Patel Engineering Ltd Management Discussions

Global Economic Outlook

Global Economy in 2024: Resilient Growth, Declining

Inflation and Infrastructure-Driven Stability

The global economic outlook for 2024 is characterized by steady but slow growth, resilience amid divergence and a gradual decline in inflation.

The world economy is projected to grow at a rate of 3.2% in 2024 and 2025, maintaining the same pace as observed in 2023. However, growth patterns vary across regions. Advanced economies are expected to see a slight increase in growth, with rates rising from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025. On the other hand, emerging market and developing economies are anticipated to experience a modest deceleration, with growth rates declining from 4.3% in 2023 to 4.2% in both 2024 and 2025.

Global inflation is anticipated to steadily decline, from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. Advanced economies are expected to achieve their inflation targets sooner than emerging market and developing economies.

Core inflation is generally projected to decrease at a more gradual pace. The global construction output is expected to grow by 2% in 2024, up 3.7% in 2023. Growth in advanced economies is predicted to be 1.8%, while building activity in emerging markets will likely increase by 2.2%.

Emerging markets have maintained robust capital flows and market access, with the US economy surpassing its pre-pandemic trend due to strong employment growth. Increased labour force participation, especially among women and immigrants, has boosted labour supply in advanced economies.

Infrastructure investment has been key to economic resilience, enhancing productivity, efficiency and supply chains while reducing costs. These investments have created jobs, lowered unemployment and attracted foreign direct investment. They also promote social and economic inclusion and support the transition to sustainable energy sources, improving climate resilience and reducing environmental impacts.

Theres a growing emphasis on sustainable infrastructure, including renewable energy projects, green buildings and resilient infrastructure to mitigate climate change impacts. The adoption of new technologies such as digitalization,

IoT (Internet of Things) and AI (Artificial Intelligence) is transforming the infrastructure sector, improving efficiency and creating new opportunities.

Indian Economic Outlook

Indias Economic Prospects Strengthen with Upgraded Growth Projections staying the fastest – growing large economy.

Indias GDP surged by 7.6% in fiscal 2024, exceeding expectations. This growth was driven by strong private investment and resilient domestic demand, despite global challenges. For the fiscal years 2024-25, 2025-26 and 2026-27, S&P projected growth rates of 6.8%, 6.9% and 7%, respectively. Looking ahead, over the next seven fiscals (2025-2031), India is projected to become the third-largest economy, crossing the $5 trillion mark and approaching $7 trillion, with an average growth of 6.7%.

The Indian government continues to prioritize infrastructure development as a cornerstone of economic growth. Initiatives such as the National Infrastructure Pipeline (NIP) aim to boost investment across sectors including energy, transportation, water and urban infrastructure.

Specific areas such as renewable energy, transportation

(including metro rail and highways), smart cities and digital infrastructure are expected to see significant growth. These sectors align with Indias goals of sustainability, urbanization and digital connectivity. Continued government support through policy reforms, incentives and infrastructure spending commitments provides a stable framework for industry growth. The focus remains on creating robust infrastructure networks that support economic expansion and improve quality of life. A third term for the BJP government would likely ensure continuity in existing infrastructure policies and initiatives providing stability for ongoing projects and planned investments, showcasing a vision of continued development and prosperity for India.

Source: https://www2.deloitte.com/us/en/insights/economy/asia-pacific/india-economic-outlook.html https://www.crisil.com/en/home/our-analysis/reports/2024/03/india-outlook-2024-report/growth-marathon.html

Union Budget Highlights for Infrastructure Sector

2024-25 Budget: Infrastructure Spending Soars to 11.11 trillion.

The Budget 2024-25 increases infrastructure investment by 11.1% to 11.11 trillion (US$ 133.86 billion), 3.4% of GDP.

This move comes after a notable 33% increase last year, underscoring the governments dedication to extensive infrastructure development. This consistent rise over the past four years has been a key driver of economic growth, with infrastructure spending acting as a catalyst for job creation and private investment. After securing a clear win in the recent Lok Sabha elections, the current government is yet again prioritizing economic expansion and the generation of employment opportunities. FDI in construction and infrastructure reached US$ 26.54 billion and US$ 33.52 billion, respectively, from April 2000 to December 2023. The Budget 2023-24 extended the 50-year interest-free loan to states with an outlay of 15,00,000 million (US$ 18 billion).

Under the National Infrastructure Pipeline, projects worth

108 trillion (US$ 1.3 trillion) are in progress. Key initiatives include three major railway corridors under PM Gati Shakti to improve logistics. Significant improvements include expanding highways, ports, electrified rail routes, aircraft movement and airports.

The government is also developing new airports under the UDAN scheme and promoting urban transformation through metro projects and the NaMo Bharat initiative to drive economic growth and improve citizens quality of life.

Source: https://www.ibef.org/industry/infrastructure-sector-india https://www.indiabudget.gov.in/ https://www.businesstoday.in/magazine/deep-dive/story/modi-30-can-the-new-govt-continue-with-its-10-year-effort-to-boost-indias-infrastructu re-434491-2024-06-24 https://www.thehindu.com/business/Economy/states-seek-improvements-in-50-year-interest-free-loan-scheme/article68320330.ece

Industry Overview and Outlook: Hydropower

Indias Hydropower Surge: Paving the Way for a Sustainable Energy Future

Hydropower remains the largest single source of renewable energy, crucial for meeting net zero emissions targets. To meet net zero targets, globally the hydropower sector needs to increase its capacity growth rate significantly, requiring a growth rate of over 26 GW per year until 2030.

Installed Generation Capacity (Fuelwise) as on 31.05.2024 :

	Category		Installed Generation Capacity (GW)	% Share in Total
	Coal		210.97	47.40%
	Lignite		6.62	1.50%
	Gas		24.818	5.60%
Fossil Fuel	Diesel		0.589	0.10%
	Total Fossil Fuel		242.997	54.60%
	RES (Incl. Hydro)		193.58	43.50%
	Hydro	46.928		10.60%
	Wind, Solar & Other RE	146.652		33.00%
	Wind	46.422		10.40%
	Solar	84.277		18.90%
	BM Power/Cogen.	10.355		2.30%
Non-Fossil Fuel	Waste to Energy	0.591		0.10%
	Small Hydro Power	5.005		1.10%
	Nuclear		8.18	1.80%
	Total Non-Fossil Fuel		201.76	45.40%
	Total Installed Capacity (Fossil & Non-Fossil Fuel)		444.757	100%

India aims to reduce emissions intensity by 45% from 2005 levels by 2030 and achieve 50% of installed electric power capacity from non-fossil fuels by the same year. As of May 2024, Indias installed renewable energy capacity, excluding large hydro, is ~ 146 GW, growing at a CAGR of around 15% since 2015. The focus on developing both large and small hydro projects, along with PSPs, will help balance the grid and support more renewable energy integration.

Hydropower in India is a key component of the countrys energy mix, ranking as the third-largest source of electricity and accounting for ~ 11% of the total installed capacity. It follows coal (47%) and other renewable sources i.e. wind, solar and other renewable sources (~33%).

Currently, Indias installed hydropower capacity is ~ 46

GW. Accordingly, to meet the countrys energy demand at a faster pace and achieve the targeted 500 GW of renewable energy, there needs to be an increased focus on hydropower generation. As a result, the development of mega hydro projects is essential.

Furthermore, the hydropower capacity is expected to grow at a CAGR of 6.3% from FY23 to FY27, reaching 59.8 GW by

FY27. While in FY32, the installed capacity is expected to reach 88.8 GW. This includes ongoing projects totaling ~ 18

GW and others in various stages of development. Hydropower is crucial in Indias energy transition, especially since solar power generation doesnt align with peak demand times. Developing hydropower projects, despite natural and logistical challenges, is essential for providing peaking support and ensuring grid resilience. Pumped storage hydropower, which provides over 90% of global energy storage, is vital for balancing intermittent renewable energy sources. Pumped Storage Projects (PSPs) are also being developed to enhance grid stability and provide balancing power. Presently, PSPs with a capacity of 2.7 GW are under construction, with a target of 55 GW by 2031-32.

Despite a positive outlook, hydropower generation faced challenges in FY23-24 due to natural disasters. Flash floods in Himachal Pradesh (July 2023) and the Eastern region (October 2023) disrupted many power stations. However, the predicted good monsoon for FY24-25 by IMD suggests potential reservoir replenishment, which could reverse the lower generation trend seen last year. The Indian Meteorological Department forecasts higher rainfall for the current financial year, which, combined with snowmelt in the Himalayan region, is expected to boost hydropower generation. Some of the large Hydropower projects which are currently under various stages of development including survey and investigation and under clearance from CEA which are expected to come up for bidding in the coming few years are as under:

Name of the Project	Location	Total Capacity (MW)
Etalin HEP – Awaiting Clearance	Arunachal Pradesh	3,097 MW
Dibang Multipurpose Project - Dam Package - Tender in Process	Arunachal Pradesh	2,880 MW
Sawalkot HEP – Awaiting Clearance	Jammu & Kashmir	1,856 MW
Kamala HEP – Under S&I Stage	Arunachal Pradesh	1,720 MW
Subansiri Upper HEP – Under S&I Stage	Arunachal Pradesh	1,605 MW
Kirthai HEP – II – Awaiting Clearance	Jammu & Kashmir	930 MW
Jangi Thopan Powari HEP – Under S&I Stage	Himachal Pradesh	804 MW
Attunli HEP – Awaiting Clearance	Arunachal Pradesh	680 MW
Lower Arun HEP – Awaiting Clearance	Nepal	669 MW
Teesta - IV HEP – Awaiting Clearance	Sikkim	520 MW
Dugar HEP – Awaiting Clearance	Himachal Pradesh	500 MW

Overview of Pumped Storage Projects (PSP):

Pumped hydro storage is where water is pumped uphill into a reservoir and released to power turbines when needed. They play an important part in meeting peak power requirements and maintaining system stability in the power system.

The pumped storage technology is a long-term technically proven, cost-effective, highly efficient and flexible way of energy storage at a large scale.

There are already 4,745.6 MW of PSPs installed in the nation and another 1,500 MW of capacity is being built. The PSP potential in India has been identified as 96,529 MW as per the Central Electricity Authority. The Western region has the highest PSP potential of 37,845 MW. The following projects are under construction as of December 2023:

S. No.	Name of Project	State	River Basin	IC (MW)	Tentative year of Commissioning
1	Tehri PSS	Uttarakhand	Ganga	1,000	2024-25
2	Pinnapuram	Andhra Pradesh	Pennar	1,200	2024-25
3	Kundah PSP Ph-I, II & III	Tamil Nadu	Cauvery	500	2024-25
4	Koyna Left Bank*	Maharashtra	Krishna	80	2027-28
Total				2,780

Source: PIB

*Note: Construction activities at Koyna Left Bank are currently stalled.

To achieve the Government of Indias commitment of 500 GW of installed capacity from non-fossil fuel sources by 2030, become energy independent by 2047 and achieve net zero emissions by 2070, hydro-pumped storage projects are necessary. Accordingly, 39 Hydro PSPs of 47 GW are being pursued to be commissioned by 2029-30. Various steps have been taken by the government in order to ensure that Pumped Storage Projects (PSPs) get commissioned on a fast track for accelerating the growth of the renewable energy sector of India. Some of the large Pumped Storage projects which are currently under various stages of development including survey and investigation and under clearance from CEA which are expected to come up for bidding in the coming few years are as under:

Name of the Project	Location	Total Capacity (MW)
Savitri Pumped storage project	Maharashtra	1,800 MW
Kalu Pumped storage project	Maharashtra	1,150 MW
Indirasagar - Omkareshwar Pumped storage project (On stream)	Madhya Pradesh	640 MW
Kengadi Pumped storage project	Maharashtra	600 MW
Pumped Storage Projects located in Thenmalai, Alleri and Aliyar	Tamil Nadu	4,900 MW
Koyabestagudem Pump Storage Project	Telangana	850 MW
Nacharam Pump Storage Project	Telangana	500 MW
Shirawata Pump Storage Project	Maharashtra	1,800 MW
Bhivpuri Pump Storage Project	Maharashtra	1,000 MW
Pane (Raigarh) Pump Storage Project	Maharashtra	960 MW

Source: https://powermin.gov.in/en/content/overview https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2017271

https://powermin.gov.in/sites/default/files/uploads/powerRs.sectorRs.atRs.glanceRs.MayRs.2024.pdf

Irrigation

The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), initiated on 1st July 2015 under the slogan "Har Khet Ko

Paani," aims to expand cultivated areas with assured irrigation, enhance water use efficiency and minimize water wastage. It emphasizes the development of irrigation sources and the effective management of rainwater at the grassroots level through initiatives like "Jal Sanchay" and "Jal Sinchan," promoting micro irrigation to boost crop productivity. The Government of India has sanctioned the implementation of PMKSY for the period 2021-26 with a total outlay of 9,30,686 million, including central assistance of 3,74,540 million. The goals of PMKSY encompass consolidating investments in irrigation, increasing access to water for agricultural purposes, enhancing water use efficiency, advocating precision irrigation technologies, and facilitating holistic development of rainfed regions.

In addition to PMKSY, the government has launched the Jal Jeevan Mission, which aims to ensure safe and sufficient drinking water through tap connections to every rural household. The mission underscores the sustainability of water sources, conservation efforts and active community involvement. States and Union Territories have outlined their priorities, including managing grey water, enhancing Panchayat capacities, improving water service delivery and implementing multi-village schemes. These initiatives are geared towards addressing water challenges and ensuring access to clean water for every household under the motto "Har Ghar Jal."

The Jal Jeevan Mission and PMKSY are crucial components of Indias initiatives aimed at advancing water resource management, enhancing irrigation capabilities and ensuring access to safe drinking water. These efforts contribute significantly to promoting sustainable agricultural practices and fostering rural development. The Ministry of Jal Shakti got a major chunk from this years interim budget outlay as Finance Minister Nirmala

Sitharaman allocated 9,84,180 million in the interim budget for 2024-25 with its flagship Jal Jeevan Mission getting a 71% share.

Moreover, the Government of India has identified priority links under the National Perspective Plan (NPP). Whereas

30 identified interlink projects are already under various stages of project preparation as of 2023. River interlinking will lead to increased overall area under the irrigation, domestic and industrial water supply. Thus, government support is evaluated to substantially contribute to Indias irrigation sector growth.

Source: https://www.india.gov.in/spotlight/pradhan-mantri-krishi-sinchayee-yojana)

https://jaljeevanmission.gov.in/

Tunnel

Tunnel construction has become integral to Indias infrastructure development, experiencing significant growth in recent years. This growth is driven by advancements in key infrastructure sectors such as urban rail, roads and highways, hydropower and irrigation. The expanding metro rail sector has also boosted tunneling activities, while road and highway tunnels, particularly in hilly areas, are seeing increased development.

According to data from India Infrastructure Research, India has completed over 2,500 km of tunnel infrastructure across various sectors. A breakdown by sector reveals that the hydropower industry leads with over 1,200 km of completed tunnels, followed by irrigation (more than 470 km), railways (more than 270 km), metro projects (more than 240 km), water and sewerage systems (more than

230 km) and roads (more than 60 km).

Looking ahead, the tunnelling sector anticipates a robust pipeline of approximately 1,300 upcoming projects, covering a total length exceeding 3,600 km. Among upcoming projects categorized as under planning, under bidding and ongoing, Jammu & Kashmir leads with around 200 tunnels, followed by Maharashtra (around

140 tunnels), Himachal Pradesh (more than 100 tunnels),

Andhra Pradesh (around 90 tunnels) and Arunachal Pradesh (around 80 tunnels). Maharashtra tops the list in terms of projected length, with over 1,100 km, trailed by Jammu & Kashmir with over 460 km and Uttarakhand with more than 280 km.

Progress in tunnel techniques and underground space engineering has been pivotal in facilitating quicker and more effective construction processes. The New Austrian Tunnelling Method (NATM) is increasingly recognized in the country, particularly favored for its effectiveness in handling unpredictable geological and hydrogeological conditions. Tunnel boring machines (TBMs) are becoming increasingly popular in tunnel construction, particularly in the roads, highways and metro sectors, due to their suitability for urban tunneling. TBMs are being adopted as alternatives to traditional methods like the Drill and Blast Method (DBM). The use of innovative and advanced materials has become crucial as tunnel construction becomes more intricate, particularly in the Himalayan and peninsular regions.

Looking ahead, the future prospects for tunnel development in the country appear promising.

Source: https://indianinfrastructure.com/2023/06/06/tunnelling-works-market-size-developments-and-upcoming-projects/

Road

India boasts the worlds second-largest road network spanning approximately 6.7 million kilometers, crucial for transporting 64.5% of its goods and accommodating 90% of passenger traffic. Over the last decade, the countrys road infrastructure has expanded significantly, exemplified by the growth of its national highways from 97,830 km in 2014-15 to 146,145 km by December 2023. This growth trajectory is supported by substantial investments, with

2,78,000 million allocated to the Ministry of Road

Transport and Highways in the Interim Budget 2024-25. The sector has seen a steady increase in national highway construction, achieving 10,457 km in FY22 and 10,331 km in FY23 despite pandemic challenges. Currently,

202 national highway projects totaling 6,270 km are underway, reflecting an investment of 7,97,890million. Public-private partnerships (PPP) play a pivotal role, with

352 projects worth US$ 76.95 billion in progress as of

November 2023.

Future projections are optimistic, with the National

Infrastructure Pipeline earmarking 11,100,000 million for FY25, indicating a substantial 18% share for the roads sector in capital expenditure. Private investments are expected to surge, potentially reaching 1 trillion annually over the next 6-7 years, driven by initiatives to attract corporate investments and enhance project efficiency.

Recent developments include Prime Minister Narendra

Modi inaugurating 112 national highway projects valued at approximately US$ 12.04 billion in March

2024, underscoring the governments commitment to infrastructure expansion. Furthermore, infrastructure investment trusts (InvITs) in the road sector are set to double by March 2025, fostering additional avenues for funding and development.

In conclusion, Indias road infrastructure is undergoing rapid expansion fueled by significant investments and strategic initiatives, poised to bolster economic growth and connectivity across the nation.

Source: https://www.ibef.org/industry/roads-india

Urban Infrastructure

Indias rapid urbanization is poised to transform its landscape by 2036, with towns and cities expected to accommodate 600 million people, constituting 40 percent of the population, up from 31 percent in 2011. Urban areas are projected to contribute nearly 70 percent to GDP. The successful management of this urban shift will be pivotal in achieving Indias goal of becoming a developed nation by 2047, marking its 100th year of Independence. The construction of essential infrastructure will be crucial in creating sustainable, climate-resilient and inclusive cities that drive economic growth. Significant investments are necessary, given that nearly 70 percent of the required urban infrastructure by 2047 remains to be built. Investment in public services is essential to enhance citizens productivity and quality of life. Improving healthcare access and upgrading skills, with the private sectors involvement, is critical for building human capital in Indias urban areas. Efficient public transportation is another pivotal factor in enhancing productivity. Ensuring safe and accessible transportation for women is crucial for enhancing workforce participation and economic development. Increasing female labor force participation could significantly boost Indias potential growth in the coming decade. Given Indias water scarcity challenges, creating robust water infrastructure is imperative. Cities like Surat and Dharampuri have set examples in water management through large-scale wastewater recycling and integrated water supply systems.

India currently operates 945 kilometers of metro systems, with an additional 1,000 kilometers under construction. It is projected that within the next two and a half years, India will boast the worlds second-largest urban metro system. Indias real estate sector is experiencing robust growth and significant investment, poised to expand further by 2040. With the market expected to reach 650,000 million (US$ 9,300 million) from 120,000 million (US$ 1,720 million) in 2019 and potentially grow to US$ 5,800,000 million by 2047, the sector is set to contribute 15.5% to Indias GDP. Strong demand across residential, commercial and retail segments, coupled with increasing investments and government initiatives like PMAY-U to boost affordable housing, are driving this expansion.

In 2023 alone, residential property sales surged and the completion of 5,58,000 homes underscored market vitality. The commercial real estate sector also saw substantial activity, with record-high leasing volumes and increasing investments from domestic and foreign sources. The flexibility of office spaces and rising demand for data centers further indicate the sectors adaptability to evolving economic trends.

Source: https://www.worldbank.org/en/news/opinion/2024/01/30/gearing-up-for-india-s-rapid-urban-transformation

https://www.ibef.org/industry/real-estate-india

Future Outlook of the Infrastructure Sector in

India:

The infrastructure of India is a crucial component of its economic system. World-class infrastructure is being built across the nation in the fields of roads, waterways, trains, airports and ports, among other sectors, as a result of a substantial shift in the industry. The nationwide smart cities initiatives have changed the game for the economy. Given its crucial role in the development of the country, Indias need and ambition for rapid development has resulted in a great boom in the infrastructure industry. Urbanisation and a rise in foreign investment in the industry have facilitated the expansion.

According to S&P Global Ratings, Indias GDP is projected to rise by 8% over the next three fiscal years, one of the fastest rates among significant developing nations.

India and Japan have teamed together to build the infrastructure in the northeastern states of India and they are also creating an India-Japan Coordination Forum for Northeast Development to carry out important infrastructure projects for the area.

Patel Engineering (PEL) Development

Financial Performance

The Company achieved significant growth in FY24 and has continued the growth momentum as seen in recent years. For FY24, the Companys consolidated revenues from operations increased by 16.78% to 45,441.08 million, up from 38,911.47 million in FY23. Standalone revenues rose by 15.59% to 44,120.39 million, compared to 38,171.26 million in FY23.

The segment wise revenue break-up on a standalone basis for FY24 is Hydropower 50% i.e. 22,060 Mn, Irrigation 24% i.e. 10,589 Mn, Tunnel 15% i.e. 6,618 Mn, Road 5% i.e. 2,206 Mn and revenue from Urban Infra and Others contribute 6% i.e. 1,908 Mn.

Further, in FY24, the Company also filed for various settlement amounts under the Vivad Se Vishwas scheme which was launched for the settlement of pending disputes related to Government contracts which were under on-going arbitration. The Company realized around

1,300 Mn through settlement of arbitration claims.

The Company continued to reduce the overall debt burden and improve the profitability thereby unlocking shareholder value.

As of March 31, 2024, the consolidated gross debt stands at 18,855 Mn, compared to 17,408 Mn as of March 31, 2023. Further, total advances from clients as of March 31, 2024, amount to 7601 Mn, down from 12,358 Mn as of March 31, 2023. Consequently, the net serviceable debt has decreased from 29,766 Mn in March 2023 to 26,456 Mn in March 2024, marking a reduction of 3,310 Mn. The debt breakdown is as follows: 11,120 Mn is categorized as Working Capital Debt, while the remaining 7,735 Mn constitutes Term Debt. The Term Debt is anticipated to be settled over the next 3 to 4 years through proceeds from monetizing non-core assets and/or surplus generated from operations.

There was also a reduction in interest outflow by 501.28 Mn in FY24 which stood at 3,620.94 Mn as compared to 4,122.22 Mn in FY23.

Based on the improvements in the financial performance, the Company also received an upgrade in its credit rating from BBB+ to A-.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including: In compliance with the requirement of listing regulations, the key financial ratios on Consolidated basis have been provided here under:

INTERNAL RISK FACTOR

Dependency on Government Contracts and

Potential Policy Changes Risk and Concern:

Our business faces a significant risk and concern due to its heavy dependency on government contracts which we enter into with various Central/State Governments and public sector undertakings wherein Central and/or State Governments hold a majority stake and the potential impact of policy changes. This situation introduces uncertainty and potential challenges that need to be carefully addressed and managed. However, majority of the clients i.e. Central PSUs have strong balance sheets which minimizes the risk.

Potential Delays, Modifications or Cancellations of

Projects Impacting Business Risk and Concern:

Our business faces a risk and concern regarding potential delays, modifications or cancellations of projects included in our Order Book and future projects. These circumstances may arise due to factors beyond our control, Nevertheless, it has been observed that there is a decrease in these risks in recent years due to improved monitoring and decision-making by both the client and the Company. Additionally, the Company mitigates its risks through escalation clauses included in nearly all contracts.

EXTERNAL RISK FACTORS

Impact of Prevailing Economic, Political and Market Conditions on Our Business

Risk and Concern:

Various factors may lead to a slowdown in the Indian economy, which in turn may adversely impact our business, prospects, financial performance and operations.

In the past, the Indian economy has been affected by global economic uncertainties, liquidity crisis, domestic policies, global political environment, volatility in interest rates, currency exchange rates, commodity and electricity prices, volatility in inflation rates and various other factors. Recently, despite serious concerns in the global economic landscape, the countrys GDP continues to grow at approximately 8% due to robust domestic demand, increased output and the governments dedicated implementation of the "Make in India" initiative.

Impact of Communicable Diseases and Natural Calamities on Indian Economy and Our Business.

Risk and Concern:

Our business faces a significant risk and concern regarding the impact of widespread communicable diseases, such as COVID-19 and natural calamities on the Indian economy. These events have the potential to materially and adversely affect our business, prospects, financial condition and results of operations. As a Company, we are prepared to embrace these challenges, drawing from our past experiences.

Impact of Non-Performance / late performance or poor performance by third-party subcontractor to comply with applicable laws could affect the completion of our contracts Risk and Concern: Risk and Concern:

In our Business, we are mostly engaged as a contractor by clients and we further sub-contract part or entire work on case to case basis in respect of our projects. When we sub-contract, payment on such projects may depend upon the performance of the sub-contractor. When we are the principal contractor, we rely on third-party subcontractors we hire to perform a substantial amount of the work under our contracts, particularly engineering and construction contracts. We also rely on third-party equipment manufacturers or suppliers to provide the equipment and materials used for engineering and construction projects. However, majority of subcontractors and suppliers have been collaborating with the Company for decades and have acquired extensive expertise in their respective fields of work.

Adverse Impact of Indias Debt Rating Downgrade on Our Business.

Risk and Concern:

Our business is exposed to a significant risk and concern arising from the potential downgrading of Indias debt rating by domestic or international rating agencies. Such downgrades can have adverse effects on various aspects of our business operations and financial performance. Write about rating upgrade of India and our Company.

Operations Review

The Company continues to prioritize improving execution capabilities, optimizing resources and leveraging extensive experience in hydro-power, irrigation, tunnelling and urban infrastructure. These efforts enable us to competitively pursue projects that align with government investments.

During the year the Company received new projects of

~ 40,273 Mn. Ordering in FY24 was subdued due to election period. However, ordering is expected to pick up in the current FY25. With the outlook and focus of the Government on infrastructure and increase in budget allocation for this year, a large number of projects are expected to come up for bidding. The Company is executing 47 ongoing projects across

15 states in India, as well as 2 on-going projects in Nepal. These projects have a combined value of 1,86,630 million.

Hydro Power Projects:

Our Company maintains a significant presence in the hydro power sector, accounting for 61.89% of our current order book. We are currently involved in 15 ongoing hydropower projects. In FY24, our Company was awarded the works for the Construction of Head Race Tunnels, Intake, Pressure Shafts, Penstocks, Power House & Transformer Cavern, Tail Race Tunnels, Pothead Yard, Adits etc for Dibang Multipurpose project which is located in Arunachal Pradesh having a capacity of 2,880 MW. The value of the contract is 36,371 Mn. The project is being executed in joint venture and our share in the project is 18,185 Mn. Currently, in India around 18,000 MW of hydropower projects are currently under execution, of which our Company is involved in around 8,000 MW of these projects which is a 45% market share of the current hydropower projects currently under execution. Some of the Major Hydropower projects that our Company is currently under taking is as below:

Dibang Multipurpose Project	2,880 MW
Subansiri Hydropower Project	2,000 MW
Kiru HEP	624 MW
KWAR HEP	540 MW
Teesta VI HEP	500 MW
Shongtong HEP	450 MW
Luhri HEP	210 MW

Irrigation

In recent years, the Company has been actively increasing its presence in the irrigation sector, driven by abundant opportunities and upcoming projects. Government emphasis on this sector, supported by initiatives such as the Jal Jeevan Mission and PMKSY, has further bolstered this expansion.

In FY24, our Company was awarded six new Irrigation projects, 4 of which are located in Maharashtra namely

Krishna Marathwada Lift Irrigation Scheme 1 and 2 and the Nira Deoghar Right Bank Main Canal works from KM66 to KM76 and also from KM77 to KM87, an RCC Protection wall project on Munneru River located in Telangana and the SHER Micro – Irrigation project in Madhya Pradesh. The total value of these projects is 28,009 Mn and share of the Company in these irrigation projects amount to

12,430 Mn,

The Company is currently executing 18 Irrigation projects and this sector accounts for 20.98% of the current order book of the Company. Some of the major irrigation projects that are currently under execution are as follows:

• Sleemanabad Irrigation Project

• Khalwa Micro Lift Irrigation Scheme

• Tumkur Branch Canal Project Package 1, 3 and 5

• Krishna Marathawada – Scheme 1 and 2

• Parbati Irrigation Project

Tunnel

The Company is currently undertaking tunnel projects and is honored to be involved in some prestigious projects of national significance. In FY24, our Company completed the Sela Road and Tunnel Project which is the worlds longest bi-lane tunnel in the world situated at an altitude of over 13,000 ft. The Sela Tunnel was also honored as the highest tunnel in India by the International Book of Honour, England. The project was inaugurated by the honorable Prime Minister Mr. Narendra Modi in March 2024. In FY24, we were awarded a tunnel project for the design and construction of a Water Tunnel in the state of Maharashtra by City and Industrial Development

Corporation (CIDCO) having a total value of 5,195 Mn. Our Company currently has 6 on-going tunnel projects which account for 10.74% of the current order. We are working on Tunnel T-15 which is located in Jammu &

Kashmir. Our Company is also executing two water tunnel projects in Mumbai City namely AMT-II which is from Amar Mahal to Trombay and also a tunnel from Powai to

Ghatkopar. Apart from this our Company is executing the Tunnel T-7 project in West Bengal and Sikkim which is

Indias first underground station cavern to be built.

Road

The Company is actively participating in road construction projects, a sector that holds immense potential with the governments strong focus on enhancing road connectivity in recent years. Indias government has prioritized resources towards improving the countrys road transport infrastructure, including the development of highways, economic corridors and feeder roads. According to Nitin Gadkari, Indias Minister of Road Transport and Highways, the nation aims to expand its road network to rival that of the United States within the next five years.

The governments primary goals include reducing metro traffic congestion, minimizing commute times and improving road safety. With an allocation of approximately $1.4 trillion, the government has substantially increased infrastructure investments up to 2025. The finance minister has revised the allocation from 1,67,000 million in the previous year to 1,68,000 million for the fiscal year 2024-25, providing significant support to the National Highways

Authority of India (NHAI).

Our Company has 5 on-going road projects which account for 2.75% of the order book under execution. The Sela Road and Tunnel project is being executed by the Company which is located in Arunachal Pradesh at an altitude of

13,000 ft. In the past as well our Company has worked on road projects located in high altitude regions in North India. Our Company is also involved in executing the Katraj Kondwa road project located in Maharashtra.

Urban Infrastructure Development & Others:

Given the governments emphasis on enhancing the countrys urban infrastructure, there is considerable potential in this sector. Initiatives by the Government aimed at providing drinking water to every household, are expected to generate further projects to foster urban development. Further, there is significant growth in the real estate sector in India and is expected to grow further as more than 600 million people would be living in urban cities by 2036.

The Company is currently involved in 5 ongoing projects within this sector contributing to 3.64% of the current order book. In FY24, Our Company received a 12,753 Mn contract from Madhya Pradesh Jal Nigam for the Narmada – Gambhir Multi-village drinking water supply scheme located in Madhya Pradesh. The project is being executed in joint venture and our Company share in this project is

4,463 Mn. Our Company is also executing construction of a Integrated Coy Level building in the state of Jammu & Kashmir.

Asset Ownership:

Hydro Power Projects – The Gongri H.E. Project is terminated and the Company has also settled the debt of the lenders for this project. The Company shall now focus only on E&C business.

Thermal Power Projects – Our Company, through our subsidiaries had acquired land in Tamil Nadu for setting up a thermal power plant. The thermal power projects have been currently kept on hold. Road BOT – The consortium consisting of our Company and KNR Constructions Limited had executed a road annuity project to expand an existing two-lane expressway to a four-lane on the NH 7 highway in the state of

Karnataka over a 60.40 km stretch between Andhra Pradesh-Karnataka border and Avathi village (KNT-1) through our SPV, Patel KNR Infrastructure Limited ("PKIL"),

The project was developed on a BOT basis. PKIL is entitled to receive fixed semi-annual payments from NHAI, for a period of 20 years. The yearly annuity for the project is 658.80 million. Our stake in the project is 60%. The commencement date was December 2009. The consortium consisting of our Company and KNR Constructions Limited had executed a road annuity project to expand an existing two-lane expressway to a four-lane on the Nagpur – Hyderabad section on the NH 7 highway in the state of Andhra Pradesh over a 53.02 km stretch annuity road between Islam Nagar and Kadtal, through our SPV, Patel KNR Heavy Infrastructure Limited ("PKHIL"),

The project is being developed on a BOT basis. PKHIL is entitled to receive fixed semi-annual payments from NHAI for a period of 20 years. The yearly annuity for the project is 887.40 million. Our stake in the project is 42%. The commencement date was June 2010.

Further, the Company have a 32% stake in ACP Tollways Private Limited (ATPL) which has developed a road project for the state of Uttar Pradesh, between Varanasi and Shakti Nagar. The project was commenced in October

2015. Revenue is received based on the toll collection from vehicular movement.

Real Estate:

Majority of the Companys land parcels are located in or close to the major cities of Mumbai, Hyderabad, Bangalore and Chennai. These sites are mostly intended for residential construction.

The Company intends to sell these land parcels outright to monetize them. The Company has completed all construction activities and is nearing completing handing over the possessions of the apartments to owners in its residential project – Smondo Gachibowli located in Hyderabad.

CSR Initiatives

The Company has undertaken vide range of Corporate Social Responsibility (CSR) initiatives, spanning across regions including Lower Subansiri (Arunachal Pradesh), Simla & Kullu (Himachal Pradesh), Kishtwar, Poonch & Ramban (Jammu & Kashmir), Nilgiri (Tamil Nadu). Through concerted efforts, Company is driving positive change and making impact on the lives of individuals and communities.

The Company has undertaken several CSR activities aimed at empowering local communities around our project sites which includes adoption of school, infrastructure development in local villages around few project sites of the Company, education aids to kids of BPL families, ambulance service for local villagers, bus service for local villagers, relief to victims of wreaked havoc, construction of cultural cum library hall, essential commodities in medical dispensaries provided to local villagers etc. You can read more about Companys CSR initiatives on page 74 of the Annual Report 2024.

Internal Financials Controls

The Company has in place adequate internal financial controls with reference to financial statements. During the year under review, such controls were tested and no reportable material weakness in the design or operation was observed.

Management Systems

In the FY 24-25, Company continues to prioritize performance enhancement. This includes resource utilization, quality management, safety measures, environmental protection, human resource development and design engineering. Our commitment to customer satisfaction, work effectiveness and time management remains unwavering.

Our Integrated Management System (IMS), based on ISO standards, is meticulously managed and maintained. It covers all aspects of our operations, ensuring that we adhere to the highest standards in all our activities. We have further refined our document control system, which organizes, stores, retrieves and shares a vast array of project-related documents securely. This system ensures that the right stakeholders have access to the necessary information at the right time, enhancing our operational efficiency. Quality remains paramount to us. Our quality management system has been further improved to ensure that our projects meet required standards and specifications. It includes quality control inspections, documentation of non-conformities and corrective actions. Safety management continues to be critical, especially given potential hazards at our project sites. Our safety management system, which includes safety policies, hazard identification, risk assessments, safety training, incident reporting and emergency response procedures, ensures compliance with safety regulations and promotes a safe working environment.

We have expanded our safety and environment training programs, conducting them more frequently. We have implemented Risk-Based thinking methods for hazard identification and environment protection at our project sites. This has reduced the incident ratio, making our operational sites safer. Our communication and collaboration systems have been upgraded to facilitate more efficient communication among project teams, subcontractors, suppliers and clients. This includes advanced email systems, state-of-the-art project management software and other innovative collaboration tools.

Our resource management system has been enhanced to manage labor, equipment and materials more efficiently.

It helps track and allocate resources, schedule equipment usage, manage inventory and optimize resource utilization. This ensures that resources are effectively utilized and projects are adequately staffed. Our management review sessions have become more frequent, allowing us to regularly inspect our operations, identify flaws and provide solutions. This strengthens our system, making it more robust and resilient.

Looking forward to the rest of the fiscal year, we are excited about incorporating more advanced technologies into our operations. We are exploring the use of AI and planning to scale up our E-Learning and IoT efforts. These initiatives are part of our ongoing commitment to digital transformation and innovation. We remain committed to our goal of becoming a Digital Native enterprise, connecting our business with the outside world and fostering new skills among our employees. We are confident that these efforts will position us for continued success in the years to come.

Information Technology Services

On behalf of all of our leaders in the Company, we would like to congratulate and thank each and every one of our talented IT team for their hard work, enthusiasm, unwavering commitment to quality and dedication. The wide range of capabilities and experiences they bring to work every day are the foundation of our success. We have made our technology investments in building a strong digital core aligned with our corporate strategic ambitions to optimize our operations, accelerate revenue growth, create tangible value at speed and scale to help our stakeholders succeed in achieving sustained outcomes and building trust. We are proud that we could rise to all the challenges and deliver the digital solutions in such a short time because of our excellent coordination between technology and business. This partnership has helped us be very intentional by being really clear what value we intend to generate from the technology we deploy. These digital transformation investments are providing returns that have exceeded expectations and are driving tangible gains for the companys revenues from operations increased by 16.78%

Given there is more transformation ahead of us than behind us, technology is at the core of change today. Our projects have even greater opportunities for digitization especially with the emergence of AI in particular which is maturing rapidly – it will reinvent the way we live, work and be a significant source of value for us over time. It is important to emphasize that we are early in the maturity of generative AI for enterprise but we have to act today. With a deep technical knowledge and understanding of AI and are blending it with our industry and functional expertise, our IT team at PEL has started by building a strategy to reinvent our processes and operating models, bringing together the depth and breadth of our expertise. In addition, in FY24 we are implanting IoT solutions for Truck Volumetric Measurement, Fuel and Fleet management across all our projects, this will improve fleet efficiency and productivity and reduce fuel costs.

In IT, we care deeply for knowledge and are committed to a culture of shared success. We provide opportunities to learn and grow in their careers through their work experience and continued development by drip-feed on the job training and reskilling and to helping them achieve their aspirations both professionally and personally.

Human Resources Department

The foundation of our success is teamwork. With a diverse workforce of approximately 4,580 permanent employees, we take pride in attracting, engaging and retaining top talent in a competitive environment. Our goal is to create a positive workplace that nurtures employee growth and satisfaction.

We provide comprehensive on-the-job training and development programs to ensure our employees have the skills and support needed to excel and contribute to our goals. Through transformational leadership, we promote mentorship and collective growth, driving continuous improvement in our dynamic industry.

Our commitment to inclusivity allows employees from diverse backgrounds to be their authentic selves, develop their skills and advance their careers. By fostering a sense of belonging, we enhance work performance and create a culture of inclusion.

We focus on talent acquisition, employee well-being and process optimization. We actively engage with employees at remote sites to promote their health and happiness. With over 95% of our workforce working remotely, these initiatives significantly enhance satisfaction and productivity.

We continually improve HR processes and systems. These optimizations enhance organizational effectiveness and drive positive outcomes.

Our management team consists of seasoned professionals and fresh talent from top institutes, creating a dynamic environment for innovation and growth. We adhere to a

"People First" policy, recruiting the best talent to foster a motivated and high-performing workforce.

We emphasize continuous development and retention through a robust performance management system and development plans. Our Variable Pay system, linked to performance metrics, reinforces a meritocratic and performance-driven culture.

In summary, our HR department is committed to acquiring and developing talent, enhancing employee well-being and streamlining processes. Through collaborative efforts, we foster a supportive and dynamic workplace where employees thrive and drive our collective success.

Cautionary Statement

In this Annual Report, the management has disclosed forward-looking information like objectives, estimates and expectations to enable investors to comprehend our prospects and take investment decisions, which may be ‘forward-looking statements within the meaning of applicable laws and regulations. This report and other statements - written and oral that we periodically make, contain forward-looking statements that set out anticipated results based on the managements plans and assumptions. The management has tried wherever possible to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expects, ‘projects, ‘intends, ‘plans, ‘believes and words of similar substance in connection with any discussion of future performance. The management cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in assumptions. The operations of the Company may be affected due to various reasons like changes in political and economic front of the country; fluctuations in exchange rate, tax laws, litigations, labour relations, interest costs and overall scenario of the infrastructure sector. Hence, the achievements of results are subject to risks uncertainties and even inaccurate assumptions. Should know or unknown risks or uncertainties materialise, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.