows upto FY2022 to support growth. Increased impetus to the creation of affordable housing mission, along with quicker approvals and other supportive policy changes offers a considerable opportunity. On operating cost metrics, the new entrants with their pan-India ambitions would need to build scale quickly to compete with the incumbents whose regional-focussed models have helped maintain tight opex ratios in addition to their cost of fund advantage. This entails building up the order-book at a rapid pace. This in turn would necessitate having the right people (who have seen various cycles and scale) and the right processes (building a scalable and robust platform) while getting the pricing (risk and opex adjusted spreads) right. These are the key differentiators. As your Company has already become a sort of a Specialist in affordable housing space, it is quite favourably placed to participate in such opportunity as discussed further.

PMAY has selected 171 cities of Gujarat and 183 cities of Rajasthan for HFA by 2022. The latest progress of PMAY (U) - HFA at March 25, 2019 is furnished below:

State Project Proposal Considered

Financial Progress ( in crores)

Physical Progress (Nos.)

Investment in Projects Central Assistance Sanctioned Central Assistance Released Houses Sanctioned Houses grounded* for construction Houses Completed* Houses Occupied*
Gujarat 743 40,984 8,172 4,849 4,79,988 3,94,279 2,27,036 2,29,293
Rajasthan 345 10,235 2,847 864 1,74,942 97,663 57,505 57,383
Total 1,088 51,219 11,019 5,713 6,54,930 4,91,942 2,84,541 2,86,676
PAN India 16,512 4,64,347 1,23,307 44,039 79,78,066 44,11,410 19,05,379 18,18,764

* Including incomplete houses of earlier NURM.

It can be gathered from the above table that your Company is already operating in states that offer about 7% in numbers and 11% amountwise opportunity. Also, about 52% Central assistance is already released in Gujarat (59%) and Rajasthan (30%) combined together, wherein it is 36% for Pan India. Out of the Houses Sanctioned, Gujarat has completed 47% and Rajasthan 30% that is superior to 24% for Pan India. Further, out of the Houses Sanctioned, 48% are occupied in Gujarat and 33% in Rajasthan that is superior to 23% for Pan India.

ii. Slum Redevelopment in PPP:

According to the GoGs UDUHD, about 7,00,000 families reside in slums in the urban areas of Gujarat. State Government aims to accord priority to rehabilitate such slum dweller families in-situ. Eligible slum dwellers families will be provided houses of minimum 25 sq. mtr. Carpet area with basic civic amenities free of cost in lieu of their hutments with main objectives being:

• In-situ rehabilitation of the slums situated on public land in urban areas of the State

• Provision of pucca houses with basic amenities having two rooms, kitchen, bath room and latrine for slum dwellers families

• Ownership rights of the house to the beneficiaries after 15 years

• Provision of hygienic and healthy life style especially for urban poor

• Qualitative improvement in socio-economic and environmental conditions of towns and cities of Gujarat

• Attracting private investment by PPP for this purpose

• Simple and transparent policy framework to rehabilitate slums in-situ on public land through PPP

The beneficiaries get basic civic facilities of drinking water, sewerage line, electricity connections, Anganwadi/Health Centre. The beneficiaries are responsible for payment of operational and maintenance cost, property tax and any other tax levied by LSG. The beneficiaries will be initially granted leasehold rights for the houses allotted to them for first 15 years and thereafter will be granted ownership rights. However, the ownership of the land will remain with the LSG. The developer gets certain incentives including additional FSI, TDRs, free-hold rights on balance vacant land for development and free sale, exemption on developmental charges, relaxation in construction. Private developer is selected through established, open and transparent procedures.

Your Company has already built proprietary knowledge required to execute such PPP projects by successfully delivering a 630 units slum in record-time, while a couple of Slum projects are currently being executed. Hence, your Company is very enthusiastic about such opportunity with additional advantage of its rich legacy in real-estate development and marketing.

iii. Civic Urban Infrastructure:

Your Company has, over a period of time, developed a niche for itself by executing unique and pioneering projects e.g. BRTS bus-shelters, Multi-level parking facility, Slum Rehabilitation and Redevelopment, etc. Through execution of such projects, your Company has built proprietary knowledge and it places your Company favourably with employers of such projects. The Company expects that number of large sized urban infrastructure projects in Gujarat will start taking shape on the basis of investments committed vide 28,360 MoUs executed during the latest Vibrant Gujarat. In the backdrop of the announcement of GIFT, MEGA, Dholera SIR, Mega cities, Million plus cities, etc., your Company is favourably poised to replicate such experience in additional geographies/ employers. Apart from this, there are also other opportunities that your Company can participate into, such as:

• Transportation infrastructure for better mobility through public transport, improved walkability, parking

• Sewerage, drainage and water supply

• Solid waste management

• Social infrastructures such as parks, playgrounds and leisure spaces

• Preservation of heritage precincts

• Community Halls

Your Company is confident to benefit from this.

1. Bus Ports in PPP

A typical SRTC is a state owned corporation for passenger transport providing bus services both interstate and intra-state. As part of this endeavour, various SRTCs have decided to develop state-of-the-art Bus Terminals with an iconic structure and design as well as modern facilities. To improve the urban transport infrastructure, SRTC will undertake development and operation & maintenance of bus terminals with commercial facilities on DBFOT basis.

SRTC normally adopts a single stage three step online tendering process for selection of the Concessionaire for award of the Project(s). GoIs guidelines for qualification of bidders seeking to acquire stakes in any public sector enterprise through the process of disinvestment apply mutatis mutandis. The selected bidder i.e. the Concessionaire is responsible for designing, engineering, financing, procurement, construction, operation and maintenance of the Project(s) under and in accordance with the provisions of a long term Concession Agreement to be entered into between the Concessionaire and SRTC.

The scope of work broadly include rehabilitation, demolition of existing bus terminals with designing, financing, construction of new bus terminals along with associated amenities & facilities, development and construction of commercial facilities and the operation and maintenance thereof of bus terminal and commercial facilities. The commercial facilities to be developed by the Concessionaire shall be available on a long-term lease basis.

Your Company has already got a couple of orders directly as well as in joint venture with other reputed corporates for Amreli and Modasa Bus Ports at Gujarat. Your Company is confident to gain positively from execution of such projects.

2. Office/Commercial Complex

Your Company is already executing 8,00,000 sq ft bua for a reputed corporate at Gujarat. Your Company is confident to gain positively from execution of such projects.

3. Health and Medical

Your Company is already executing 3,00,000 sq ft bua facility of a Medical College campus for 100 MBBS admission annually as per applicable MCI norms at Barmer, Rajasthan. This Project will provide additional opportunities to your Company into Medical and Health related construction business, which has abundant prospect. Your Company is confident to gain positively from execution of such project.

D. Industrial and Logistics:

The logistics value chain comprises three units - transportation, warehousing and administration. Transportation involves the end-to-end movement of freight from the manufacturer/retailer to the customer. This transfer can span across borders and across different modes of transport. Warehousing is the intermediate storage of goods that happens during a products journey from the factory to the consumer. Administration is supply chain management.

Logistics entails a lot of coordination and integration, which is made efficient through supply chain management. It plays an indispensable role in the transportation of goods across the country. There is a target to reduce the logistics cost in India from the present 14% of GDP to less than 10% by 2022. At present it is nearly double as compared to 6-9% in developed countries such as the US, Hong Kong and France. Much of the higher cost could be attributed to absence of efficient intermodal and multimodal transport systems. Moreover, warehousing which approximately accounts for 25% of the logistics cost has also been facing major challenges. This further added to the logistics cost borne by the end users and other stakeholders.

Indian Government has increased thrust to improve the logistics sector. Promising and futuristic Policy and Infrastructure environment for the Logistic sector exists in India today, and is creating the most encouraging impact in revolutionizing the logistics sector and taking it to the next level of evolutionary phase. The country is gradually improving its logistics positioning as seen in the LPI, wherein Indias rank has improved as mentioned earlier - also attributable to reforms undertaken by the government like the introduction of the SWIFT in the Customs Department.

The sector indeed has a potential to embrace lot more positive changes and has a long way to go. With the Logistics Sector getting Infrastructure status, the access to credit on long term basis is at competitive rates from financial institution and access to funds as ECB, as well as access long tenure funds from insurance and pension funds and borrow from IIFCL. Further, the implementation of GST has made way for cost and operationally efficient Hub & Spoke

Model of warehousing and has shifted the end user demand and developer supply from inefficient, low quality redundant warehouses to large box, good quality Grade "A" warehouses. Strong demand and investment are foreseen in short to medium term.

A warehouse is a fundamental part of business infrastructure and is one of the key enablers in the global supply chain. It is the fulcrum for procurement, manufacturing and distribution services which collectively build robust economies. Earlier, the incentives to enter Indias warehousing sector was minimal for organised players as the occupiers themselves were content to engage with fringe partners offering low cost options with a network of small storage facilities near consumption centres. Multiple state and central level taxes made it sensible for companies to maintain smaller warehouses in each state. Further, this limited the focus on automation and higher throughput. This attitude of occupiers of preferring to save on costs as their sole objective is changing. There has been a gradual transition in the mind-set of occupiers to use the services offered by organised segments. A plethora of factors are driving this wave of change such as: requirement from compliance regulators (in case of the pharma industry), quality consistency assurance required by clients/ regulators, statutory penalties on non-complaint warehousing facilities, economies of scale being achieved through larger warehouses, safety and security of goods, efficiency in operations, quicker turnarounds, need for efficient warehousing designs and the advent of e- commerce and other multinational businesses that prefer to occupy only complaint facilities. This shift was further accentuated by the implementation of the GST. The warehousing market in India is highly fragmented as majority of the warehouses measure less than 10,000 square feet. Further, almost 90% of the warehousing space is controlled by unorganised players and comprises small- size warehouses with limited mechanisation. The present warehousing market in India can be categorised into three - lower stratum, middle stratum and higher stratum. The lower stratum is just godowns of the past converted into warehouses. These are old buildings, mostly Reinforced Cement Concrete (RCC) structures and their only utility is storage. The middle stratum warehouses comprise similar structures as in the lower stratum, but these are built with pre-engineered slabs and are known as pre-engineered building (PEB) structures. Their planning and functioning is very basic, like that of the lower strata, but their buildings are in a comparatively better condition. Higher stratum warehouses are the modern and massive structures that perform a lot of supply chain functions along with storage. Another practice in Indian warehousing market is the lack of attention to warehouse designing. This ignorance stems from lack of awareness and/or lack of willingness on the part of landowners and developers to cater to the requirements of end users. Most warehouses are built keeping in mind the developers perspective and not that of the end user. Hence, the focus is to save cost which results in the construction of a very basic structure for a warehouse. Such warehouses do not adhere to market standards and therefore, end users are frequently plagued with issues like lack of basic amenities and sub-standard infrastructure with lower longevity. Warehouses today take different forms - fulfilment centres, distribution centres, return centres, and even showrooms. Your Company, thus, focuses on the concept of Built-to-Suit (BTS) warehouse incorporating the designing and end user centric facilities/amenities. Demand for large warehousing spaces is likely to see steady increase as occupiers now prefer to move out of their smaller warehouses and consolidate their activities in larger facilities, which are presently in short supply compared to the demand. This demand-supply gap is visible in the current premium commanded by organised players owning these assets.

Such opportunity has attracted global corporations in Indian warehousing sector. The governments thrust to the sector such as giving infrastructure status to the logistics sector, "Make in India", "Digital India", "Skill India", India Brand Equity Foundation Trust, Multi-modal logistics parks, signing of FTA/PTA, etc.; and initiatives to set up industrial corridors like DMIC, Delhi Kolkata Industrial Corridor and logistics parks have propelled the cause. Over the past few years, the government has undertaken several reforms to promote and provide an exit route to real estate investors via the REITs. Currently the market for REITs in India is at a very nascent stage and it would take time to evolve. Once the market for REITs matures, the institutional investors would be able to get a credible exit avenue to gain from their warehousing investments by listing their warehousing assets through REITs. These initiatives would go a long way in leveraging the true potential of the sector and bring down the overall costs linked to warehousing and logistics as well give credible exit opportunities to investors.

According to a study, a 22% y-o-y growth in total stock in Grade A & B warehousing space in top eight cities at 1,690 lakh sq. ft. compared to 1,380 lakh sq. ft., a year ago is noted. The absorption clocked an unprecedented 63% y-o-y growth to 318 lakh sq. ft. last year from 197 lakh sq. ft. in 2017. The robust growth in absorption reflects demand outstripping supply and vacancies dropping below 10% level for the first time ever. Meanwhile, first container movement on National Waterways 1 between Kolkata and Varanasi has since commenced during the year, while trial run of 300+ km in WDFC (First Phase) is successfully done near NCR. Logistics has attracted about USD 55,000 lakh investments.

As more and more companies streamline their logistics networks, it would be observed that unorganised players or smaller organized players would consolidate or sell their assets to larger ones. The industry is expected to witness a structural shift over the next 3-5 years. The warehousing aspect in the logistics supply chain globally is going through a transformation. From being a mere storage space provider for goods, the segment is offering an array of value added services such as packaging, small scale manufacturing, cross docking, automation, algorithm based demand forecasting and distribution centres. This transition would only happen if economies of scale come into play and companies are able to consolidate their spaces and move into larger warehouses. The Indian warehousing industry, which was lagging behind its global counterparts due to its fragmented structure, would now enter the same league. Your Company is favourably located, being in the economically most vibrant state of India i.e. Gujarat, to participate in developing/constructing the industrial infrastructure. The MOU with the Katana Group of Ahmedabad to work jointly for acquiring land and developing industrial and logistics parks, units, sheds, plots, residential colonies, and allied infrastructure at various locations situated near the upcoming automobile hub at Bechraji - about 90 kms from Ahmedabad at Gujarat; offers your Company a strategic advantage. Your Company has already delivered five (5) dormitories, commercial complex, and a couple of sizeable logistic warehouses under this initiative. Your Company is favourably placed to take the advantage of the expected spur in construction/development of new industrial facilities e.g. industrial park, warehouse/logistics Park, etc.

6. RISK, CHALLENGES, AND THREATS:

As is typical in expanding business activities your Company has become a subject to a variety of risks, challenges, and threats. It is recognised that risks are not only inherent to any business but are also dynamic in nature. Further, the Company is susceptible to certain risks arising out of various activities undertaken in the normal course of business. There are many constraints affecting the smooth functioning of the industry in which your Company operates. The table below provides a brief overview of the most significant risks and the companys approach to managing them.

Risk Explanation Mitigation approach
Interest rate risk Your Companys interest costs are impacted by market rates. Your Companys liquidity and borrowing are managed by professional at Senior management level. The interest rate exposure of your Company is reduced by matching the duration of investments and borrowings.
Credit risk Your Companys Principals ability to pay can have an impact on the financial result. As per your Companys policy only well- established institutions/corporates are approved as counterparties. Exposure per counterparty is continuously monitored.
Liquidity risk Acceptable liquidity levels are required in order to achieve desired financial results. In addition to its own liquidity, your Company enjoys credit facilities with the largest Bank of the country as well as other sizeable/reputed financial institutions.
Competitor risk Competitors find ways to bid at dramatically lower cost or bid to construct with better functioning/latest technologies. Your Company aims to be the cost and value leader, meaning striving to innovate and bring new and increased value through the innovation to our customers while at the same time working to assure that your Companys operations are world class in terms of efficiency, cost and waste avoidance. Your Company has developed proprietary knowledge to construct with different technologies, while the management provides highest importance to the Quality perspective to ensure long-term sustainable growth.
Economic downturn Your Companys customers could be impacted by a major economic downturn resulting in lower demand for their respective projects. Your Company has a highly diversified and well balanced customer base. The risk is therefore spread very widely on customer, regional and industrial sector/segment perspective. Your Companys flexible business model is capable to set operational priorities in the face of changing economic scenario. Your Company uses market data intelligence to follow and anticipate developments - allowing proactive management of changing market conditions.
Input cost fluctuations Significant changes in raw material costs can impact the profitability. Your Company has established a proficient supply chain which assures raw materials are purchased in a highly competitive manner. Raw material cost indexes could also be included in customer agreements.
Risk Explanation Mitigation approach
Supply chain disruption External factors such as fires, extreme weather events, natural disasters, water stress, war or pandemic illness to mention a few, could result in disruption of supply and impact on revenue and profit. Your Company has intentionally set up a flexible supply chain and works to avoid dependence on a single source or production location. The supply chain tracks issues e.g. extreme weather events, natural disasters, water stress, war or pandemic illness, etc. as these may impact the supply. In addition your Company focuses on working with suppliers that have adequate insurance for both production and transports.
Water risk Water scarcity in the supply chain or at the project site leads to reduced construction Your Company has a diversified supply chain that facilitates risk reduction and avoidance for water risks. Those projects which are located in areas of water scarcity are identified and required to drive rationale water reuse and reduction programs.
Material source or type compliance risks Your Company aims to avoid the use of hazardous substances in its products and processes; the company also strives to avoid negative social impacts within the extended supply chain. Legislations have been and are being introduced in these aspects, failure to meet with direct or customer requirements of these legislations could result in costs as well as loss of business for your Company. Your Companys majority Principal/client are government bodies and the material used by your Company is subject to stipulations of the client, BIS specifications, laboratory checks, inspection by independent third-party e.g. Project Management Consultant, etc. Hence, environment, health and safety risks have already been considered while deciding such stipulations.
Labour disputes Industrial disputes lead to industrial action with impacts your Companys ability to meet Principal/client demands. Your Company maintains an open and positive relationship with all the employees, subcontractors, workers, etc.; as exemplified by not a single instance of any such dispute so far.
Loss of a major project site Fire, flood or natural disaster could result in the temporary loss of a construction operation, in addition to the reconstruction and remediation costs, this could put time schedule, cost and revenues at risk. Your Companys Quality Management System is ISO 9001 : 2015 accredited by INTERCERT that include Project Management, Site Development and Construction activities for Infrastructure, Industrial, Residential and Commercial projects. Your Companys construction strategy aims to assure adequate insurance, so that your Company is not financially affected. While, the loss prevention programmes, protect your Companys tangible and intangible assets through active risk management. Your Company is operating on about 15 projects across Gujarat and Rajasthan. Hence, if one project is taken out of action, others could provide support.
Major incident at a project A major incident during which a significant amount of local environmental damage occurs leading to fines, loss of reputation, etc. Your Companys Quality Management System is certified to ISO 9001 and works to assure that all such material risks are identified and effective counter-measures are implemented in order to mitigate them. This includes actions to mitigate the risk as well as emergency response plans to assure the impacts of any incident are minimised.
Health and Safety at projects Any employee, labour, worker is hurt or killed by an accident at work. Apart from the QMS, project execution policy/processes, loss prevention programmes, insurance, etc. your Company ensures to initiate
Risk Explanation Mitigation approach
development and construction of the Project, only post identifying, defining and addressing all such risk propositions and dynamics. Your Company also ensure to share sufficient knowledge about such risks and imparts adequate training to all the employees, labours, workers, so as to tackle such risks. Zero accident programs supported by proactive near miss reporting aims at the avoidance of all workplace accidents.
Climate change risks - extreme weather events Extreme weather events disrupt project execution. Requirements for emergency response plans at all sites include flood risks etc. See also mitigations mentioned hereinabove.
Health and Safety related to your Companys construction (conformance and performance) Person or persons are hurt or injured as a result of your Companys construction failure or defect. Stability/sturdiness of the structure is compromised. Your Company follows strict design and validation rules for all projects, and fully adheres to Principal/client/NBC specific requirements for safety and structural sturdiness. Your Company ensures implementation of detailed instructions of the Project Principal/client, Architect, Structural Engineer, PMC, etc. to ensure the fulfilment of Principal/clients requirements and your Companys quality standards. Your Companys overall approach to quality management assures conformance and performance to the highest level.
Corrupt or fraudulent actions carried out by your Companys representatives. Your Companys employee or employees fail to adhere to the Companys Code of Conduct and related policies and requirements and act in a fraudulent or corrupt manner leading to financial penalties and reputation damage. Your Company takes a proactive approach to assure awareness of demanded ethical standards by education, compliance programmes including anti-corruption, antifraud and antitrust. The work to follow up adherence is facilitated by the whistle blower function and a risk-and incident based audit system.
Non-compliance with applicable laws The diverse nature of your Companys business and operations means that the Company is required to adhere to numerous laws and regulations related to all aspects of its activities. Failure to meet these requirements could lead to legal and financial consequences as well as damage to the Companys reputation. Your Company has put in place comprehensive and robust compliance programme which is based on the Companys Code of Conduct. The compliance programme is put in place to ensure that applicable laws and regulations are identified, understood and adhered to.
Legal risks relating to our business activities In connection with the revenue of your Company and in the purchase of materials and services from our suppliers, consultants, etc. large potential liabilities may occur in case of e.g. late delivery, delivery of defective products, unfulfilled service commitments and incorrect advice. Therefore, it is important that all such risks are identified, that risk decisions are taken on the appropriate level and that carefully worded contractual provisions aiming at reducing your Companys liabilities are included in contracts. Your Company has put in place policies, procedures and training programs in order to make sure that legal risk relating to our business activities are identified and that risk decisions are taken on the appropriate level. In addition, independent professional legal counsels support the Company in identifying and handling legal risks. The legal counsels work closely with the Senior management and provide contract drafting and negotiation support, claim and litigation management, support, training and general advice.

Your Company is operating in a business which is cyclic in nature and in which; the price is mainly driven by the demand and supply factors. It is not largely based on the cost of the product. Timely supply of raw material like cement, steel, bricks are essential for timely completion of the projects. Shortage of labour and raw material may delay the execution of projects of the Company. The infrastructure projects are capital intensive in nature. The Companys business requires long-term commitment of capital to meet the financial requirement of long-term projects. Further, timely availability of skilled and technical personnel is also one of the key challenges. Infrastructure projects are mainly dependent on the economic scenarios and any adverse events affecting the whole economy may deteriorate the industry as well. Any significant change in government policy in promoting Affordable Housing and/or Civic Urban Infrastructure could pose a threat. Further, the approval process and time for projects are generally uncertain which may delay the execution and thereby affect financials.

Your Company has in place an effective risk management mechanism to identify potential risk and its timely mitigation.

7. CORPORATE GOVERNANCE:

Your Companys Corporate Governance philosophy is based on conscience, openness, fairness, professionalism and accountability. These qualities are ingrained in its value system and are reflected in its policies, procedures and systems. Your Company not only believes in adopting the best corporate governance system but also in proactive inclusion of public interest in its corporate priorities. The Company has its mission, vision, goals and core values. The Company is being governed in accordance with the policies, code of conducts, charters and various committees are formed in accordance with the law to ensure governance. The Companies Act, 2013 and SEBI Listing Regulations have strengthened the governance regime in the country. Your Company is in compliance with the governance requirements provided under the new law and listing regulations. The Company has adopted the policies in line with new governance requirements including the Policy on Related Party Transactions, Policy on Material Subsidiaries, CSR Policy and Whistle Blower Policy. These policies are available on the website of the Company at www.nilainfra.com. The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.

The extract of annual return in Form MGT-9 as required under Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to this Report. A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.

8. WORK CULTURE AND HUMAN RESOURCES:

The management believes in team work and a corporate environment which is self-motivating. Your Company has successfully developed a work force of people over a period of time i.e. 66 Nos. at March 31,2019. The top management is acting as the governing force in creating and maintaining the corporate work culture. The businesses that your Company engages in are primarily people-driven. Our Vision is to raise our own benchmarks with every successive endeavour and it is possible only by making every employee a fully engaged and aligned team member. Your Company continues to remain focused on reinforcing the key thrust areas i.e. being the employer of choice, building an inclusive culture, building a strong talent pipeline, building capabilities in the organization and continuing to focus on progressive employee relations policies. Accordingly, our HR policies are centered around the creation of an environment that attracts, nurtures and rewards high- caliber talent. Young engineers gain the opportunity to operate on the frontlines of technology and associate with projects of scale and complexity. We drive sustainable growth and have been instrumental in bringing in thought leadership in building strong employee relations. There is no material development in HR. Your Company continued to build on the Diversity and Inclusion agenda through building leadership capability and recognizing line managers who provide a simple, flexible and respectful work environment for their teams. Your Company is developing future leaders and having the best people practices. A structured leadership development initiative has helped to build a robust talent pipeline at all levels. Our HR organisation is well-geared towards attraction and retention of engineering talent in an ecosystem that provides long-cycle professional development opportunities in various facets of civil urban infrastructure and caters to career building aspirations of talent at all levels.

9. INTERNAL CONTROLSYSTEM:

The Corporate Governance Policy guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities and authorities at each level of its threetiered governance structure and key functionaries involved in governance. The Code of Conduct commits management to financial and accounting policies, systems and processes. The Corporate Governance Policy and the Code of Conduct stand widely communicated across the Company at all times, and, together with the Strategy of Organisation, Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to your Companys Financial Statements. Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. These Policies are supported by the Corporate Accounting and Systems Policies that apply to the entity as a whole to implement the tenets of Corporate Governance and the Significant Accounting Policies uniformly across the Company. The Accounting Policies are reviewed and updated from time to time. These, in turn are supported by a set of divisional policies and SOPs that have been established for individual businesses. Your Company uses ERP System as a business enabler and also to maintain its Books of Account. The SOPs in tandem with transactional controls built into the ERP Systems ensure appropriate segregation of duties, tiered approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by divisional management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through to implementation. Your Company has in place adequate internal financial controls with reference to the Financial Statements. Such controls have been tested during the year and no reportable material weakness in the design or operation was observed. Nonetheless your Company recognises that any internal financial control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an on-going basis. Your Company has also put in place comprehensive systems and procedural guidelines concerning other areas of business, too, like budgeting, execution, material management, quality, safety, procurement, asset management, human resources etc., which are adequate and necessary considering the size and level of operations of the Company. The management has been making constant efforts to review and upgrade existing systems and processes to gear up and meet the changing needs of the business.

10. BUSINESS OVERVIEW:

A. Infrastructure

During FY2019, your Company has carried-on development and construction of various projects on PPP, EPC/LSTK basis - the details are furnished below.

Affordable Housing Projects - Gujarat

Ramapir No Tekro - Vivyan Vivyan Infraprojects LLP has awarded a Turnkey contract for slum redevelopment project, at Ramapir No Tekro, Juna Wadaj, Ahmedabad involving about 8,00,000 sq. ft. built-up area for 1,540 slum dwelling families. The project shall commence soon.
Radha Raman Ni Chali - Vyapti Vyapti Infrabuild Pvt Ltd has awarded a Turnkey contract for slum redevelopment project, at Radha Raman Ni Chali, Bapunagar, Ahmedabad involving about 1,80,000 sq. ft. built-up area for 552 slum dwelling families. The project shall commence soon.
EWS (Cat.-II) at Bopal - AUDA AUDA has awarded two (2) EPC orders that envisage overall construction of approximately 250,000 sq. ft. carpet area for total 616 EWS (Cat.-II) flats with ~402 sq. ft. super built-up area each along with common amenities, infrastructure & development works of the entire site, electrification, alongwith Supply, Installation, Testing and Commissioning (SITC) of 134 KW Roof Top Solar PV System. The project is yet to commence.
Integrated Slum In-situ Development for P.P.P. Project (Phase-2) AMC has awarded a contract for the Integrated Slum In-situ Development for P.P.P. Project of 80 residential units at Ahmedabad under Urban Development & Urban Housing Department, Government of Gujarats Slum Rehabilitation and Redevelopment Policy-2013. The Project envisages rehabilitation of about 80 slum-dwelling families living at Kailashnagar, Sabarmati, Ahmedabad. The slum redevelopment is to be completed in 18 months. As remuneration, your Company will get the balance vacant land and/or TDRs. It offers financial and operational flexibility to either use it for captive consumption or monetize it by selling it to other developer/s, depending on the market trends. The project has since commenced. However, the units have been revised to 196 that entails revision in the development cost and the TDRs.
Integrated Slum In-situ Development for P.P.P. Project (Phase-2) AMC has awarded a contract for the Integrated Slum In-situ Development for P.P.P. Project of 360 residential units at Ahmedabad under Urban Development & Urban Housing Department, Government of Gujarats Slum Rehabilitation and Redevelopment Policy-2013. The Project envisages rehabilitation of about 360 slum-dwelling families living at Chhanaji Na Chappra and Khodiyarnagar, Asarva Slum. The slum redevelopment is to be completed in 24 months. As remuneration, your Company will get the balance vacant land and the TDRs to be used within the development plan of the Ahmedabad City. These offer financial and operational flexibility to either use it for captive consumption or monetize it by selling it to other developer/s, depending on the market trends. The project has since commenced.

Affordable Housing Projects - Rajasthan

RUDSICO - Jodhpur RUDSICO has awarded a contract for construction of Project of Mega Housing at Jodhpur for EWS, LIG & MIG through PPP. Out of the total land area of 10.12 acre, Nila has developed 75% area for RUDSICO and balance 25% of total land is allotted to NILA free of cost to subsidise the ceiling rate. 1,072 units are constructed, wherein 50% are EWS units (325 sft each), 35% are LIG units (500 sft each) and 15% MIG units (700 sft each) i.e. total ~4,72,800 sft is constructed by NILA. NILA can further develop a Residential (150,000 sft) cum Commercial (25,000 sft) area on the 25% free land allotted by RUDSICO.
Urban Improvement Trust (UIT) - Udaipur Urban Improvement Trust, Udaipur has awarded four (4) contracts for the construction of affordable housing flats on turnkey basis under the Chief Ministers Jan Awas Yojana - 2015 corresponding to the Memorandum of Understanding under the latest "Resurgent Rajasthan Partnership Summit - 2015". The large scale affordable housing schemes for EWS (325-350 sq. ft.) and LIG (500-550 sq. ft.) categories envisage overall construction of approx. 4,00,000 sq. ft. super built-up area on the Government lands at Sector A, South Extension Scheme, Udaipur. The Project will be constructed on 75% of the land area and remaining 25% will be allotted to the Company, free of cost to subsidize the ceiling rate. The Project has commenced and is scheduled to complete by June 2019.

Affordable Housing Projects - Rajasthan

Urban Improvement Trust (UIT) - Bhilwara Urban Improvement Trust, Bhilwara has awarded a contract for the construction of affordable housing flats on turnkey basis under the Chief Ministers Jan Awas Yojana - 2015 corresponding to the Memorandum of Understanding under the latest "Resurgent Rajasthan Partnership Summit - 2015". The large scale affordable housing schemes for EWS (325-350 sq. ft.) and LIG (500-550 sq. ft.) categories envisage overall construction of approx. 300,000 sq. ft. super built-up area on the Government land at Harni Khurd village, Bhilwara. The Project will be constructed on 75% of the land area and remaining 25% will be allotted to the Company, free of cost to subsidize the ceiling rate. The Project has commenced and is scheduled to complete by June 2020.
Jodhpur Development Authority - Jodhpur JoDA has since revised the contract for construction of EWS and LIG Houses with G+3 pattern and internal Development as per Model No. 4A (i) of Chief Minister Jan Awas Yojana 2015 at Khasra No. 88, Village Barli, District Jodhpur. The township / complex / campus will comprise total 1,216 residential units i.e. total ~470,000 sft will be constructed by NILA. Work will be completed in stipulated time. The Company will also get the balance vacant land of 3.37 acres towards part-remuneration, once the project reaches 50% completion.

Civic Urban Infrastructure Projects

Adam - APSEZ APSEZ has awarded a contract for construction of PMC Office Building at Adani Shantigram, located on S.G. Highway, Ahmedabad. The building envisages overall construction of Ground + 13 floors + two basements covering about 3,00,000 sq. ft. built-up area. The Project has commenced and is scheduled to complete soon.
Adam - Inspire Business Park Adani Groups Shantigram Estate Management Pvt. Ltd. has awarded an EPC work contract for construction of "Inspire Business Park" Project (Basement and Towers CH1 to CH9) at Shantigram, Ahmedabad. The project envisages overall construction covering about 4,00,000 sq. ft. built-up area. The Project has commenced and is scheduled to complete within stipulated time.
Adam - Inspire Business Park Phase-II Adani Groups Shantigram Estate Management Pvt. Ltd. has awarded an EPC work contract for further construction of "Inspire Business Park, Phase-II" Project (Basement and Towers CH1 to CH9) at Shantigram, Ahmedabad. The project envisages overall construction covering about 400,000 sq. ft. built-up area (one (1) tower having double basement+G+12 floors and two (2) towers with double basement+G+8 floors). The project has commenced and work is to be completed by November 2019.
Medical college campus and residences at Barmer, Rajasthan EPIL has awarded a contract for construction of the Medical College Campus and Residences at Barmer, Rajasthan. The Medical College Campus site is 9.3 km from District Hospital at Barmer and spread over 19.38 acres of land on NH-15. The Project of about 3,00,000 sq. ft. has commenced and is scheduled to complete soon.
Demolition of Existing old building of DK Patel Hall and Construction of new Building with all amenities in Naranpura ward West Zone AMC has awarded a contract for demolition of existing old building of DK Patel Hall and construction of new building with all amenities in Naranpura ward West Zone. AMC intends to construct a majestic community hall with all the latest amenities for the benefit of its citizens. The hall could be used for social, religious, and other general community purpose. The EPC project involves construction of about 6,000 sq. ft. built-up area and shall be completed within 24 months. The Project has commenced and is scheduled to complete within stipulated time.
GSRTC Bus Terminals- Amreli and Modasa To improve the urban transport infrastructure, GSRTC has awarded a contract to develop and operate state-of-the-art BTF with an iconic structure and design as well as modern facilities that integrate CF on DBFOT Basis. The BTF construction work envisages development of the latest infrastructure including bus bays, administrative area, operating area, works/repairs area, passenger amenities, etc. The SPV of your Company will have to maintain certain basic BTF facility for 30 years, while the core operating and depot facility will be maintained by GSRTC. In consideration, the Company will get the right to develop, design, finance, construct, operate and maintain the CF (shops, offices, restaurants, hospitals, multiplex, parking lots, etc.) to be leased upto period of 90 (ninety) years. At Amreli, out of the total area of 17,095 square meters, the BTF facility will be constructed in 7,719 square meter built-up area incorporating 12 (twelve) boarding/alighting bays and six (6) idle bays. In consideration your Company will get right to monetise CF of about 12,800 square meters.
While, at Modasa, out of the total area of 30,212 square meters, the BTF facility will be constructed in 6,279 square meter incorporating 11 (eleven) boarding/alighting bays and seven (7) idle bays. In consideration the SPV will get right to monetise CF of about 39,000 square meters.
While the Amreli BTF facility is awarded individually to your Company, the Modasa BTF is awarded in Consortium with Vyapti Infrabuild Pvt Ltd (wherein your Companys share is 34%).
The Projects have commenced and is scheduled to complete within stipulated time.

Summary of movement in your Companys order book for last five (5) years is furnished below:

Particulars F.Y. 2015 F.Y. 2016 F.Y. 2017 F.Y. 2018 F.Y. 2019
Opening Order book 9,537 20,955 20,259 40,761 51,784
Add: Work started on new orders 19,486 15,050 39,758 35,053 41,766
Less: *2,919 06,508
Less: Work executed 8,068 15,746 19,256 21,111 #22,278
Confirmed unexecuted Order book 20,955 20,259 40,761 51,784 64,764

* To be executed by the SPV : 0 Tender value reduction post allocation : # Including value of proportionate land

The composition of the existing order-book of your Company is quite balanced. The summary of the existing unexecuted order-book is

(Rs. in lakhs)
Activity

Gujarat

Rajasthan

Total %
GoG PWL/Misc. Total(A) GoR EPIL Total(B) (A+B)
Affordable Housing 8,539 20,698 29,237 6,224 - 6,224 35,461 55
EPC 6,554 20,697 27,251 6,224 - 6,224 33,475 52
PPP 1,985 - 1,985 - - - 1,985 3
Civic Urban Infra (EPC) - 26,800 26,801 - 2,503 2,503 29,304 45
Total 8,539 47,498 56,037 6,224 2,503 8,727 64,764
% 13% 73% 87% 10% 3% 13% 100%

Geographically the state of Gujarat accounts for 87% orders ( 56,038 lakh), and Principalwise government entities account for 26% ( 17,266 lakh). GoR, EPIL and AMC are the largest government clients. Your Company continues to focus on its core competence of "Affordable Housing" with 55% orders ( 35,461 lakh), while EPC is the major tributary with 97% orders ( 62,780 lakh). Detailed information on the order book is given in the subsequent part to this report.

B. Leasing

Your Company holds 88,000 sq ft of commercial properties at the prime location in Ahmedabad, which your Company leases to earn rental income.

C. Share of Profit

Your Company has made certain strategic investments in JV/associates/subsidiaries and earns its share of profit, which is detailed further.

FINANCIAL DISCUSSION AND ANALYSIS:

Our vision of consciously concentrating on Civic Urban Infrastructure Projects is paying-off to the satisfaction. The considerable improvement in business profile of your Company has continued primarily due to the demerger of the real estate undertaking into a separate company as well as expanded scale of operations of your Company in civic urban infrastructure activities. The summarized analysis of financial statements viz. Profit and Loss Account, Balance Sheet and Cash Flow are furnished further.

Total Income

Particulars For F.Y. 2019 00 o CM LL L_ o LL YoY change % change
Revenue from Operations on: (Refer Note 24) 22,278 21,111 1,167 6%
• EPC basis 21,656 18,896 2,760 15%
• PPP basis 622 2,215 -1,593 -72%
Rental income 272 300 -28 -9%
Share of Profit/(Loss) from LLP 29 19 10 53%
Total Operating Income (TOI) (A) 22,580 21,430 1,150 5%
Other income (B) (Refer Note 25) 828 734 94 13%
Total Revenue (A + B) 23,408 22,164 1,244 6%

 

(Rs. in lakhs)
Particulars For F.Y. 2019 For F.Y. 2018
Revenue from Operations on: 95% 95%
• EPC basis 92% 85%
• PPP basis 3% 10%
Rental income 1% 1%
Share of Profit/(Loss) from LLP 0.12% 0.09%
Total Income from Operations (A) 96% 97%
Other income (B) 4% 3%
Total Revenue (A + B) 100% 100%

The revenue of the Company comprises income from construction and development of civic urban infrastructure projects in three (3) distinct modes as mentioned herein above as well as certain income from rental, and share of profit from LLPs; while Other income mainly comprises interest earned on investments such as term deposits with banks, and on loans given.

The pattern of revenue-mix is since set with Infrastructure projects contributing about 95%. During FY2019, revenue from better-margin projects has increased, while the EPC streams growth has been moderate. Since the PPP project of Slum Rehabilitation was concluded during FY2018 and the new ones are yet to make distinct contribution, there has been reduction in revenue-share of PPP projects as compared to previous years.

With such inter-change in composition of revenue-streams, revenue account of GST has impacted your Company. Prior to GST regime, all our contracts were inclusive of taxes, while the Service Tax was exempt. Hence, in absence of any explicit clarity from the government with respect to the additional impact of such new tax law, it was estimated to continue with under GST regime. We have made all such calculations and on clarity from the government and on such revision our topline is affected. However, your Company has been able to successfully overcome most of such constraints and grow on topline and bottom-line. The total income for FY2019 is Rs. 23,408 lakh as against Rs. 22,164 lakh in the previous year registering an increase of 6%. The detailed breakup of Infrastructure revenue for FY2019 is furnished in the following table:

Activity

Gujarat

Rajasthan

Total (A+B) %
GoG PWL/Misc. Total(A) GoR Non. Govt. Total(B)
Affordable Housing 624 1,839 2,463 4,974 - 4,974 7,437 33%
• EPC 1 129 1,841 4,974 - 4,974 6,815 30%
• PPP 622 - 622 - - - 622 3%
Civic Urban Infra (EPC) 576 13,063 12,415 - 2,913 2,427 14,841 67%
Total 624 14,254 14,878 4,974 2,427 7,400 22,278
% 3% 64% 67% 22% 11% 33% 100%

Whereas the breakup for FY 2018 is furnished in the following table:

Activity

Gujarat

Rajasthan

Total %
GoG PWL/Misc. Total(A) GoR EPIL Total (B) (A+B)
Affordable Housing 3,441 - 3,441 3,526 - 3,526 6,967 33%
• EPC 1,226 - 1,226 3,526 - 3,526 4,752 23%
• PPP 2,215 - 2,215 - - - 2,215 10%
Civic Urban Infra (EPC) 475 10,854 11,329 - 2,815 2,815 14,144 67%
Total 3,916 10,854 14,770 3,526 2,815 6,341 21,111
% 19% 51% 70% 17% 13% 30% 100%

Each element of total revenue is discussed further.

Infrastructure Projects

Your Company undertakes construction and development of Civic Urban Infrastructure projects for government/semi-government agencies/departments as well as private corporates of repute. Construction and development of Infrastructure project is carried-out pursuant to work order issued by/Agreement entered into with the client. Revenue of your Company from construction and development of Infrastructure project is driven by the success in selecting the right order (nature as well as size), executing it proficiently and building sufficient order-book.

The movement in your Companys order-book of construction and development of Infrastructure projects during FY2019 is furnished further.

(Rs. in lakhs)
Project - Client Unexecuted at 1 April 2018 Added during F.Y. 2019 Executed during F.Y. 2019 Unexecuted at 1 April 2019
A B C D = (A+B)-C
I Affordable Housing
A PPP
1 Khodiyarnagar - AMC 2,107 - 122 1,985
2 Kailashnagar - AMC 482 - 500 $
Total(A) 2,589 - 622 1,985
B EPC
1 Jodhpur -JoDA 10,728 (6,508)* - 4,220
2 Udaipur - UIT 3,398 - 2,120 1,278
3 Bhilwara - UIT 1,415 - 840 575
4 Jodhpur - RUDSICO 691 - 540 151
5 Other/Misc - - 1,473 -
6 Vadaj - VivyanB 13,167 - - 13,167
7 Bopal 232 - AUDA - 5,778 1 5,777
8 Anant SkyB - 4,383 804 3,579
9 Bapunagar - VyaptiB 4,416 - 909 3,507
10 Bopal 241 - AUDA - 778 1 777
11 Other/Misc 571 - 128 443
Total (B) 34,386 4,431 6,815 33,475
I TOTAL (A+B) 36,975 4,431 7,437 35,460
II Civic Urban Infrastructure (EPC)
1 Modasa Bus-Port CF - VyapnilaB - 7,800 301 7,499
2 Inspire Phase II - AdaniB - 5,384 808 4,576
3 ArhamB - 4,888 394 4,494
4 Amreli Bus-Port CF - Nila TerminalsB - 4,133 291 3,842
5 Barmer - EPIL 4,930 - 2,427 2,503
6 Inspire - AdaniB 4,126 - 1,706 2,420
7 APSEZB 2,376 1,070 1,682 1,764
8 Romanovia - BecharajiB 2,295 764 1,359 1,700
9 D K Patel Hall - AMC 1,082 - 576 506
10 Kent - BecharajiB - 2,918 2,918 -
11 Others/Misc - 2,379 2,379 -
II TOTAL 14,809 29,337 14,841 29,304
I AH 36,975 4,431 7,437 35,460
II CUI 14,809 29,337 14,841 29,304
GRANDTOTAL 51,784 33,768 22,278 64,764

$ under revision : BPrivate White Label Project

* On 25/Oct/2018, the Company received an official correspondence from Jodhpur Development Authority (JoDA) intimating reduction in existing works contract from Rs. 10,728 lakh to Rs. 4,220 lakh i.e. reduction of Rs. 6,508 lakh.

Income from construction and development of civic urban infrastructure project for the FY2019 has increased by Rs. 1,167 lakh to Rs. 22,278 lakh i.e. an increment of 5% over FY2018s income of Rs. 21,111 lakh.

The market dynamics are now in favour of the organized players like your Company. The outlook of government spending in civic urban infrastructure is absolutely positive in short, medium and long-term. Be it PMs "Housing for All by 2022 Mission" or "Smart Cities" - the scales here are very promising and additionally the Fiscal and Monetary eco-systems are also galvanized.

Your Company is absolutely convinced about the Affordable Housing sector, moreso, as nara hA 3nora ofiaai - "Housing for All by 2022" is getting significant push from the PMO - e.g. Affordable Housing since officially classified as "Infrastructure". Currently your Company is executing about 7,900+ units under EWS, LIG and MIG categories (Affordable Houses). Your Company is very favorably placed to seize the growth opportunities in the area of its core competence as the governments focus is on creating more affordable houses. Your Company has since secured meaningful orders in the state of Gujarat and Rajasthan under the schemes of Affordable Housing and envisages that, on back of enhanced pre-qualifications/bidding capacities, it will grow in natural/normal course of business. Considering the funding dynamics, it well fits into your Companys strategy of executing civic urban infrastructure projects where the cash flows are expected to be steady. Your Company is also executing a couple of unique Slum Rehabilitation and Redevelopment Projects in Ahmedabad as well as GSRTC Bus Port projects for Amerli and Modasa.

So far as the "Smart Cities" are concerned, your Company is in sweet-spot and very favorably placed to partake in the opportunities as it is already active in all the important facets of "Smart City" concept that is in Social Infrastructure, your Company is qualified to construct infrastructure for education, healthcare, entertainment, sports, childrens parks and gardens, Slum rehabilitation, etc. In Physical Infrastructure, your Company has already executed urban utility projects like BRTS Bus Stations, Multilevel Parking, the housing stock, sanitation facilities, etc. For Economic Infrastructure, your Company has requisite experience and expertise to undertake construction of office complex, industrial parks, logistic parks, community hall, etc.

Rental

Your Company owns prime commercial office space of 88,000 sq ft in an upmarket locality of Ahmedabad. In order to generate regular sustainable income, your Company has leased certain prime commercial office space to reputed corporates on long-term basis. Income from rental for FY2019 is Rs. 272 lakh that is 9% ( 28 lakh) lower as compared to FY2018 on account of amortizing the total lease rental per Lease Equalization Method as prescribed under Ind AS 19 as well as vacation of certain premises during the Q4-FY2019 by the Lessees. However, your Company is looking-out for the new lessee with better/equivalent credentials and is confident to find lessee/s in due-course.

Share of Profit/(Loss) from LLP

During FY2019, your Company has earned share of its profit from JV Limited Liability Partnership firm i.e. Kent Residential and Industrial Park LLP Rs. 29 lakh that is 53% higher ( 10 lakh) as compared to Rs. 19 lakh during FY2018. Meanwhile, it may be noted that the operations in subsidiary, associate and JV entities have since commenced and are gradually gaining the scale.

Other Income

Other income mainly comprises interest income from bank deposits and others, liabilities written back, and miscellaneous income. Other income in FY2019 is Rs. 828 lakh that is 13% ( 94 lakh) higher as compared to FY2018s Rs. 734 lakh. The break-up of other income is furnished further.

(Rs. in lakhs)
Particulars For F.Y. 2019 00 o CM LL L_ o LL YoYchange % change
Interest income: (Refer Note 25) 732 696 36 5%
• From loan 667 610 57 9%
• On Bank Deposits 65 86 -21 -24%
Liabilities no longer required to be paid written back 56 34 22 65%
Other non-operating income 40 4 36 900%
Total Other Income 828 734 94 13%

The increment in interest income from other parties to the extent of Rs. 57 lakh is from the advances extended mainly to JVs and subsidiary companies. It may be mentioned that such advances are given in the routine course of business and it carry interest not lesser than the weighted average cost of your Companys funds. Interest income from bank deposits for FY2019 has reduced by Rs. 21 lakh as your Company has availed bank-guarantees from the bank that stipulates lower cash-margin. Overall interest income has registered a growth of 5% from the previous financial year i.e. by Rs. 36 lakh.

Expenses

Total expenses in FY2019 is Rs. 20,272 lakh as compared to Rs. 18,917 lakh in FY2018 i.e. increase of 7%, which is marginally higher in comparison of 6% growth of revenue. The breakup of the said expenses is furnished further.

(Rs. in lakhs)
Particulars For F.Y. 2019 For F.Y. 2018 YoY change % change
Cost of material consumed and project expenses (Refer Note 26) and Changes in inventories (Refer Note 27) 17,569 16,579 991 6%
Employee benefit expenses (Refer Note 28) 542 592 -50 -8%
Finance costs (Refer Note 29) 1,299 1,110 189 17%
Depreciation and amortization expense (Refer Note 4, 5 & 6) 186 172 14 8%
CSR Expense (Refer Note 30A) 56 54 2 4%
Other Expenses (Refer Note 30) 619 410 209 51%
Total Expenses 20,271 18,917 1,355 7%

Cost of material consumed and project expenses (Refer Note 26) and Changes in inventories (Refer Note 27)

The expenditure incurred on projects for FY2019 is Rs. 18,658 lakh, which is an increment by 10% over the previous years expenditure of Rs. 16,945 lakh. The net increment of Rs. 1,714 lakh is mainly due to an increase in operations with more no. of sites; and incremental scale in infrastructure projects sites. It may be mentioned that the overall profitability has marginally dipped despite economies-of-scale as a couple of large orders were in nascent stage.

The expenditure incurred on consumption of material for FY2019 is Rs. 6,414 lakh, which is an increment by 21% over the previous years expenditure of Rs. 5,282 lakh on back of higher backward integration; while Civil, Electrical, Contracting, Labour work, etc. cost for FY2019 is Rs. 11,300 lakh, which is an increment by 8% ( 808 lakh) over the previous years expenditure of Rs. 10,492 lakh. Legal and professional expense for FY2019 is Rs. 124 lakh, which is an increment by 158% over the previous years expenditure of Rs. 48 lakh mainly owing to the demerger scheme. However, such incremental costs were curtailed by reduction of 31% over the previous years expenditure in the other direct expense by Rs. 203 lakh i.e. from is Rs. 649 lakh for FY2018 to Rs. 446 lakh for FY2019. Freight charges reduced by 96% ( 114 lakh) i.e. from Rs. 119 lakh for FY2018 to Rs. 5 lakh for FY2019 on back of higher backward integration.

The inventories (RM+WIP) have increased collectively, in alignment with TOI, by 5% ( 116 lakh) i.e. Rs. 2,301 lakh during FY2019 from Rs. 2,185 lakh during FY2018. This is attributable to the more no. of sites under execution as well as certain sites attaining specific maturity that caused higher WIP. There has been substantial increment in land-bank by 23% i.e. Rs. 973 lakh during FY2019 to Rs. 5,152 lakh from Rs. 4,180 lakh during FY2018, which otherwise increases the overall inventory by Rs. 1,089 lakh.

Employee benefits expenses (Refer Note 28)

Employee benefits expenses include salaries, allowances, bonus, Contribution to provident and other funds, Remuneration and perquisites to Directors, and Staff welfare expenses.

Employee benefits expenses have reduced by 8% from Rs. 592 lakh in FY2018 to Rs. 542 lakh in FY2019 mainly due to the transfer of certain real-estate undertaking related employees to Nila Spaces Limited - pursuant to the Scheme of Demerger. Total No. of employees at March 31, 2019 is 66, which is net increment/reduction as compared to 83 employees at March 31, 2018. Meanwhile, the remuneration and perquisites to the Directors has increased marginally by 4% i.e. from Rs. 46 lakh in FY2018 to Rs. 48 lakh in FY2019. There is no variable component of remuneration availed by the Directors except fixed pay of monthly salary and sitting fees as applicable, which is in conformity of the Remuneration Policy of your Company.

Finance costs (Refer Note 29)

The finance costs (net of inventorising) for FY2019 is Rs. 1,299 lakh in comparison to Rs. 1,110 lakh for FY2018. Interest on borrowings has increased by Rs. 201 lakh over previous financial year due to higher utilization of funds during the year. However, the weighted average cost of borrowing has reduced by 7 bps in FY2019 from previous financial year as an impact of optimum utilization of low cost funds.

The Other borrowing cost has reduced by 8% from Rs. 139 lakh in FY2018 to Rs. 127 lakh in FY2019, as during FY2019 your Company has paid upfront/one-time processing fees higher by Rs. 6 lakh (11% increment) towards sanction of new credit facilities, which has been outdone by lower payment of bank charges by Rs. 17 lakh (19% reduction) - as compared to FY2018.

For FY2019, your Company has not inventorised any finance cost, while the corresponding amount for the previous year was Rs. 200 lakh.

Depreciation and amortisation expense (Refer Note 4, 5 & 6)

The depreciation and amortisation expense charged to the profit and loss account during the year is Rs. 186 lakh as compared to Rs. 172 lakh in FY2018, registering an increase of 8%. During FY2019, your Company has sold certain worn-out Plant & Machinery aggregating Rs. 41 lakh and used-vehicles aggregating Rs. 26 lakh; while there has been a net addition of equipments and furniture by Rs. 26 lakh. Though the net-block of PPE has reduced by Rs. 172 lakh at March 31,2019, the depreciation is higher owing to higher rate of depreciation on fresh additional assets.

CSR Expense (Refer Note 30A)

The Company has undertaken activities for promotion of sanitation and preventive healthcare by way of installation of sanitation equipments, organizing awareness campaigns for cleanliness and waste management, physical work for cleanliness and waste removal at various locations of Ahmedabad. The entire activity has been undertaken as a project under the brand name "My Own Street". An aggregate amount of Rs. 56 lakh is spent on the said CSR project during the year, well satisfying the statutory stipulations.

Other expenses (excluding CSR Expense) (Refer Note 30)

Other expenses majorly comprise Legal and professional charges, bad-debts written off, Power and fuel expenses, Loss on sale of PPE, Provision for loss allowance, Travelling and conveyance, Miscellaneous expenses, Printing and stationery, Repairs and maintenance expenses. Collectively other expenses (excluding CSR Expense) have increased by Rs. 209 lakh i.e. Rs. 619 lakh in FY2019 from Rs. 410 lakh in FY2018 mainly owing to Rs. 130

lakh bad-debts written off, Rs. 38 lakh incremental loss on sale of PPE, Rs. 15 lakh incremental Power and fuel expenses, Printing and stationery and Donation each enhanced by Rs. 8 lakh.

Profitability (Rs. in lakhs)
Particulars For F.Y. 2018 For F.Y. 2017 YoYchange % change
Revenue from Operations 22,580 21,430 1,150 5%
Less: Operational Expenses 18,786 17,635 1,151 7%
EBITDA 3,794 3,795 -1 -0.03%
EBITDA % to Revenue from operation 17% 18%
Add: Other Income 828 734 94 13%
Less: Finance Costs 1,299 1,110 189 17%
Less: Depreciation and amortisation expenses 186 172 14 8%
Profit Before Tax (PBT) 3,137 3,247 -110 -3%
PBT % to Total Revenue 13% 15%
Tax Expenses 920 994 -74 -7%
Profit After Tax 2,217 2,253 -36 -2%
PAT % to Total Income 9% 10%

During FY2019, the EBIDTA of your Company on a standalone basis has been stagnant with marginal reduction by Rs. 1 lakh i.e. Rs. 3,794 lakh (17% of revenue from operations), as against Rs. 3,795 lakh (18% of revenue from operations) for FY2018. Cost of material consumed and project expenses alongwith Changes in inventories of construction material, land and work in progress are 78% of Revenue from operations for FY2019 as compared to 77% for FY2018. The PBT for FY2019 has reduced by Rs. 110 lakh as Operational Expenses, Finance Costs, and Depreciation and amortisation expenses have increased. PAT for FY2019 is Rs. 2,218 lakh (9% of Total Revenue), as against Rs. 2,253 lakh (10% of Total Income) for FY2018. Your Company provides for current tax and deferred tax based on the computation in accordance with provisions of Income Tax Act, 1961. The net tax payable for FY2019 is Rs. 920 lakh that is reduction by Rs. 74 lakh over FY2018s Rs. 994 lakh, mainly owing to reduction in tax rate from 33.99% to 29.12%.

Overall reduction in profitability is mainly due to the change in revenue-mix with contribution from PPP projects being minimal/negligible. With contribution from other income (mainly from interest) as well as change in the effective tax-rate, the reduction in profitability is curtailed to 69 bps at PAT level. With certain projects being in nascent/primary stage, the finance expense has increased towards interest, as well as processing charges towards availment of fresh credit facility and renewal of existing credit facilities. Your Company has made sufficient provision towards current tax for FY2019. The Board of Directors of your Company has thought it prudent to not propose declaration of any dividend and plough-back the entire profit instead as retained earnings to ably fuel further growth of your Company.

Non-current Assets

The non-current assets at March 31, 2019 and March 31, 2018 with detail of changes therein during the financial year are as follows:

(Rs. in lakhs)
Particulars As at 31 March 2019 As at 31 March 2018 YoY change % change
a. Property, plant and equipment (Refer Note 4) 726 899 -172 -19%
b. Investment properties (Refer Note 5) 2,445 2,500 -55 -2%
c. Intangible assets under development (Refer Note 6) 1 - 1 100%
d. Financial assets:
i. Investments (Refer Note 7) 1,552 1,287 265 21%
ii. Loans (Refer Note 8) 5,972 5,152 820 16%
iii. Other financial assets (Refer Note 9) 330 728 -397 -55%
e. Other non-current assets (Refer Note 10) - 3 -3 -100%
f. Other tax assets net (Refer Note 11) 9 11 -2 -19%
Total 11,035 10,578 457 4%

During FY2019, your Company purchased net new PPE amounting Rs. 26 lakh - mainly equipments and furniture, etc. to support incremental operations, while it sold certain worn-out Plant & Machinery aggregating Rs. 41 lakh and used-vehicles aggregating Rs. 26 lakh. Building amounting to Rs. 2,601 lakh is the sole Investment Property, while there has been no addition/reduction but only the depreciation has reduced the balance to Rs. 2,445 lakh at March 31,2019.

The primary reason of increase in Investment during the year is fresh investment in JV/associate viz. Vyapnila Terminals (Modasa) Pvt Ltd and Kent Residential & Industrial Park LLP. Your Company has also extended further loans to all four (4) subsidiary/associate/JV entities. These entities are established to address specific business opportunities. Such investments as well as loans/advances are extended in normal course of business in order to pursue the specific objective for which it is formed. Loans and Advances to related parties at March 31,2019 are Rs. 4,949 lakh as against Rs. 4,943 lakh at March 31,2018 mainly on back of incremental loans extended to subsidiary, associate and JV entities to address specific business endeavours.

Security Deposit has increased to Rs. 1,023 lakh at March 31,2019 from Rs. 659 lakh at March 31,2018 mainly due to initiation of fresh projects during FY2019, wherein the client has held the stipulated amount of revenue as per the tender terms.

The benefits of contracting bank guarantee facilities at

favourable terms have started delivering the fruits to your Company with reduction in margin money deposited with bank; alongwith other favourable terms. It may be noted that such interest bearing fixed deposits are kept with bank for the purpose of issuing bank guarantee in order to participate in various tenders. Other financial assets reduced by Rs. 397 lakh at March 31, 2019 to Rs. 330 lakh mainly due to release of Rs. 340 lakh cash- margin towards such bank guarantees. While, retention money amounting Rs. 60 lakh were released as per the terms of contract on satisfactory expiry of mandatory time for more no. of and/or high value work-orders.

As prescribed vide Ind AS 19, with the passage of time as the maturity of the lease agreements are approaching, there has been marginal reduction in lease equalization by Rs. 3 lakh from March 31, 2018 to March 31, 2019. The advance payment of tax has marginally reduced from Rs. 11 lakh at March 31, 2018 to Rs. 9 lakh at March 31,2019.

Hence, overall Non-current Assets have increased by net Rs. 457 lakh i.e. 4% from Rs. 10,578 lakh at March 31,2018 to Rs. 11,035 lakh at March 31, 2019 mainly due to support operations of the subsidiary, associate and JV entities of your Company.

Current Assets:

The detail of Current Assets at March 31, 2019 and March 31, 2018 with changes therein during the year is furnished further.

Particulars As at 31 March 2019 As at 31 March 2018 YoY change % change
a. Inventories (Refer Note 12) 7,454 6,365 1,089 17%
b. Financial Assets
i. Trade receivables (Refer Note 13) 3,400 3,474 -74 -2%
ii. Cash and cash equivalents (Refer Note 14) 79 132 -54 -41%
iii. Bank balances other than (ii) above (Refer Note 14) 625 524 101 19%
iv. Loans (Refer Note 8) 19 1,230 -1,211 -98%
c. Other current assets (Refer Note 10) 9,960 6,013 3,947 66%
Total 21,536 17,738 3,797 21%

Total increase of Rs. 1,089 lakh in inventories during FY2019 is mainly attributable to substantial increment in land-bank by 23% i.e. Rs. 973 lakh during FY2019 to Rs. 5,152 lakh from Rs. 4,180 lakh during FY2018. RM+WIP have increased collectively, in alignment with TOI, by 5% ( 116 lakh) i.e. Rs. 2,301 lakh during FY2019 from Rs. 2,185 lakh during FY2018. This is attributable to the more no. of sites under execution as well as certain sites attaining specific maturity that caused higher WIP. Hence, the overall inventory has increased to Rs. 7,456 lakh at March 31, 2019 from Rs. 6,365 lakh at March 31,2018.

There is an overall reduction in the level of Trade Receivables by Rs. 74 lakh i.e. from Rs. 3,474 lakh at March 31,2018 to Rs. 3,400 lakh at March 31,2019. However, it has almost stagnated in proportion of the overall revenue at 55-56 days. Collection for FY2019 is Rs. 23,483 lakh i.e. efficiency of 100%. Meanwhile, your Company has continued rigorous follow-up with debtors (all considered "good") and is confident to recover such amounts in full, in normal course of business.

There is a reduction in collective cash and bank balance by Rs. 47 lakh i.e. from Rs. 656 lakh at March 31,2018 to Rs. 704 lakh at March 31,2019.

Loans comprise the portion that is expected to be realized before a period of 12 months from the Balance Sheet Date. At March 31, 2019 it is Rs. 19 lakh as against Rs. 1,230 lakh at March 31, 2018 depicting a reduction by Rs. 1,211 lakh, which is mainly attributable to repayment of loan by Nila Spaces Ltd pursuant to the Scheme of Demerger. During FY2019, your Company has earned interest to the tune of Rs. 562 lakh from Loans to Related Parties.

The other current assets have increased by Rs. 3,947 lakh to Rs. 9,960 lakh at March 31,2019 as against Rs. 6,013 lakh at March 31,2018 mainly on account of increment of Land and transferrable development rights by Rs. 2,096 lakh to Rs. 3,978 lakh at March 31, 2019 as against Rs. 1,882 lakh at March 31, 2018. The contract assets vide Ind AS 11 and Ind AS 18 have also increased by Rs. 2,040 lakh to Rs. 4,602 lakh at March 31, 2019 as against Rs. 2,563 lakh at March 31, 2018. It may be noted that such contract assets are booked in normal course of business and would be converted to receivables in due course to time. It has further increased on account of GST, wherein your Company has credit amounting to Rs. 433 lakh i.e. an increment by Rs. 123 lakh. These have been curtailed by some extent with reduction in advance to vendor by Rs. 285 lakh, VAT receivable by Rs. 10 lakh, prepaid expenses by Rs. 6 lakh as well as lease equalisation by Rs. 3 lakh.

Hence, overall Current Assets have increased by Rs. 3,797 lakh i.e. 21% from Rs. 17,738 lakh at March 31, 2018 to Rs. 21,536 lakh at March 31, 2019 mainly due to an increase in Land and transferrable development rights as well as Contract assets, and GST that are attributable to increase in operations with more no. of sites; and incremental scale in infrastructure projects sites of your Company.

Net Worth

The net worth of your Company has been augmenting considerably in past financial years mainly owing to plough-back of enhanced profit as well as increase in share capital base, and premium on securities issued. The net worth of Rs. 10,782 lakh at March 31,2018 has increased to Rs. 12,501 lakh at March 31,2019 mainly due to earnings are retained and ploughed-back.

Non-current liabilities (Rs. in lakhs )
Particulars As at 31 March 2019 As at 31 March 2018 YoY change % change
a. Financial liabilities
i. Borrowings (Refer Note 17) 8,863 6,075 2,789 46%
ii. Other financial liabilities (Refer Note 18) 202 91 111 123%
b. Provisions (Refer Note 19) 73 112 -39 -35%
c. Deferred tax liabilities (Net) (Refer Note 20D) 1,001 982 19 2%
Total 10,139 7,260 2,880 40%

While the order-book increased by adding-up on new projects, incremental no. of sites under operations as well as to support the specific business initiatives through subsidiary, associate, JV; Borrowings of your Company has increased by Rs. 2,789 lakh at March 31,2019 i.e. from Rs. 6,075 lakh at March 31,2018 to Rs. 8,863 lakh at March 31, 2019. It may be mentioned that your Company has honoured all its financial commitments and the account is Standard with all the lenders. None of the BGs submitted by your Company has ever been invoked by any Principal/Client. Other financial liabilities are security deposits that your Company accepts in ordinary course of business from its various vendors and/or contractors. It has increased by Rs. 111 lakh i.e. to Rs. 202 lakh at March 31, 2019 from Rs. 91 lakh at March 31, 2018 owing to holding back retention amount to your Companys contractors pending completion of project and/or achieving agreed milestones by them.

Provision for employee benefits including gratuity and leave encashment has reduced to Rs. 73 lakh at March 31, 2019 from Rs. 112 lakh at March 31, 2018 as a result of reduction in no. of continuing qualifying employees.

Net deferred tax liability has increased by Rs. 19 lakh i.e. Rs. 1,001 lakh at March 31, 2019 from Rs. 982 lakh at March 31, 2018 as a result of reduction in deferred tax assets by Rs. 6 lakh, while the deferred tax liability has increased by Rs. 13 lakh during FY2019.

Hence, overall Non-current Liabilities have increased by Rs. 2,880 lakh i.e. 40% from Rs. 7,260 lakh at March 31,2018 to Rs. 10,139 lakh at March 31, 2019 mainly due to increase in borrowings and security deposits.

Current liabilities

Particulars As at 31 March 2019 As at 31 March 2018 YoY change % change
a. Financial Liabilities
i. Borrowings (Refer Note 17) 1,852 663 1,189 179%
ii. Trade payables (Refer Note 21) %
iia. Due to micro and small enterprises 2 - 2 100%
iib. Due to others 4,639 4,091 548 13%
iii. Other financial liabilities (Refer Note 18) 1,556 3,726 -2,170 -56%
b. Other current liabilities (Refer Note 22) 1,793 1,509 284 19%
c. Provisions (Refer Note 19) 72 39 33 84%
d. Current tax liability (Net) (Refer Note 23) 15 247 -231 -94%
Total 9,929 10,275 -345 -3%

Current Borrowings consist of overdraft bank facility with higher utilisation by Rs. 579 lakh i.e. Rs. 1,242 lakh at March 31, 2019 as compared to Rs. 663 lakh at March 31, 2018, while Rs. 610 lakh at March 31, 2019 were outstanding payable to Nila Spaces Ltd. Trade Payables at March 31, 2019 have increased by Rs. 550 lakh i.e. an increase of 13% signifying your Company is reasonably leveraging and gaining from economies-of-scale. The current maturities of long term borrowing during FY2019 are Rs. 1,450 lakh at March 31, 2019 as per the repayment schedule of term debt contracted by your Company.

Other Current Liabilities have increased by Rs. 284 lakh mainly towards the advance from contractors and TDS payable, while advance from customers have reduced by Rs. 116 lakh to Rs. 1,071 lakh at March 31,2019 from Rs. 1,186 lakh at March 31,2018 owing to setting-off of mobilization advance during FY2019.

Provision consist of employee benefits including gratuity and leave encashment that have increased to Rs. 48 lakh at March 31, 2019 from Rs. 39 lakh at March 31, 2018, while provision for defect liability period has been made to the tune of Rs. 24 lakh at March 31, 2019.

The tax liability of your Company has reduced by Rs. 231 lakh mainly due to reduction in tax-rate during FY2018.

Hence, overall Current Liabilities have reduced by Rs. 345 lakh i.e. 3% from Rs. 10,275 lakh at March 31,2018 to Rs. 9,929 lakh at March 31, 2019 mainly due to reduction in other financial liabilities and tax liability.

Key financial ratios:

Ratio FY2019 FY2018 Detailed explanation
Debtor Turnover 6.57 6.62 The credit policies, and collection process of your Company are satisfactory and commensurate to the industry and/or the segment it operates into. Your Company deals with creditworthy customers. During FY2019, your Company could convert its debtors to cash marginally lower by 0.05 times as compared to FY2018. In the perspective of No. of days, your Company has allowed a days credit more than the previous year, which is mainly owing to marginally higher level of Average Debtor as compared to previous year.
Days 56 55
Inventory Turnover 2.54 2.68 As your Company has certain historic land, the inventory turnover is not exactly comparable with industry and/or the segment it operates into. During FY2019, your Company could turnover the inventory marginally lower by 0.14 times as compared to
Days 144 136 FY2018. In the perspective of No. of days, your Company required 8 more days than the previous year, which is mainly owing to overall higher inventory - as more specifically described in the other sections of this Report.
Interest Coverage Ratio 3.42 3.93 Your Companys debt: equity, leverage, gearing are commensurate to the industry and/or the segment it operates into. Your Company has tied-up with first-rung banks/FI/NBFCs for its various credit requirements. Your Company has successfully maintained Investment Grade credit rating over a period of years, while the account is Standard with all the lenders. For FY2019, the interest coverage is marginally lower by 0.51 times as compared to FY2018, which is mainly owing to higher level of Interest cost while the earnings have remained almost at the same level.
Current Ratio 2.17 1.73 The improvement in current ratio of your Company at March 31,2019 as compared to that of March 31, 2018 is mainly owing to the increment in current assets on one hand, while reduction in current liabilities on the other during FY2019. It could also indicate that your Company has sufficient ability to pay short-term obligations or those due within one year. Your company has been able to maximize the current assets on its balance sheet to satisfy its current debt and other payables.
Debt : Equity Ratio 0.97 0.76 During FY2019, your Company has been aggressive in financing its growth with debt. However, it is commensurate to the industry and/or the segment it operates into. Your Company has tied-up with first-rung banks/FI/NBFCs for its various credit requirements. Your Company has successfully maintained Investment Grade credit rating over a period of years, while the account is Standard with all the lenders.
Operating Profit Margin (%) 15.98% 16.91% During FY2019, your Company could earn marginally lower at operating level by 93 bps as compared to FY2018, which is mainly owing to marginally higher level of operating expenses on back of more no. of sites and certain projects being in typical phase of maturity as compared to previous year - as more specifically described in the other sections of this Report.
Net Profit Margin (%) 9.47% 10.17% During FY2019, your Company could earn marginally lower at net profit level by 70 bps as compared to FY2018, which is mainly owing to lower growth in revenues vis-a-vis expenses as compared to previous year - as more specifically described in the other sections of this Report.
Return on Networth 17.74% 20.90% The stagnated return during FY2019, while increased networth has affected the return on networth by 3.16%. The phenomena are more specifically described in the other sections of this Report.

Cashflow

Particulars For F.Y. 2019 For F.Y. 2018
Opening cash and cash equivalents 132 275
Net cash generated from / (used in) Operating Activities (A) (1,623) 191
Net cash from / (used in) Investing Activities (B) 1,487 (1,139)
Net cash from / (used in) Financing Activities (C) 82 806
Change in cash and cash equivalent (Total = A+B+C) (54) (143)
Closing cash and cash equivalents 79 132

Net cash used in operating activities is Rs. 1,623 lakh during FY2019 mainly on account of increase in the inventories by Rs. 973 lakh towards purchase of certain land-bank and Rs. 116 lakh towards increase in RM+WIP, and Land & TDR by Rs. 2,096 lakh, and contract assets by Rs. 2,040 lakh. It may be noted that such contract assets are booked in normal course of business and would be converted to receivables in due course to time. While, it is generated mainly from incremental Trade Payables by Rs. 606 lakh (including certain balances written- back), and advance from contractors by Rs. 396 lakh.

Net cash generated from investing activities is Rs. 1,487 lakh during FY2019 mainly on account of refund of unsecured loans by the borrower of your Company to the tune of Rs. 1,204 lakh, and the interest income Rs. 728 lakh. While, it is utilized mainly in investing in related parties with increment by Rs. 456 lakh, Rs. 231 lakh in Vyapnila Terminals (Modasa) Pvt Ltd, and Rs. 115 lakh in PPE.

Net cash generated from financing activities is Rs. 82 lakh during FY2019 mainly on account of fresh borrowing to the tune of Rs. 2,789 lakh. While, it is utilized mainly towards finance cost of Rs. 1,303 lakh, and payment of dividend alongwith tax thereon of Rs. 522 lakh.

Hence, your Companys cash has redcued by Rs. 54 lakh during FY2019.

Details of Subsidiaries, Associates and JVs of your Company:

Sr. No. Name of the entity : Project location NILAs investment in equity % shareholding Loans & Advances extended Profit After Tax shared Remark
1 Romanovia Industrial Park Pvt Ltd (23.480621, 71.974021), Navyani, Gujarat 1,250* 50% 33 - Industrial and logistics park -
2 Kent Residential and Industrial Park LLP 23.478515, 72.009447), Sitapur, Gujarat 68 50% 3,695 10 various structures under execution
3 Nila Terminals (Amreli) Pvt Ltd (2136 11 N 7113 19 E), Amreli, Gujarat 1 100% 422 Bus-port projects for GSRTC -
4 Vyapnila Terminals (Modasa) Pvt Ltd (2328 N 7318 E), Modasa, Gujarat 232* 34% 799 under execution

*measured at fair value at the date of transition to Ind AS i.e. the deemed cost of such investment for your Company.

None of the Pvt Ltd entities mentioned above have declared any dividend during FY2019. Further, with respect to your Companys strategic investment with the Kataria Group of Ahmedabad to work jointly for acquiring land and developing industrial and logistics parks, units, sheds, plots, residential colonies, and allied infrastructure at various locations situated near the upcoming automobile hub at Bechraji - about 90 kms from Ahmedabad at Gujarat, it may be mentioned that the progress is satisfactory and your Company has started to reap benefits as more specifically furnished in detail in other sections of this Annual Report. Your Company has executed a well-thought strategy and is favorably positioned as a first-mover, promoter of industrial eco-system in the region, and fostering infrastructure development.

Your Company has built industrial warehouse structures as well as residential dormitories on BTS basis. Such infrastructure development has already been rented out on long-term lease basis to reputed corporates including MNCs.