Reliance Infrastructure Ltd Management Discussions.

Forward Looking Statements

Statements in this Management Discussion and Analysis of financial condition and results of operations of the Company describing the Company’s objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company’s operations include determination of tariff and such other charges and levies by the regulatory authority, changes in Government regulations, tax laws, economic developments within the country and such other factors globally.

The financial statements of the Company are prepared under historical cost convention, on accrual basis of accounting and in accordance with the provisions of the Companies Act, 2013 (the "Act") and comply with the Indian Accounting Standards specified under Section 133 of the Act. The management of Reliance Infrastructure Limited ("Reliance Infrastructure" or "the Company") has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the state of affairs and profit for the year.

The following discussions on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the annual report.

Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", or "Reliance Infrastructure" are to Reliance Infrastructure Limited and its subsidiary companies and associates.

About Reliance Infrastructure Limited

Reliance Infrastructure Limited is one of the largest infrastructure companies, developing projects through various Special Purpose Vehicles (SPVs) in several high growth sectors such as power distribution, roads and metro rail in the infrastructure space, the defence sector and Engineering and Construction (E&C) sector. Reliance Infrastructure is ranked amongst India’s leading private sector companies on all major financial parameters, including assets, sales, profits and market capitalization. The highlights of the consolidated performance of the Company during 2020-21 are furnished hereunder:

Total Income of Rs. 20,106 crore (US$ 2.75 billion)

Net Loss of Rs. 532.30 crore (US$ 72.81 million)

EBITDA of Rs. 5,784 crore (US$ 791.12 million)

Cash profit of Rs. 1,633 crore (US$ 223.37 miillion)

Consolidated Net Worth of Rs. 9,203 crore (US$ 1.26 billion) In order to optimise shareholder value, the Company continues to focus on in-house opportunities as well as selective large external projects for its E&C and Contracts Division. The E&C and Contracts Division (the E&C Division) order book position is at Rs.14,890 crore (US$ 2.04 billion).

Fiscal Review

The Financials of the Company have been prepared in accordance with the Companies (Indian Accounting Standards) Rules 2015 (IndAS) prescribedunder Section 133 of the Act. The Company’s total consolidated income for the year ended March 31, 2021 was Rs. 20,106 crore (US$ 2.75 billion) as compared to Rs. 22,376 crore (US$ 2.97 billion) in the previous financial year.

The total income includes earnings from sale of electrical energy of Rs. 16,381 crore (US$ 2.24 billion) as compared to Rs. 17,336 crore (US$ 2.30 billion)in the previous financial year.

During the year, interest expenditure was Rs. 2,727 crore (US$ 372.96 million) as compared to Rs. 2,400 crore (US$ 318.67 million) in the previous year.

The capital expenditure during the year was Rs. 931 crore (US$ 127.40 million), incurred primarily on modernizing and strengthening of the transmission and distribution network as also on road projects.

The total PPE as at March 31, 2021 stood at Rs. 8,766 crore (US$ 1.20 billion).

With a net worth of about Rs. 9,203 crore (US$ 1.26 billion), Reliance Infrastructure is ranked as one of the top performing Indian Company amongst private sector infrastructure companies of India.

Details of significant changes in Key Financial Ratios and Return on Networth

Due to various asset monetization events and receipt of claims against arbitration awards during the year, the Company has repaid more than 35% of its outstanding debt.

These events have resulted in number of exceptional items in statement of profit and loss and reduction in assets and liabilities of the Company. The key financial ratios including return on networth of the current financial year are hence not comparable with the previous year.

Monetisation of Assets and Debt Reduction

The Company has completed sale of 100% stake in Delhi Agra (DA) Toll Road for Enterprise Value of ~ Rs. 3,600 crore, sale of Parbati Koldam Transmission Company for Enterprise Value of ~ Rs. 900 crore. The Company successfully completed the sale of its commercial property at Santacruz, Mumbai, to YES Bank Limited (YBL) for a transaction value of Rs. 1200 crore. For this purpose, the Company and YBL had entered into a Composite Transaction for Sale, Buyback, and Lease in respect of the property whereby the Company would have the option to buy back the property at the end of 8 years and 6 months and upon buyback, the Company will simultaneously lease it to YBL for a period of 9 years. Entire proceeds from this sale were utilized to repay the debt of YES Bank. Further, the Company has received arbitration awards for Rs. 190 crore from Government of Goa and the entire receipts of the above transaction are utilized for debt reduction. The Company has paid Rs. 2,275 crore to the lenders through above monetization of assets / receipts of claims thereby reducing total debt outstanding by more than 35%.

Operational and Financial Performance of Businesses

We present here under detail report of various business divisions during 2020-21:

A. The E&C Business

The E&C Division is a leading service provider of integrated design, engineering, procurement and project management services for undertaking turnkey contracts including coal-based thermal projects, gas-power projects, metro, rail and road projects.

The Division is equipped with the requisite expertise and experience to undertake E&C projects within the budgeted cost and time frame, ensuring customer satisfaction in terms of quality and workmanship. The Division has constructed various Greenfield projects in medium, large and mega categories over the last two decades.

Following major projects are currently under execution by the E&C Division.

i. Design & E&C of Common Services Systems, Structures & Component for Kudankulam Nuclear Power (KKNP)-3&4

E&C contract for common services systems, structures and components at KNPP Unit 3 & 4 from Nuclear Power Corporation Ltd (NPCIL). Civil works has already started and most of the equipments are likely to be delivered during 2021-22.

ii. Mumbai Metro Line 4-Packages 8, 10 & 12

E&C contract for elevated viaduct for Mumbai Metro Rail Project (Wadala-Kasarvadavali 3 packages of Line-4 Corridor: CA-08 length 6.4 Km from Bhakti Park to Amar Mahal Junction,CA-10 length 6.7 Km from Gandhi Nagar to Sonapur & CA-12 length 6.8 Km from Kapurbawdi to Kasarvadavali). This project is a joint venture of Reliance Infrastructure with Astaldi.

iii. Versova- Bandra Sea Link

E&C contract for Design and Construction of Versova- Bandra Sea Link including development of connectors and improvement of proposed junction from Maharashtra State Road Development Corporation (MSRDC). This project is a joint venture of Reliance Infrastructure with Astaldi.

iv. Vikkaravandi to Pinalur-Sethiyahopu section of NH- 45C in the State of Tamil Nadu

The Project is awarded by NHAI for Improvement & Augmentation of Four Laning from Vikkaravandi to Pinalur-Sethiyahopu section of NH-45C in the State of Tamil Nadu under NHDP –IV. The length of road is 66 Km.

v. Six laning of highway from Bihar-Jharkhand Border to Gorhar, Jharkhand

Reliance Infrastructure has won an E&C order from NHAI for "Six Laning of Highway from Bihar-Jharkhand Border (Chordaha) to Gorhar section of NH-2 from 249.525

Km to 320.810 Km in the state of Jharkhand under NHDP Phase-V". The length of six laning of highway is 71.285 Km.

vi. Four laning and construction of twin tube six-lane tunnel at Kashedighat, Maharashtra

Reliance Infrastructure in JV with CAI-Ukraine has won an E&C order from MoRTH for "Rehabilitation and Upgradation of KashediGhat section of NH-17 (New NH-66) to four lanes with paved shoulders from existing 148.0 Km to 166.600 Km including construction of twin tube six-lane tunnel in the state of Maharashtra on E&C Mode under NHDP-IV".

vii. Nagpur Mumbai Super communication expressway – Package 7

Reliance Infrastructure has won an E&C order from Maharashtra State Road Development Corporation (MSRDC) for construction of access controlled Nagpur - Mumbai Super Communication Expressway (Maharashtra Samruddhi Mahamarg) in the state of Maharashtra on E&C mode for package 07, from 296.000 Km to 347.190 Km (section - village Banda to village Sawargaon mal) in district Buldhana.

B. Delhi Power Distribution Companies

The Company has two material subsidiaries involved in the electricity distribution in Delhi, they are BSES Rajdhani Power Limited (BRPL) serving South and West Delhi and BSES Yamuna Power Limited (BYPL) serving East and Central Delhi (together called Delhi Discoms). The year FY20-21, had been exceptional year due to COVID-19 pandemic breakdown and imposition of lockdown by the Govt. severely affecting the commercial and industrial activities. During the year, Delhi Discoms registered an aggregate income of Rs. 16,358 crore (BRPL - Rs. 10,621 crore and BYPL - Rs. 5,737 crore) against aggregate of Rs. 17,206 crore in the previous year (BRPL- Rs. 11,128 crore and BYPL - Rs. 6,079 crore), which is a decrease of 4.9 per cent over last year. Overall aggregate power purchase cost during the year FY2020-21 is Rs. 10,339 crore (BRPL - Rs. 7,022 crore and BYPL - Rs. 3,317 crore) from Rs. 11,994 crore (BRPL - Rs. 8,142 crore and BYPL - Rs. 3,852 crore) in the previous year, a decrease of 13.8 per cent. Other operating expenses are in line with cost control objectives of Discoms, which was achieved by following stringent budgetary control and rigorous monitoring of all expenses and commercial processes. The aggregate capital expenditure incurred during the year amounted to Rs. 735 crore (BRPL - Rs. 470 crore and BYPL - Rs. 265 crore) for up-gradation, strengthening and modernization of the distribution system. The aggregate net block including Capital Work in Progress stood at Rs. 7,187 crore (BRPL - Rs. 4,752 crore and BYPL - Rs. 2,435 crore).

The total number of customer base in both Delhi Discoms grew by 2.9 per cent to 45.1 lakhs (BRPL - 27.4 lakhs and BYPL -17.7 lakhs) in FY2020-21 from 43.8 lakhs (BRPL- 26.5 lakhs and BYPL - 17.3 lakhs) in FY2019-20. During the year, Delhi Discoms maintained the system reliability of over 99.9 per cent. Delhi DiscomsTransmission and Distribution (T&D) loss levels are comparable to international benchmarks, BRPL achieved 7.21 per cent while BYPL achieved 7.98 per cent in FY2020-21.

During the year,as a result of reduced commercial and industrial activities due to reasons stated above, there is a decrease in peak demand for Delhi Discoms to 4,254 MW which is 12.5% down from previous year peak demand of 4,864 MW

BRPL BYPL

BSES Delhi Discoms

(Total)
2020-21 2019-20 Variance 2020-21 2019-20 Variance 2020-21 2019-20 Variance
2,815 3,211 - 12.3% 1,439 1,653 -12.9% 4,254 4,864 -12.5%

Key Regulatory Updates

Some of the key regulatory highlights of FY2020-21 are as below-

Tariff recovered as per the DERC Tariff Order dated 28.08.20 during the FY 2020-21.

Tariff was not decreased for FY 2020-21 despite COVID-19 pandemic during the year.

DERC has requested MoP to permanently de-allocate Delhi share of power from Dadri-I (840 MW), which has completed its PPA tenure. This will strengthen our Petition for exit from PPA with Dadri-I which is pending before CERC (matter was reserved for judgment on 8th April 2021).

Detailed representations were submitted by BSES during April-June 2020 highlighting various risks and difficulty arising due to outbreak of COVID-19. DERC taking cognizance of BSES’s submission, allowed relaxation in Supply Code Regulations.

Power Purchase Adjustment Cost (PPAC) of 7.94% for BRPL and 7.43% for BYPL continued till 31.03.2022

Delhi Discoms have filed petition for ARR for FY21-22 and trueing up upto FY19-20 on 15.12.20 to DERC.

Measures taken due to COVID-19 to ensure uninterrupted quality power supply

During lockdown, primary focus was on supplying reliable and quality power

Operational teams were regrouped in a manner so that exposure risk is divided and minimized

To supplement the operations, technical teams from Business, Safety, Enforcement, Quality, C&M departments were drawn into a Central pool to manage smooth operations

Progressively deployment for all departments are being scaled up towards normal

Delhi Discoms staff in all establishments provided with sanitizers, masks, PPE kits and regularly educated on social distancing and other aspects as per Govt. norms/guidelines

Our social support and care team is providing support to employees including education on COVID -19 to their medical requirements and even set up quarantine centers Tie-up with hospitals for treatment of staff affected from COVID -19 Vaccination of frontline workers in coordination with DoP, Delhi Govt.

Consumer Services Digitization and Automation for enhanced customer experience

Introduction of Virtual Service Centre concepts

Self-meter reading facility through WhatsApp

Contactless application processes through website

"Call Back" option for customer who cannot visit our offices

"Appointment" facility prior to physical visit to reduce waiting time

Instant payment acknowledgement through third party payments like wallets

Dynamic pay now button provision in the e-bill

SMS link based bill download & payment facility

Recharge of smart pre-paid meters through website and mobile wallets

Awards and Accolades

Delhi Discoms have been recognized at various national and international forums and won prestigious awards for their exemplary performance and best practices in distribution business, corporate governance, green initiatives, HR initiatives, CSR programs and safety practices.

Key awards won by BRPL in FY20-21 are

National Award for Excellence in Cost Management – First position (ICMAI)

Golden Peacock Award 2020 (Institute of Directors)

International Safety Award 2020 (British Safety Council)

Green Energy Award (Indian Chamber of Commerce - ICC)

TISS CLO Award 2020(Tata Institute of Social Science)

Golden Globe Tigers Award - CSR (World HRD Congress)

Best Smart Grid Project in India by Utility (India Smart Grid Forum - ISGF)

Adoption of Emerging Technology by Utility(India Smart Grid Forum - ISGF)

Best Company - Electric Charging Stations (IPPAI)

Order of Merit for Employee Engagement and Transforming Workplace (SKOCH Foundation)

Excellence in Smart Energy Initiative (World HRD Congress)

Best Practices in Procurement and Services (World HRD Congress)

State Level Safety Award New Delhi Power Distribution Sector (World Safety Forum)

Artisans Award 2020 (Construction Industry Development Council)

Energy Conservation & Awareness Award (National Ability Awards Forum)

Key awards won by BYPL in FY20-21 are

National Award for Excellence in Cost Management – Second position (ICMAI)

Golden Peacock National CSR Award 2020 (Institute of Directors)

Golden Peacock Innovative Product/Service Award 2020 (Institute of Directors)

Innovation Awards (India Smart Grid Forum ISGF)

National Energy Award for Excellence in Energy Management 2020 ( CII )

CCQC Award 2020 (Quality Circle Form of India QCFI)

ICQCC Award 2020 (International Convention on QC Concept – ICQCC)

International Best Practice Award 2020 (Asia Pacific Quality Organization – APQO)

Global Performance Excellence Awards 2020 (Asia Pacific Quality Organization – APQO)

Greentech Safety Award 2020 (Greentech Foundation)

Innovation with Impact Award 2020 (Indian Chamber of Commerce – ICC)

Compliance 10/10 award under category of "40 under 40" (Legasis Services Pvt. Ltd.)

C. Roads Projects

All road projects are revenue operational which are majorly urban centric roads in high traffic density corridors and on Golden Quadrilateral spread across six states in India.

a. NK Toll Road Limited

NK Toll Road is engaged in widening of 2-lane to 4-lane portion from 258.65 Km (End of Namakkal Bypass) to 292.60 Km (Start of Karur Bypass), covering 33.48 Km on the NH 7 in Tamil Nadu. Moreover, the improvement, operation and maintenance of 248.63 Km (start of the flyover on Namakkal Bypass) to 258.65 Km (end of Namakkal Bypass) on the NH 7, on a BOT basis. The project commenced commercial operations in August 2009.

b. DS Toll Road Limited:

The project stretch of 53 Km long 4-lane dual carriageway of 15 stretches on BOT and annuity basis, which included, inter alia, the package for design, construction, development, finance, operation and maintenance of 373.275 Km (Start of flyover at Dindigul bypass) to 426.6 Km (Samyanallore) on NH-7 in Tamil Nadu, is in operation since September 2009.

c. TD Toll Road Private Limited

The project stretch of 87 Km long 4 lane NH 45 road is in operation since January 2012 and provides connectivity to Trichy and Dindigul in Tamil Nadu.

d. TK Toll Road Private Limited

TK Toll Road Project was for strengthening and maintenance of the existing carriageway from 135.80 Km to 218.00 Km, on the Trichy - Karur section of the NH67 in Tamil Nadu, on a BOT basis. The project commenced commercial operations in February 2014 for 61 Km long 4 lane NH 67 road.

e. SU Toll Road Private Limited

SU Toll Road project was envisaged to strengthen and maintain the existed carriageway from 0.31 Km to 136.67 Km, on the Salem – Ulundurpet section of NH 68 in the State of Tamil Nadu and widen the roads from two to four lanes, on a BOT basis. The project commenced commercial operations in July 2012 and 3rd toll plaza was put in operation in September 2013. The project stretch is a 136 Km long 4 lane NH 68 road from Salem to Ulundurpet in Tamil Nadu.

f. GF Toll Road Private Limited

GF was engaged to upgrade the existing road from 0.00 Km to 24.31 Km on the section of the Gurgaon–Faridabad road, 0.00 Km to 6.10 Km of the section of the MCF road, 0.00 Km to 3.10 Km of the section of the crusher Zone road, 0.00 Km to 28.58 Km of the section of the Ballabhgarh – Lukhawas junction road and 0.00 Km to 4.10 Km of the section of the Pali – Bhakri road.

g. JR Toll Road Private Limited

R Toll Road project was set up with the objective to design, build and operate 52.65 Km long 4 lane NH11 road connecting Reengus in northern part of Rajasthan to the State’s Capital, Jaipur.

h. HK Toll Road Private Limited

HK Toll Road project was envisaged for Strengthening and widening of the 59.87 Km stretch (from 33.130 Km to 93.000 Km) of the Hosur – Krishnagiri on NH – 7 from existing 4-lanes to 6-lanes as BOT (Toll) on design, build, finance, operate and transfer (DBFOT) pattern in Tamil Nadu.

i. PS Toll Road Private Limited

PS Toll Road project was envisaged to expand the 725.00 Km to 865.35 Km, Pune – Satara section of the NH 4, which in turn forms part of the Golden Quadrilateral, in Maharashtra, on a DBFOT basis. The project was set up with the objective to design, build and operate 140 Km long 6 lane between Pune and Satara in Maharashtra. Tolling on the project started in October 2010.

D. Mumbai Metro One Private Limited (MMOPL)

The Mumbai Metro Line-1 project of the Versova- Andheri- Ghatkopar corridor was awarded by the Mumbai Metropolitan Region Development Authority (MMRDA) through a global competitive bidding process on Public-Private Partnership (PPP) framework to the consortium led by the Company for 35 year period, including construction period. Due to its complex challenges, Mumbai Metro Line-1 is one of the most prestigious infrastructure projects.

Mumbai Metro One (MMOPL), Special Purpose Vehicle for the project, is in its 7th year of commercial operation and continues to provide world-class public infrastructure to city of Mumbai and has served more than 650 million customers from inception. It’s a matter of pride that MMOPL crossed the 600 million commuter mark in just 1960 days, which less than five years and 5 months. Before the pandemic, the average ridership on weekdays was around 4.50 lakh per day, making it the busiest metro in India and the 7thdensestmetrointheworld.MMOPLresumeditsservices on October 19, 2020 after seven months of lockdown in a graded manner as per the unlock guidelines issued by Government of Maharashtra & Ministry of Housing & Urban Affairs, Government of India. The average weekday ridership grew from 20,000 in 1st week of re-start, October 25, 2020, to 110,000 by March 2021. MMOPL has continued to achieve excellence in the field of the public transport operation. It has been achieving 100% train availability and 99.9% on-time performance since the commercial operation. The rolling Stock and Civil Maintenance process of MMOPL are certified as ISO 9001. The trains are being operated from 06:50 AM to 10:15 PM with the highest frequency of 5 minutes in peak hours under the graded operations. MMOPL carried 10.20 million passengers with total train trips of 31,793 between October 19, 2020 and March 31, 2021. MMOPL extended the MyByk (a public bike-sharing service) from Versova & 6 more metro stations from January 2021 after the successful launch & operations from Jagruti Nagar metro station in February 2020 with support from MMRDA, WRI & Toyota Mobility Foundation. The MyByk services will encourage Mumbaikars to shift to an eco-friendly mode of transport as feeder services to decongest the city & reduce pollution.

In coordination with Mumbai Police, State Government and BMC, MMOPL provided a relief package to Kalina – Santa cruz Covid treatment Centre on Metro Day, i.e. on

8th June 2020. This relief package includes an electric kettle, temperature gun, mask, sanitizer, hazmat suit for our COVID warriors.

MMOPL re-started the operations from October 19, 2020 after the 7-month lockdown with 360-degree communication through all digital mediums & across all stations. MMOPL launched campaigns like "Metro se Chalona Mumbai" & "Your Metro, Safe Metro" online & offline with a sense of ownership & responsibility to make the commuters’ journey not only comfortable but safer than ever to build confidence within them. MMOPL also bagged the "Brand Impact Award 2021" by the Indian Achievers’ Forum for "Outstanding Brand Communication & Reinventing Strategies for Community Outreach."

MMOPL also launched "Metro Open for all" campaign to increase ridership, where extensive communication was carried at road level across all metro stations.

MMOPL strives to increase the non-fare revenue through significant initiatives such as station branding rights (SBR), telecom infrastructure development, retail area development, train wraps, payment alliances, etc. During the lockdown in 2020, Techno Mobile took Marol Naka metro station, whereas IndusInd Bank considered Chakala (J.B. Nagar) metro station for station branding rights. Post resumption of MMOPL services in October 2020, station branding rights of Andheri & Ghatkopar metro stations were taken by LIC of India & Mastercard, respectively. For the first time, MMOPL offered these brands an opportunity to paint the station’s civil structure in brand colours. IndusInd Bank and LIC have taken up the initiative to paint Chakala and Andheri stations, respectively.

E. Defence Sector

The Government of India has identified Defence sector as a high growth area with increased focus on Manufacturing in India.

To address this situation, large number of policy changes have been implemented by the government over the last 4-5 years resulting in reduction in Defence imports by around 33% during 2016-20, as compared to the period 2011-2015. More such policy changes are on the anvil, which will promote indigenous manufacturing, reduce dependence on imports and promote exports. A shift in the intent of the Government is evident from Defence Production Policy, on reducing import dependence and incentivizing exports with an ambitious target of Rs. 40,000 crore of Defence exports by 2025. Changes in tax regime to promote Maintenance Repair Overhaul (MRO) for Defence and Commercial aircraft and introduction of new category - "Buy Global (Manufacture in India)" in the Defence Acquisition Procedure 2020 are clear indication on the resolve of the Government to achieve self sufficiency for majority of requirements of the Indian Armed Forces.

In consonance with this policy initiative, MoD has indicated its preference to procure Defence equipment from Indian companies and has accorded highest priority to the "Buy Indian (Indigenously Designed Developed and Manufactured-IDDM) procurement category.

Further, MoD has published a negative list of 101 items and has introduced an import embargo on these items to boost Indigenisation of Defence production. It is estimated that contracts worth almost Rs. 4 Lakh crore will be placed upon the domestic industry within the next 6 to 7 years after this step.

Propelled by domestic Defence spending and a growing commercial aviation market, the Indian Defence and aerospace industry is one of the fastest growing segmented markets in the world. India is rapidly building capabilities under the Government "Make in India" program to emerge as a preferred destination for indigenous manufacturing of Defence equipments, weapon platforms, systems and components. India has skills and competencies in areas that include Engineering Design, IT, Artificial Intelligence, Virtual Reality and Data Analytics, all force multipliers in the Defence domain. This, coupled with lower production cost, makes India an attractive destination for the foreign Original Equipment Manufacturers (OEMs).

Defence Business

In order to tap the enormous opportunities on offer, our company created Reliance Defence Limited; a wholly owned subsidiary of Reliance Infrastructure with the aim of building capabilities and Indigenous development for Defence and Aerospace Industry. The purpose was to align with the government initiatives under "Manufacture in India" and "Atmanirbhar Bharat Abhiyan".

Currently, we have two operational Joint Ventures, one of the largest Defence & Aerospace Park in Private Sector at MIHAN, SEZ and Special Purpose Vehicles (SPV’s) that together hold 12 Industrial licenses issued by the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce.

In the Defence and Aerospace domain, Reliance Defence has taken multiple initiatives to meet the needs of both military and civil aviation. The Dhirubhai Ambani Aerospace & Defence Park (DAAP) is one such initiative, located at the SEZ at MIHAN (Multi Modal International Hub at Nagpur). The long term vision is to create a comprehensive Aerospace & Defence manufacturing hub, with capability to address the domestic as well as export Civil and Military markets. Discussions with multiple global majors are underway to set up manufacturing facilities at MIHAN.

Reliance has an operational Joint Venture (JV) Company with Dassault Aviation of France Dassault Reliance Aerospace Limited (DRAL); for its Aerospace programs. DRAL, in operations for three years, now has strength of 115 people and has successfully delivered large number of aero structures of Falcon-2000 business jets and components of Rafale fighter jets. DRAL is in process of adding more than 2,00,000 Sq Ft to its existing facility spread over 1,50,000 Sq Ft to expand its business with a target of final assembly, integration and delivery of Falcon 2000 business jet from MIHAN facility. The first made in India Falcon-2000 aircraft is expected to fly out of Nagpur in 2022.

Thales Reliance Defence Systems Limited (TRDS) is the second Joint Venture company of Reliance in Aerospace & Defence domain, incorporated in partnership with Thales of France. TRDS’s scope of work includes Assembly, Integration and Testing (AIT) of Airborne AESA Radars and Electronic Warfare Suite of Rafale fighter jets, Performance Based Logistics (PBL) support to the Rafale aircraft fleet of the Indian Air Force (IAF) and integrating multiple Indian companies into Thales’s global supply chain. TRDS has already carried out successful AIT of three airborne radars and EW suites of Rafale and exported the same to Thales facility in France. This is the first time an Indian company has assembled the Active Electronically Scanned Array (AESA) airborne radar of a fighter aircraft.

Reliance is also executing a contract awarded by Hindustan Aeronautics Limited (HAL) for upgradation of Dornier-228 (Do-228) aircraft of the Indian Navy (IN) and Indian Air Force (IAF) with state of the art digital glass cockpit. This program is being executed in collaboration with a US based OEM. So far, Reliance has already helped in modification of 37 aircraft and program is on track for upgrade of the remaining 18 aircraft will be delivered over next three years.

Reliance Armament Limited is engaged in multiple programs valued at over Rs. 6,000 crore over next 10 years.

Technology will play an increasingly dominant role in the future and accordingly, Artificial Intelligence, Virtual Reality, Cyber security and Data Analytics will have pivotal role in the Defence applications. These fields are not new for us, been qualified vendors for C4ISR with MoD and having received number of tenders for AR/ VR Simulators. We have also presented our credentials in the field of Artificial Intelligence and Cyber Security and are actively looking for partners based on forthcoming programs. These New Technologies will provides an opportunity for us to play a significant role and complement the existing infrastructure with the PSUs for legacy systems technological knowhow.

Reliance Ammunition Limited. is pursuing different programs under "Make in India" for the Indian Army and Indian Air Force and has already qualified to receive the RFPs, which are expected to be issued by October 2021. The Company is also in the process of acquiring land for establishing an ammunition and explosive manufacturing park.

Reliance Defence Limited. is also pursuing various MRO opportunities for the Indian Air Force fleet and has already qualified to receive the RFPs for these programs. For these opportunities, Reliance has tied up with qualified vendor.

In continuation of a phased manner approach to developing capabilities and creating infrastructure,

Reliance is participating in multiple upgrade programs for Armoured Vehicles like the Armoured Recovery Vehicle (ARV) and Infantry Combat Vehicle (ICV) BMP 2/2K. These programs allow us to create skill sets and establish infrastructure for addressing capital procurement programs.

Reliance Armaments Limited has created the ‘Jai’ series of small arms and has developed a 7.62x51 Light Machine Gun (LMG) to meet the exacting requirements of our Defence Forces as also for overseas requirement. With the development of the LMG, the Company has achieved an ‘OEM’ status which is a first for any Indian Private Sector company manufacturing Automatic weapons in Defence Sector.

F. Airport Business

The Company through its subsidiaries were awarded lease rights to develop and operate five brown field airports in the State of Maharashtra at Nanded, Latur, Baramati, Yavatmal and Osmanabad in November 2009 by the Maharashtra Industrial Development Corporation (MIDC) for 95 years.

Human Resources

In a business environment and marketplace that continuously changes, the major competitive advantage for a leading organization hinges upon skills, experience and engagement with its employees. At Reliance Infrastructure, Human Resource (HR) drives organizational performance by harnessing unique capabilities of developing robust systems, processes and an engaging work environment fostering critical skill development, improving employee experience and enhancing employee engagement. As a strategic enabler and business partner, HR strongly focuses on organizational development and employee engagement to accelerate our businesses with ability, agility and adaptability. Innovation and alignment of HR practices with business needs and total commitment to the highest standards of corporate governance, performance excellence, business ethics, employee engagement, social responsibility and employee satisfaction has lead our organization to evolving a work environment that nurtures empowerment, meritocracy, transparency and ownership. As on March 31, 2021, the Reliance Infrastructure Group had nearly 5,493 employees on roll.

The Company’s strong foundation of policies and processes ensures health, safety and welfare of its employees. Rigorous practical training on safety and extensive safety measures like job safety assessment and safe construction techniques at project sites have been undertaken by the Company for its employees. Throughout the year, the Company organized several medical camps, sports and cultural activities for employees and their families. The Company has established harmonious industrial relations, proactive and inclusive practices with all employee bodies

Risks and Concerns

All of the Company’s revenues including those from the E&C division are derived from the domestic market. Over the years, the Company has made significant investments in various infrastructure sectors like Mumbai Metro, Roads and also in Defence. These sectors may potentially expose the Company to the risk of any adverse impact to the national economy and any adverse changes in the policies and regulations. The Company closely monitors the Government’s policy measures to identify and mitigate any possible business risks.

In the power distribution business, the consumer tariffs are regulated by respective State Electricity Regulatory Commissions. Any adverse changes in the tariff structure could have an impact on the Company. However, the Company endeavours to achieve the highest efficiency in its operations and has been implementing cost reduction measures in order to enhance its competitiveness. There is also a risk of rising competition in the supply of electricity in the licensed area of the Company. The Company has built a large and established distribution network that is difficult to replicate by potential competitors and shall endeavor to provide reliable power at competitive costs, with the highest standards of customer care to meet the threat of competition.

Infrastructure projects are highly capital intensive, run the risks of

(i) longer development period than planned due to delay in statutory clearances, delayed supply of equipments or non-availability of land, non-availability of skilled manpower, etc.,

(ii) financial and infrastructural bottlenecks,

(iii) execution delay and performance risk resulting in cost escalations. The past experience of the Company in implementing projects without significant time overruns provides confidence about the timely completion of these projects.

On the finance side, any adverse movement in the value of the domestic currency may increase the Company’s liability on account of its foreign currency denominated external commercial borrowings in rupee terms. The Company undertakes liability management on an ongoing basis to manage its foreign exchange rate risks.

In the E&C business, most of the ongoing projects are nearing completion or are already completed. The Company has to expand the E&C contracts by bidding for projects across power, transport infrastructure, civil infrastructure, defence, etc. In defence business, the Company through its Special Purpose Vehicle (SPV) has received licences for production of defence equipment under the aegis of ‘Make in India’ initiative of the Government. The Company faces significant concentration risks as the Government of India is the sole customer for most of the defence equipments initially. The Company has recruited experienced professionals for implementing the projects within the framework of the policies and regulations being formulated by the Government for private sector participation in the defence industry.

Risk Management Framework

The Company has a defined Risk Management policy applicable to all businesses of the Company. This helps in identifying, assessing and mitigating the risk that could impact the Company’s performance and achievement of its business objectives. The risks are reviewed on an ongoing basis by respective business heads and functional heads across the organization.

Company has Risk Management Committee consisting of independent directors and senior managerial personnel. On a Quarterly basis, the Risk Management Committee independently reviews all identified major risks & new risks, if any, and assess the status of mitigation measures/plan.

Internal Control Systems

The internal financial controls for all the significant processes have been identified based on the risk evaluation in the business process and same have been embedded/implemented in the business processes. These processes and controls have been documented. Professional internal audit firms review the systems and processes of the Company and is providing independent and professional opinion on the internal control systems. The Audit Committee of the Board reviews the internal audit reports, adequacy of internal controls and risk management framework periodically. These systems provide reasonable assurance that our internal financial controls are designed effectively and are operating as intended.

Corporate Social Responsibility

Reliance Group is committed to continue to provide essential without interruption during lockdown period of COVID-19 Delhi Discoms effectively serving at full capacity to more than 45 lakhs households including critical governance structure Road business ensuring smooth transport of essential goods with safe, secure and obstruction free roads Apart from the above, various divisions of the Company actively participated in several corporate social responsibility (CSR) initiatives mainlyin the areas of education, healthcare, welfare programmes for tribal development, skill development and training, cleanliness drive such as Swatch Bharat, promotion and protection of environment, etc. in line with the CSR Policy of the Company.

A few of the significant CSR interventions and initiatives were as under:

Delhi Distribution Business

During the year, CSR activities and programs completed using the annual budget for FY20-21 of Rs. 5.23 crore in BRPL and Rs. 3.11 crore in BYPL. These programs are empowering women in a big-way, In fact, over 50% of the beneficiaries are women.

Complementing the efforts of the Delhi Government, these CSR programs have been playing their part in the fight against COVID-19 and making a positive impact in the lives of the needy under its SPARSH initiative.

It has facilitated needy students from government schools to get better access to online education, handed-over about 540 e-tablets by BRPL and 300 by BYPL to Govt. of Delhi

Donation of 6 fully equipped ambulances for the use of Delhi Government’s CAT’s Ambulance service, three each by BRPL and BYPL.

Promoting Women Self Help Groups involved in stitching and distributing affordable masks & sanitary napkins. During the year, they produced and distributed around 67,000 masks and over 27,000 sanitary napkins respectively.

During the year, around 30,000 trees were planted at the CRPF Camp, Jharonda Kalan in West Delhi, Delhi Government offices and MCD Schools.

In the Vocational Training Centres, over 1,100 students enrolled for undertaking job oriented courses on computers, beauty and tailoring. The classes are being undertaken by observing full COVID safety protocols.

Distribution of 200 oximeters, 1.5 lakh masks and 2 lakh disposable gloves for MCD hospitals and also distributed aids/appliances to 134 people with disability.

Distribution of 100 sanitizer machines, 6850 hygiene kits and 2800 COVID relief ration kits to places like mohalla clinics, police stations and public places in East & Central Delhi.

Support to treatment for 170 children with clubfoot in the partnership with Cure International India Trust.

Provided financial assistance under SASHAKT 2020- 21 scholarship to 135 distressed final year graduation students of Govt. colleges.

Continuing SURAKSHA Safe Delhi, BYPL installed 246 fire extinguishers at 114 places of worship along with fire extinguisher demonstration and training.

Roads Business

COVID 19: The unprecedented crisis caused by the global pandemic, impacted our Citizens and shattered many livelihoods. The Roads Business provided support to the people impacted and distribution of food to needy along the stretch of the toll plaza was undertaken. To ensure that our frontline warriors of security were safe and secure, distribution of PPE equipments near the toll plazas was undertaken.

Swachh Bharat Abhiyan: Cleanliness drives were conducted around the company plant and offices and the neighbouring localities with an objective to create a clean and healthy workplace. The roads business toll plazas and project highway inculcated the concept of cleanliness and hygiene by putting Placards and Signage’s in Public areas for not spitting, littering, placements of dustbins, maintenance of toilets and way side amenities / user facility to encourage commuters to use them and not to spoil the Highway or Toll Plaza area.

Green Highways: The Union Ministry of Road Transport and Highways has framed the Green Highways (Plantation, Transplantation, Beautification and Maintenance) Policy-2015 with a vision to develop eco-friendly National Highways with participation of concerned stakeholders. Under this Policy, we have undertaken plantation and landscaping work activities in operational projects. For the projects under development, the avenue plantation and median plantation are being done as per the direction of NHAI and the same is maintained regularly.

FAST Tag campaign : To be ready for 100% FASTag as directed by NHAI all our Toll Roads geared up to efficiently migrate road users to FASTag, a holistic campaign. For customers there were pamphlet distribution, personal counseling, banners at different interjections, barricading the roads so that customers can be counselled at strategic locations and dry runs conducted in all shifts to make the staff effectively handle 100% FASTag adoption

Health & Safety Programs: o Eye screening camps: Health check-up camps with a major focus on eye screening was organized at schools in the nearby villages and at some of the toll plazas. o Awareness program on Road Safety of highways to create awareness on road safety. o Pulse polio Immunization programs were organized at toll plazas on the highway stretch. o Blood donation camps were organized

Education facilities

o School Walls were painted with educational material to enable learning and making it fun

o Created Library in school near toll plaza and donated books to encourage reading o Fixed bore well of school and installed drinking water fountain to ensure clean drinking water for all students.

o Plantation drives to encourage eco friendliness and awareness towards our responsibilities towards mother nature.

Training & Development: Training pertaining to different kind of staff were regularly under taken, including fire firghting training, first aid refresher training for paramedic staff, trainings pertaining to FASTag for toll staff were carried out at periodic intervals.

Volunteer Based Tree Plantation by Staff: Apart from the plantation activities carried out as per the requirement of concession agreement, our staff on site from time to time conduct plantation drives as part of their individual drive and commitment towards environment. o Creating Awareness in travelers

For customers there were pamphlet distribution, personal counseling, banners at different interjections for safe and hassle free travel

o Preparing the Road Sites in collaboration with Stakeholders and Training Staff for FASTag preparation

Getting maximum toll booths ready for ETC collection, and creating multiple POS for payments at strategic locations, working hand in hand with stakeholders like banks, police and NHAI officials for smooth transition for FASTag as possible.

The staff has handled customers for FASTag and non FASTag crowds in less number of cash lanes effectively. Regular trainings were conducted to prepare staff at toll booths to handle 100% FASTag users, incident management and swift transition.

The Infrastructure Sector – Structure and Development, opportunities and threats

Infrastructure, development, a key to economic development, was severely hit due to the Corona pandemic; however, there have been many bright spots, especially the progressive policy initiatives of the government, which bode well for the sector as a whole.

Large road EPC players are expected to see their revenues recover with an estimated 15-20% growth in 2021-22. This pick up is reflected in the performance of highway construction. In the current financial year ie 2020-21, 8169 km of national highways were constructed from April 2020 to January 15, 2021. During the same period in FY 2019-20, 7573 km of highways were constructed. NHAI has developed a vendor performance evaluation system to track the performance of developers, consultants, and concessionaires, for speeding up work on projects. According to rating agency, ICRA, liquidity boosting measures for the highway sector have helped in liquidity, while also getting the performance guarantees and associated margin monies released for the executed portion of the projects.

According to rating agency CRISIL, EPC companies engaged in road construction have reached their pre-Covid levels, with labour and raw material problems largely resolved.

A number of policy reforms have been undertaken and carried out by the government to boost infrastructure development. The Earnest Money Deposit (EMD) and performance security on government and public sector lenders has been relaxed for both existing and new contracts from the Centre and Public Sector Enterprises (PSEs), leading to lower working capital requirements. Funding requirements will also ease due to EMD relaxation for new tenders, thus improving execution capabilities of companies. To boost the liquidity of contractors, their payments have been fast tracked.

The policy initiatives taken to boost funding to the infrastructure sector are critical. To encourage foreign funding in the infra sector, last year, the Income Tax Department notified tax exemption on incomes of certain funds arising from their investment in Indian infrastructure.

The government’s progressive reforms and new models of financing are boosting the confidence of domestic and foreign investors. There are now better models than TOT (toll-operate-transfer) and there is 100% FDI allowed in this. InvITs are emerging as popular funding instruments for infrastructure sector involving domestic and foreign investors. Power Grid Corporation of India has raised funds through InvIT IPO to use the proceeds to fund new and under-construction capital projects.

Other key budgetary provisions to meet long-term financing needs of infrastructure sector include proposed Development Financial Institution (DFI) with initial capitalization of Rs. 2,000 crore and lending portfolio of at least Rs. 5 lakh crore with record capital expenditure of Rs. 5.54 lakh crore for FY 2021-22.

There are some more important policy reforms that are in the offing to boost infrastructure development. To ensure easier entry for domestic companies in road projects, a major rejig in eligibility criteria for EPC projects, including easing of financial, technical criteria, is underway. As a policy reform, NHAI is set to introduce performance threshold for highway bidders by ranking concessionaires based on their performance on various parameters, including safety, frequency of accidents on the stretch, and road and toll plaza management systems, among others.

However post covid recovery and despite an impressive economic recovery over the last quarter of FY:2020-21, several bottlenecks still pose some challenges. One of the major challenges faced by the infrastructure sector pertains to financing. The capital crunch, along with land acquisition and other issues have been leading to time and cost overruns of infrastructure projects.

The States account for up to 40% of the total infrastructure capital expenditure. According to rating agency ICRA, there is likely to be a 40% cut in capital outlay for infrastructure in the coming fiscal. The rising debt of NHAI is also a concerning factor and then there are projects facing a funding challenge from banks. The funding woes have severely impacted the contractors (lowest in the chain); their credit cycle has almost doubled from 3 months to over 5 months.

Further the businesses worldwide have been hugely impacted by the outbreak of COVID-19 epidemic which has resulted in significant reduction in economic activities across all sectors and general slow down conditions. The Company’s business has also been affected as result of interruption in construction activities, supply chain disruption, unavailability of personnel, closure/lock down of various other facilities, etc.

Outlook

India had entered into 2021 with lower growth projections on the economic front led by global economic slowdown and the continuing coronavirus panademic with sharp rise in daily cases after second wave has led to stricter localised lockdown conditions which further impacted businesses as well as the economic situation.

The International Monetary Fund (IMF) raised its FY22 growth forecast for India to 12.5% from 11.5% estimated earlier in January, even as a resurgent Covid spread in second phase has affected the country’s economic recovery. The IMF forecast pitches India as the fastest-growing major economy and the only one expected to record a double-digit recovery from pandemic-hit 2020.