Om Metals Infraprojects Ltd Management Discussions.

GLOBAL ECONOMY:

According to IMF WORLD ECONOMIC OUTLOOK REPORTS-After strong growth in 2017 and early 2018, global economic activity slowed notably in the second half of last year, reflecting a confluence of factors affecting major economies. Global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 percent in 2020.

INDIAN MACROECONOMICS REVIEW:

Indias economy has been one of the largest contributors to global growth over the last decade. It is the worlds Seventh largest economy by nominal GDP and the Third largest by purchasing power parity (PPP) The Indian economy has de-accelerated to a five-year low growth rate of 6.8% in 201819 as compared to 7.2% in the previous fiscal, mainly due to poor performance of agriculture, manufacturing sectors and jobless growth according to the Central Statistics Office.

After peaking a growth rate of 8% in the first quarter of the current year, growth in the Indian economy moderated during the remaining period owing to softer consumption demand, stagnant exports and investments amid tighter financial conditions. Slowdown in global economy amid declining international trade volumes and escalating trade tension poses threat to the growth outlook of the Indian economy. However, range bound crude prices, appreciating rupee and easing liquidity conditions bode well for the economy.

Moreover, during the past few years, the government has undertaken various reforms, and streamlined budgetary allocations amplify inclusive growth and sustainable development of the economy.

Indias economy is poised to pick up further in FY19 and FY20, driven by GST implementation in the exempted sectors, promotion of businesses at grassroots levels, and improved digital initiatives. The governments continued thrust on infrastructure should enable India to attract more investments while boosting consumption, aided by Indias favourable demographics and continued investments in education, public health, and large-scale sanitation programs.

The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to Indias economy.

India on its quest to become a global superpower has made significant strides towards the development of its engineering sector.

The Government of India has appointed the Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world. The Indian semiconductor industry offers high growth potential areas as the industries which source semiconductors as inputs are themselves witnessing high demand.

Overall, the Indian economy is well poised for the next leg of growth riding on the back of structural reforms, increasing consumption and investment and government spending on infrastructure and rural economy.

INFRASTRUCTURE INDUSTRY

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling Indias overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. The link between infrastructure and economic development is not a once-for-all affair. It is a continuous process; and progress in infrastructure has to be preceded, accompanied, and followed the development process so that we achieve the objective of making our economy self-sustaining. The infrastructure sector in India has been passing through a challenging period due to inadequate financial support from various capital partners despite keen interest shown by the government in boosting the sector by huge budgetary allocations.

Infrastructure industry, being the 2nd largest industry in India after agriculture, accounts for about 8% of the GDP. With its backward and forward linkages with various other industries like cement, steel bricks etc., it makes significant contribution to the national economy and it catalyzes employment generation in a big way in the country. Recognizing the same, the government has increased the budgetary allocation for the sector by Rs. 1 trillion to Rs. 5.97 trilion for the 2018-19 fiscal.

The Government of India is working to ensure a good living habitat for the poor in the country and has launched new flagship urban missions like the Pradhan Mantri Awas Yojana (Urban), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), and Swachh Bharat Mission (Urban) under the urban habitat model.

COMPANY UPDATES:

Engineering and Infrastructure

Om metals foresee a huge opportunity for demonstrating its equipments and engineering skill in river linking projects .

The Ministry of Water Resources wants to take forward the interlinking of rivers.

"Interlinking of rivers can play a major role in water management in the country," the Ministry of Water Resources, River Development and Ganga Rejuvenation told the Rajya Sabha in February. "The National Perspective Plan (NPP) for transferring water from water-surplus basins to water- deficit basins was prepared in August 1980."

The Ministry added that the link projects under the NPP are designed to minimise water going to sea unutilised, and to mitigate the "effects of floods and droughts to some extent".

Long-term plan

Many regions face severe drought routinely, and the States and the Centre try to tackle the situation with emergency plans. It seems that the only concrete long-term plan in place is that of interlinking of rivers.

The NPP is envisaged to give the benefits of 25 million ha of irrigation from surface waters and 10 million ha by increased use of ground waters, raising the ultimate irrigation potential from 140 million ha to 175 million ha. It is also seen to lead to the generation of 34 million KW of power, apart from the incidental benefits of flood control, drought mitigation, etc.

Under the NPP, the National Water Development Agency has identified 30 links (16 under the Peninsular Component and 14 under the Himalayan Component) for the preparation of feasibility reports (FRs). The government has identified four priority links for the preparation of detailed project reports (DPR) under the Peninsular Component: the Ken-Betwa link project (UP and M.P.), the Damanganga-Pinjal link project (Maharashtra and Gujarat), the Par-Tapi-Narmada link project (Maharashtra and Gujarat) and the Godavari-Cauvery link project (AP and TN). Ministry data show that DPRs are ready for the first three projects, while FRs are ready for 13 links.

Under the Himalayan Component of the NPP, the Yamuna-Rajasthan link has been proposed; it is an extension of the Sarda-Yamuna link canal proposed to originate from Nepal. The link is planned to take off from a barrage across the Yamuna.

Serious crisis

The Mihir Shah Committee report titled A 21st Century Institutional Architecture for Indias Water Reforms observes that many of Indias peninsular rivers are facing a serious crisis of post-monsoon flows.

"The single most important factor explaining the drying up of Indias peninsular rivers is the overextraction of groundwater. The drying up of base-flows of groundwater has converted so many of our gaining rivers into losing rivers," the report adds

Om Metals Infraprojects Limited is one of the leading Diversified group of Companies having business interests into various fields which covers Construction of EPC projects in Hydro Mechanical projects, Irrigation projects, Canal & Dams projects and Construction of Real Estate projects. The EPC contracts work include civil construction, designing, engineering, procurement, fabrication, manufacturing, supply, installation, commissioning and operations & maintenance . Our core business is providing turnkey EPC solutions for Engineering and Construction of Dams, Hydro power and irrigation projects in India and Abroad.

The Company has recently won a EPC Contract from Water Resource Department, Government of Rajasthan for Construction of Isarda Dam across Banas River in village-Benetha, District Tonk, Rajasthan of Rs. 615.16 Crores.

The EPC market in India has evolved over the last few years with increased project size and complexity in various sectors including Construction of Dams, bridges and Water Treatment. With increasing competition, Indian EPC players have developed their in-house design, engineering and construction capabilities to bid for and execute large and complex EPC projects. International design houses are also taking keen interest in infrastructure projects in India.

Statement Showing Balance work in hand and work to be executed (Estimated) during the F.Y. 2019-20

Name of Contract and country Contract value (In INR Crore) Our share Value of balance work/ existing commitment as on- 3103.2019 Work to be Executed during F.Y 2019-20
(In INR Crore)
1. Design, Drawing, Manufacturing, supply, Erection, Testing & commissioning of Tapovan Vishnugarh HEP in Uttra- khand, India 72.40 25.10 15.00
2. Engineering Procurement & Construction(EPC) of Canal Based Small hydro project in Gujarat, India 230.00 65.04 35.00
3. Engineering, Procurement & Construction (EPC) works of Ujjain Smart City Project in Madhya Pradesh, India - 50% Jv 124.00 24.71 24.71
4. Detailed Engineering & Designing, Procurement, Manufacturing, Inspection, Shop assembly, Testing, Painting, Transportation, Site storage, Site erection, Installation, Testing & Commissioning of Hydro mechanical works of Vyasi HE Project in Uttrakhand, India 105.91 36.75 30.00
5. Construction of Rampur Barrage on Koshi river under Extension Remodeling and Modernisation (ERM) of Koshi Canal System in the Distict of Rampur, U.P. 193.76 36.43 35.00
6. HM Works Package for Renovation and Modernization of BairaSiul Power Station (3X60 MW) in Himachal Pradesh, India 19.91 16.38 10.00
7. Construction of Right Bank piped Canal on "Turnkey" basis for Providing 0.735 cumec of water from existing Upper Beda Reservoir, M.P., India 13.50 1.95 1.95
8. Development of Irrigation and Watershed Development in Mpanga Sector (LOT 1), Rwanda(50% Share of OMIL) 53.73 49.29 25.00
9. Completion of Balance work of North Koel Reservior Project, Jharkhand 38.54 34.17 10.00
10. Rehabilitation and Completion of Kpong Left Bank Irrigation Project, Ghana(50% Share of OMIL) 103.71 86.20 30.00
11. Engineering Procurement and Construction (EPC) Contract Package - II for execution of Hydro-Mechanical works on the upstream side of Power House, etc. in Kundah Pumped Storage Hydro-Electric Project Phase-I (lxl25MW) in Nilgiris District, Tamilnadu (OMIL SHARE) 95.00 95.00 20.00
12. All Hydro-Mechanical Works including Pressure Shaft Steel Liner of Arun-3 Hydroelectric Project (900 MW) located in Sankhuwasabha Distt. in Nepal 156.98 156.98 30.00
13. Planning , Investigation, Design, Drawing and Construction of Isarda Dam Across Banas river for Drinking water near Village Banetha District Tonk (Rajasthan) 615.16 615.16 70.00
14. Design, Drawing, Manufacturing, Supply, Erection, Testing & Commissioning of Hydro Mechanical Works of Kameng HEP in Arunachal Pradesh, India - 60% share of Om Metals 195.37 4.12 4.12
Total 2017.97 1247.28 336.66

Power and Energy are two essential inputs for economic development and improving the quality of life in India. Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. India has the fifth largest power generation capacity in the world. The country ranks third globally in terms of electricity production. As per the 13th Five Year Plan, India is targeting a total of 100 GW of power capacity addition by 2022. The Government of India has released its roadmap to achieve 175 GW capacity in renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind power.

In 2018-19, for the third year in succession, power generation from Indias large hydropower projects was below 10% of total electricity generation in India. In 2016-17, for the first time in independent Indias history, power generation from large hydropower projects in India fell below 10% of total electricity generation. This calculation is based on actual generation (measured as Million or Billion Units[i]) and not installed capacity (measured in Mega Watts). As per the just released figures for the year ending on March 31, 2019, the power generation from large hydropower projects (CEA only reports large hydro generation) in 2018-19 was 134.89 BU, when total power generation in India (including renewable generation of 126.80 BU, but excluding Bhutan imports of 4.41 BU) was 1370.87 BU, hence hydropower generation in 2018-19 was 9.84% of total electricity generation. The hydropower generation proportion to total electricity generation was 9.90% in 2016-17 and 9.68% in 2017-18.

Smart Cities:

Smart Cities Mission is program by the Government of India with the mission to develop 100 cities across the country making them citizen friendly and sustainable. The government has allocated Rs 6,600 crore for the Smart Cities Mission in the Union Budget 2019 which is about 7 percent more than the amount set aside last year.

Your company has entered a 50:50 JV with SPML Infra Ltd for developing infrastructure of Ujjain Smart City. The development activities include -

• Water Supply, treatment along with drainage system

• Solid Waste Management

• Internal & External roads of 4 & 6 lanes

• Power Transmission & Distribution

• Domestic Gas Distribution System

• Street Lighting, CCTV & SCADA Systems and Safety & Security Systems

The construction of the smart city has already commenced and is going on in full swing. The company is also geared up to participate in the next round of bidding for smart cities and will look to secure a few more projects in the space.

Real Estate

The fiscal year 2018-19 was a year of consolidation for Real Estate sector. According to IMF- The Indian real estate sector has witnessed high growth in recent times with the rise in demand for office as well as residential spaces. Between 2009-18, Indian real estate sector attracted institutional investments worth US$ 30 billion. Private Equity and Venture Capital investments in the sector reached US$ 4.47 billion in 2018 and US$ 546 million in Jan-Feb 2019. As such, completion of existing projects is being prioritized over launching new ones and the focus has shifted to streamlining processes and delivery. Steady income growth, stable home prices, declining interest rates and improvement in the liquidity conditions bodes well for the industry.

The Government has also facilitated the growth of the real estate sector by introducing massive changes in the taxation and regulatory aspects of real estate. The setting up of the RERA is one step towards streamlining real estate business and ensuring that the buyer gets full value for the

money he/she is spending in acquiring a home. It has also ensured that credible developers alone will be able to survive in this industry. "Affordable Housing" has been given the much needed emphasis by the government.

The Union Budget 2019-20 has given some relief to the real estate industry which has been grappling with low demand as tax proposals will give the needed fillip to the sector that has reeling since the past two years with severe liquidity crisis and demand slowdown. The budget seeks to extend tax sops for affordable home developers and to remove the tax on notional rent for a second housing unit as well as unsold units. It also seeks to extend the benefits under Section 80- IBA of the Income Tax Act for one more year to housing projects approved till March 2020, which will boost supply of affordable housing.

The unit sale in Ashvita - Hyderabad is complete. Possession and delivery has been handed over to the users.

An overview of operations Real Estate Project Details

Project Location Partner Project Type Number of Units Project Area Sa.ft. (Approx) (OMIL Share)
Meadows Kota - Housing 340 4,45,972
Pallacia# Jaipur - Housing 152 6,45,000
Bandra Reclamation - Mhada Mumbai DB Realty & Others Housing 2,00,000A
Ashvita* Hyderabad Mahindra Lifespaces Housing 52 88,000
Total 13,75,000

# Construction has resumed after the judgment of Honble JDA tribunal which in its verdict ordered that all approvals and maps of the project approved by JDA are as per policies/ bye laws and within legal framework. The last mile construction and finishing work is in progress.

* delivered for possession and 90% units are sold A Subject to approval of Design/Area

Real Estate Project Sold in sa.ft. Unsold in sa.ft. Total realisable value of revenue (Rs Cr) Total sold revenue recognised (Rs Cr) Total estimated revenue to be recognised (Rs Cr)
Om Meadows 1,85,500 2,60,472 110 0 110
Palacia 2,25,000 4,20,000 693 0 693
Bandra Reclamation - Mhada - 2,50,000 750 0 750
Ashvita 82,000 6,000 40 32 8
Total 1,583 32 1561

(due to change in IND AS - revenue of incomplete projects recognized earlier reversed)

Key Industrial Land Bank

Location Area (Sq. Mtrs.) Key Location Advantage
Faridabad 8,000 Located on main Mathura Road, New Delhi
VKIA Jaipur 28,000 In Industrial Area at Prime Location
Kota (Institutional Land) 40,000 In the centre of Kota City

Strategy

OMIL is leading player in the hydro mechanical segment with expertise in hydro mechanical equipments along with Engineering Construction for dams and Irrigation Projects. With highly expertise and experience team OMIL is always striving to constantly upgrade its benchmarks to meet and conquer the growing competitiveness of this segment.We are Indias leading mechanical equipment manufacturers having mastery in execution of large and complex hydro -projects.

To strengthen and boost our international presence we secured Irrigation and Watershed Development in Mpanga Sector of Africa. Going ahead, it will continue to focus on the African region to secure new projects in order to garner new growth opportunities that the African region is offering.

The company is re-aligning its corporate structure and is focusing on Core operation of the business by re-structuring the business into core and non-core operation. In tune of this, company has already sold few of the non-core assets. The company has already disposed of a few of its divisions including the Cineplex division and will further look to exit all its non-core assets very soon.

Along with its strategy to exit the non-core business, the company is also focusing on new profitable ventures like Construction and Operations of Food Grain Silos, Constructions of Smart Cities and Manufacturing of bottle caps in the Packaging segment.

Other Segments

Silos

The company has received its first project for construction of Silos. Silos are to be constructed at 4 locations with 50,000 MT capacity each for storage of Wheat on PPP Mode. Few Advantages of Silos are that it occupies less space as compared to warehouses and is easier to maintain optimum grain storage conditions in the silo and better equipped to control the temperature and keep birds, moulds and bugs. Government is planning for construction of 100 LMT Silos till 2020 in a Phase Wise manner. The Company will continue to evaluate the projects that the Government will bid out in future.

Packaging & Manufacturing

The company has ventured into manufacturing of closure for water PET bottles and Carbonated Soft Drinks which is high margin business. It involves using compression moulding technology over injection moulding used by existing players in the industry. The technology has been imported from Italy which will generate high returns on investment and help unlocking greater value to shareholders. The capacity in this business will be 6-8 crore caps per month against an estimated world demand of 2 trillion caps by 2019.

According to industry sources world demand for caps and closures is projected to increase 5.6% per year to $58 billion in 2019. Beverages account for nearly two-thirds of global cap and closure demand—and a larger share than that in many national markets. Beer, carbonated soft drinks (CSD), and bottled water are the largest segments. Indias spends on packaged F&B and consumer goods are expected to increased based on the growing per capita income which grew by 9.7% to Rs.103,219 in 2016-2017 from Rs.94,130 a year ago. Further, increase in Urbanization and increasing youth population are expected to contribute significantly to growth in packaged F&B segment.

One of the Packing divisions machinery has been sold on 22nd day of May, 2019 to make the packaging business more viable.

Sale Of Hotel Division

Your Company had agreed to sell its business and assets of Hotel Om Tower to Jupiter Metals Private Limited at valuation of Rs. 36 cr. The valuation had been carried out by an independent valuers appointed by the Company and the building value has been taken at distress value as repairs and renovation was due in building. This division is not a core activity of your Company.

FINANCIAL PERFORMANCE STANDALONE (Rs. In crores)

CONSOLIDATED (Rs. In crores)

OPPORTUNITIES & THREATS

India will become the worlds third largest Construction Market by 2025 and thereby the Infrastructure Sector is a key driver for the Indian Economy. During the budget presentation, the Interim Finance Minister Mr. Piyush Goyal was quoted saying, "Infrastructure is the backbone of any nations development and quality of life. Whether it is highways or railways or airways or even digi-ways, we have gone beyond incremental growth to attain transformative achievements." The Construction Industry in India is the second largest after agriculture. It accounts for about 11 % of India as GDP and contributes to the national economy also by providing employment to large number of people.

Concerning the Infrastructure in India, the present level is inadequate to meet the demand of the existing urban population. Therefore are generation of urban areas in existing cities and the creation of new, inclusive smart cities are needed due to an increasing population and migration from rural to urban areas. Indeed, the Infrastructure Sector is the most tangible evidence of a nations development and a major push to the national economy. The major takeaways from the budgetary allocation 2019-20 for the Infrastructure Sector are as follows:-

A total of Rs. 4.56 Lakh crore was allocated to the Infrastructure Sector which includes roadways, railways, shipping and aviation, for the financial year 2019-20.

In the present time where a number of the power and infrastructure companies are either insolvent or on the verge of insolvency, the Governments initiative of allocating a huge sum on infrastructure is welcome change for the Sector and one hopes that this would boost the Infrastructure, Banking and Financial Sector.

With initiatives like Housing for All and Smart Cities Mission the Government of India is working on reducing bottlenecks and impeding growth in the infrastructure sector. With the UDAY Scheme, that will help in financial turnaround and revival of electricity distribution companies of India, the power sector has been registering strong growth. 100 per cent FDI is permitted under the automatic across various infrastructure sectors.

Owing to the nature of the industry the Company operates in, the management of company perceives the following as threats in the construction of hydropower projects:

• Time in clearances - Stringent norms and cumbersome procedures for getting environmental and forest clearances leads to delays in obtaining clearances for projects, which may affect the capacity addition programs, even though State Governments are trying their best to adopt to single window clearance system, which will mitigate this threat to large extent.

• Land acquisition- The process of land acquisition for infrastructure work as well as for a projects components including submergence is quite cumbersome and time consuming. Single window clearance system will also mitigate this threat to great extent.

• Geological uncertainties - In spite of extensive surveys and investigations, various components of hydro projects such as head race tunnels, power houses, pressure shafts and surge shafts face geological surprises especially in the hilly region.

• Inter-state and International disputes - As water is a state subject in India, there are often inter-state river disputes due to which many hydro projects may get delayed or abandoned. Certain projects are situated outside India which is affected by Indias international relations.

• Natural calamities - As most of the hydro projects are located in hilly terrains, natural calamities like landslides, hill slope collapses and road blocks, floods and cloud bursts cause severe setbacks in construction schedules.

• Unexpected complexities - Unexpected complexities and delays in clearances / execution due to reasons beyond ones control may cause variation / escalations in estimates.

RISKS & CONCERNS

The construction industry is the second largest contributor to Indias GDP. It not only has economic potential but is also among the biggest employment providers. Owing to the nature of the industry the Company operates in, it is exposed to a variety of risk factors which are broadly categorized into financial, technical, construction policy, political, market and legal. A tight risk process is carried out from pre-bid to project completion stage to manage, mitigate and monitor these risks by adopting specific risk mitigation measures.

During the year, the Board has reviewed the process and the Risks that have already been identified for the business and necessary action for mitigation has been initiated. Infra sector is crumbling as project delays, cost overruns and financing woes mount. Even new models like hybrid-annuity are proving to be unviable. Private sector investment is the key to revival, but the return of private capital may be delayed because of the inherent weakness in financial markets.

The top major constraints in infrastructure development over the next three years are thought to be corruption, political and regulatory risk, and access to financing and macroeconomic instability. This last is a shared concern troubling emerging-market economies.

Some of the crucial risks impacting the Companys overall governance are detailed below:

> Liquidity risk

Liquidity risk refers to the risk of financial distress or extraordinary high financing costs arising due to shortage of liquid funds in a situation where business conditions unexpectedly deteriorate and requiring financing. The Company requires funds both for short term operational needs as well as for long term capital expenditure growth projects. The Company generates sufficient cash flow for operations, which together with the available cash and cash equivalents and short term investments provide liquidity in the short-term and longterm. The Company has established an appropriate liquidity risk management framework for the management of the Companys short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

> Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The borrowings of the Company are principally denominated in rupees and US dollars with a mix of fixed and floating rates of interest. The Company has exposure to interest rate risk, arising principally on changes in base lending rate and LIBOR rates.

> Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks.

Companys credit risk arises principally from the trade receivables, loans, investments in debt securities, cash & cash equivalents.

> Commodity price risk

The Companys revenue is exposed to the market risk of price fluctuations in its division is as under:

Engineering Division: the company generally takes Turnkey projects from government departments. The contract price is generally fix and free from any price risk subject to change in any government policy or rules.

Real Estate Division: the company is exposed to risk of prices of Residential and commercial units. These prices may be influenced by factors such as supply and demand, and regional economic conditions.

Packaging Division: the company is exposed to risk of prices of goods. These prices may be influenced by factors such as supply and demand, Cost of Production and regional economic conditions.

Hotel Division: the company is exposed to risk of prices/ rates of Rooms. These prices may be influenced by factors such as supply and demand i.e. inflow of tourist and the seasonal effects, and regional economic conditions.

Market forces generally determine prices for the Real Estate Division and Packaging Division of the Company Adverse changes in any of these factors may reduce the revenue that the Company earns from the sale of its products.

The Company primarily purchases its raw materials in the open market from third parties. The Company is therefore subject to fluctuations in prices for the purchase of Building Material and other raw material inputs. The Company purchased substantially all of its Raw Material from third parties in the open market.

The Company aims to sell the products at prevailing market prices. Similarly the Company procures raw materials on prevailing market rates as the selling prices of its products and the prices of input raw materials move in the same direction.

> foreign currency fluctuation risk

The Companys functional currency is Indian Rupees (INR). The Company undertakes transactions denominated in foreign currencies; consequently, exposure to exchange rate fluctuations arise. Volatility in exchange rates affects the Companys revenue from export markets and the costs of imports, primarily in relation to raw materials. The Company is exposed to exchange rate risk under its trade and debt portfolio.

Adverse movements in the exchange rate between the Rupee and any relevant foreign currency results in increase in the Companys overall debt position in Rupee terms without the Company having incurred additional debt and favourable movements in the exchange rates will conversely result in reduction in the Companys receivables in foreign currency.

> Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the market prices. The Company is exposed in the ordinary course of its business to risks related to changes in foreign currency exchange rates, commodity prices and interest rates.

> Salary risk

Salary increase should take into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

No other post-retirement benefits are provided to these employees.

> Interest risk

The rate used to discount post employment benefit obligation should be determined by reference to market yields at the balance sheet date on Government bonds. The currency and term of government bonds should be in consistent with the currency and estimated term of post employment benefit obligation.

> Investment risk

The liability is not funded and is not relevant in company.

> Health, Safety And Environment Risks

The Infrastructure sector has inherent hazards and is therefore subject to extensive health, safety and environmental laws, regulations and standards. Any incident can result in property damages, injuries and potential fatalities as also adversely impact surrounding communities and environment. Such incidents may result in litigation, disruption of operations, penalties and loss of Company image & goodwill.

> Political, Legal And Regulatory Risks

Regulatory risk is the risk that a change in laws and regulations will materially impact a security, business, sector, or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of an investment, or change the competitive landscape.

Non-compliance with applicable laws & regulations as well as changes in the Government policies may adversely impact operations and hamper growth.

> Fraud And Cyber Security

With ever increasing reliance on information technology, there is enhanced risk of security breaches resulting in misappropriation of funds or assets. Such breaches could bring the operations to a standstill or worse.

> Other Operational Risks:

Execution challenges: The Company faces execution challenges like geological surprises, availability of work front, land acquisition and Right-of-Way (ROW), pending approvals and clearances from Government agencies, working in difficult/harsh weather conditions, manpower issues, etc. The Company closely tracks the key risks for each project to ensure timely mitigation

Counter Party Risks: The Company partners with different contractors (Joint Venture / consortium projects) across businesses based on technical requirements/local market conditions. The partners performance and financial strength is crucial for project success. Learnings from the past projects are incorporated in the inter-se agreements with the partners and clauses on liability of each partner is carefully drafted after legal due diligence is exercised.

Working capital challenges: Project delays and adverse contractual payment terms sometimes lead to increased working capital requirements. The Company has strengthened the process for close monitoring of cash flows at the project level. It ensures regular follow-up for delay in payments from clients, and has ensured improvement in the working capital levels.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

A strong Internal Control framework is an important part of operations and corporate governance. The management has established internal control systems commensurate with the size and complexity of the business. The internal control provides a structured approach for identification, rectification, monitoring and reporting of gaps in the internal control systems and processes.

Om Metals Infraprojects Limited has an adequate system of internal control to ensure that the resources of the Company are used efficiently and effectively, all assets are safeguarded and

protected against loss from unauthorized use or disposition and the transactions are authorized, recorded and reported correctly, financial and other data are reliable for preparing financial information and other data and for maintaining accountability of assets. Internal audits of all branches of the company across India are set in place and are reviewed by the management. The Audit Committee regularly reviews the adequacy and effectiveness of the internal controls and internal audit function.

Management has put in place effective Internal Control Systems to provide reasonable assurance for:

• Safeguarding Assets and their usage.

• Maintenance of Proper Accounting Records and

• Adequacy and Reliability of the information used for carrying on Business Operations.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The success of any project is a direct reflection of the skill of the workers who completed it and the managers who supervised it. The total employee strength of the Group, as on 31st March, 2019 was more than 218.

The Companys Human Resource Development ("HRD"), being a key function is manned by professionally qualified and experienced personnel and with necessary directions from the senior management. The Company focuses on effective HRD, resulting in greater employee satisfaction and retention levels.

OUTLOOK

There are large opportunities in the future. The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy, power Sector, etc and recent budgets announcements on investments in infrastructure segments like Irrigation and HydroPower are huge positives for the company.

Company has been exploring bids for projects in both domestic & international markets and expected to add good amount of fresh orders in FY20. With the execution picks up at international projects, we expect this year should be strong with over 25% revenue growth as our focus on improving execution and operational efficiencies would help in further improvement in margins

In the future and the Company plans to increase its footprint through value-accretive projects leading to increase in profitability.

• Recent budgets announcements on investments in infrastructure segments like Irrigation and Hydro-Power are huge positives.

• Tendering activities are expected to remain good in the coming period.

• Company has been exploring bids for projects in both domestic & international markets and expected to add good amount of fresh orders in FY20

• CI Strong revenue visibility with current unexecuted order-book of Rs l247.3 crore, which is over 5x of FYI9 revenues

• With the execution picks up at international projects, we expect this year should be strong with over 25% revenue growth

• Focus on improving execution and operational efficiencies would help in further improvement in margins

• With balance sheet remains healthy, the company is well placed to better execute its projects and further look for opportunities in this space leading to increase in profitability

KEY RATIOS

S. No. PARTICULARS FY 2018 FY 2019 YOY CHANGE REMARK
1 Current Ratio 2.57 1.75 -32% A
2 Debt Equity Ratio 0.12 0.09 -25% A
3 Debtors turnover ratio 4.01 2.48 -38% A
4 Interest coverage ratio 3.79 2.48 -35% A
5 Operating profit margin 0.11 -0.03 -127% A
6 Net profit margin 0.14 0.09 -36% A
7 Inventory turnover ratio 3.23 1.57 -51% A
8 Return on net worth 0.07 0.03 -57% A
A- Adverse

Reasons for Significant Changes:

1. Current loan of Subsidiary has been classified as noncurrent amounting to Rs. 8000 lacs Aprox.

2. company has paid its debts regularly

3. Sales of Company has been decreased due to sluggish market conditions.

4. Profitability of Company has been decreased due to sluggish market conditions.

5. Profitability of Company has been decreased due to sluggish market conditions.

6. Profitability of Company has been decreased due to sluggish market conditions.

7. Inventory of Company increased due to IND AS-115 implementation

8. Profitability of Company has been decreased due to sluggish market conditions.

CAUTIONARY STATEMENT

The statements in this report, particularly which relate to Management Discussion and Analysis describing the Companys objectives, plans, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statement depending on the circumstances.