Ruchi Infrastructure Ltd Management Discussions

Company is primarily engaged in the business of storage infrastructure and renewable energy, viz.

(a) Liquid storage facilities for handling bulk storage of liquid commodities such as edible oils, petroleum products, bitumen, paraffins, liquid chemicals, with transfer via pipeline etc.

(b) Warehousing facilities including storing agri commodities such as wheat, maize, soybean, cotton, chana etc. as well as extending customised warehousing facility for various industries dealing in FMCG, E-commerce, cement, white goods, soap, adhesive, paint, etc. and (c) Renewable Energy The Company has set up wind energy projects in MP including through 100% subsidiary. The Company is also evaluating opportunities for expansion in this sector.

India comprises a significant size maritime sector with 13 Major and more than 200 Non-major Ports situated along its 7500 km long coastline spanning 13 maritime States and Union Territories and a vast network of navigable waterways. There are 125 berths across all ports in India that can handle vessels up to the size of Very Large Crude Carriers (VLCCs). The countrys maritime sector plays a crucial role in its overall trade and business development.

Liquid storage tank terminal facility business is increasing in India amid challenges like increasing traffic and limited storage capacities. Construction of Tanks for storage of Edible oil, Black oil, Chemicals, LPG, etc. has increased gradually in recent years. Industries such as petrochemicals, chemicals, synthetic fibers, power generation, food processing and pharma are in requirement of amicable handling solutions for the same.

Government is keen and giving top priority to port-led infrastructural development so that the immense potential of Indian coastline strength can be harnessed to the fullest. Indias port infrastructure is gearing up to handle this additional traffic of chemicals and other liquids. Liquid cargoes i.e. crude oil, petroleum products, LPG, acids, edible oils, chemicals, etc. are handled by most ports in India. There is growing impetus from the government to develop India into a production base for specialty chemicals and this drive has accelerated since COVID, as Indian products have become accepted as high-quality chemicals in many western economies. Improving standard of living in India is unleashing demands for construction goods, consumer goods, automobiles and electronics, all of which would have a positive impact on the growth of the Indian chemicals industry. India is the sixth largest chemicals market in the world and the third largest in Asia. Rising consumerism in the domestic market as well as cost competition and proximity to many developing Asian economies are driving the increase of chemicals production in India.

India is Nitric Acid demand stood at 575 thousand tonnes in FY2021 and is forecast to reach 930.98 thousand tonnes by FY2030, growing at a healthy CAGR of 5.50% until FY2030. Nitric Acid is one of the major chemicals with different grades available in the market such as Diluted Nitric Acid (DNA) 60%, Concentrated Nitric Acid (CNA) 98%, Strong Nitric Acid (SNA) with 64%, 68%, and 72% used in different applications in multiple industries. The major demand for Nitric Acid is derived from the fertilizer industry to produce Ammonium Nitrate. The Company is committed to built a dedicated capacity of 6,000 metric tonnes at Haldia Port to store /handle Nitric Acid to in the next Financial Year.

Domestic manufacturer consumes nitric acid for captive use to produce nitrate-based fertilizer. Demand for nitric acid application has recently improved in the electronic industry & steel industry also. With government initiatives such as Make in India and reducing the import of explosives from the overseas countries, the domestic end-user such as Ordnance Factory and some private players are focusing on enhancing their production output, which is anticipated to fuel the demand for nitric acid in the coming years. The tank terminals around the country are managed by private companies with some built on private land in the proximity of a port whilst others are built on land leased by a port trust. All government ports in India have delegated the operation of tank terminals to private companies and there is healthy competition among them at most locations. Increased activity has already been witnessed in this sector as operating chemical tanks have evolved as a viable business model at many locations. Post pandemic, the market regained its momentum, production units bounced back and started operations to their fullest efficiency and markets exhibited robust growth. In recent times, Indian warehousing market has been on a high growth trajectory. Also, since last five years, the usage of warehousing facilities by e-commerce platforms has risen sharply as demand for goods has been unprecedently high, boosting the e-commerce market and warehousing space requirements alike. Further, after e-commerce, Quick- Commerce and instant delivery models have generated tremendous demand. This kind of demand has got focus and attention of many domestic and international investors. Growth of new segments like organized food delivery, has accelerated because of the pandemic, resulting in incremental demand for customized warehousing space.

As a result of such demands, the warehousing industry has emerged as a resilient asset class and continues to show an uptrend within the real estate sector. A lot of capital is also being allocated to the technological infrastructure of the warehouse, to ensure automation and efficient operations.

As per the information and reports available in public domain, Indias Warehousing Market was valued at USD 14.26 Billion in 2024 and is expected to reach USD 34.60 Billion by 2030 with a CAGR of 15.64% during the forecast period. Indias warehousing industry is undergoing a significant transformation, with tier II and III cities emerging as pivotal growth centers. As of 2024, Indias total warehousing stock has reached 533.1 mn sq ft, with emerging tier II-III cities contributing approximately 100 mn sq ft a fourfold increase since 2017.

Thrust to infrastructure development across sectors such as roads, ports, economic corridors, affordable housing, solar and wind energy is identified by the Government as an important lever to generate growth and employment. The governments impetus to the national infrastructure pipeline (NIP) is one of the examples. The Government has rightly recognized the need to lessen the burden of the budgetary support for the vast amount of funds required for infrastructure sector. The Government has emphasized the role of private investment and the PPP route for funding the development of infrastructural initiatives. Governments project DMIC (Delhi Mumbai Industrial Corridor) is covering the maximum area from MP and the companys 5 warehouses are now in the proximity of the corridor. The year 2024 demonstrated robust demand across both established and emerging markets, with a combined absorption of approximately 60 mn sq ft across 20 warehousing markets in India. This growth is primarily driven by the consumption boom, with 60% of online purchases now originating from Tier II and III cities. The industry structure is highly fragmented especially the industrial warehousing segment with the un-organised players accounting for 70 to 75 percent of the total warehousing space. However, the logistics industry faces challenges such as under-developed material handling infrastructure, fragmented warehousing, multiple regulatory & policy making bodies, lack of seamless movement of goods across modes, minimal integrated IT infrastructure. In order to develop this sector, focus on new technology, improved investment, skilling, removing bottlenecks, automation, single window system for giving clearances and simplifying processes are being considered. The industry believes that the concerns are in process of being addressed.

In the same manner, Renewable Energy is also accorded priority in the Energy sector in the country for in recent. As a part of Paris Agreement commitments, the Government of India has set an ambitious target of achieving 175 GW of renewable energy capacity. These include100 GW of solar capacity addition and 60 GW of wind power capacity.

The Indian warehousing industry is set to grow at a CAGR of 8 to 10 percent and modern warehousing at 25 to 30 percent over the next five years due to various factors including anticipated increase in global demand, growth in organized retail coupled with increasing manufacturing facilities, presence of extremely affordable and desirable e-commerce options and growth in international trade. E-Commerce is growing multifold and at the same time Agri spot market is on growing trend on all exchanges, including NCDEX, MCX and BSEs portal. Going forward, a responsive supply chain will be a combination of speed, cost and efficiency. Market and demand patterns are changing very rapidly and the ultimate strategy would be opting for agile supply chain management.

Edible oil and chemicals are mostly stored in commercial tank farms. Demand for liquid storage is increasing in India amid increasing traffic and limited existing capacities. Currently, the utilization of commercial farm tanks in India is around 80 percent. Bitumen is used as a binder in road construction and in roofing and waterproofing applications. Almost 90% of the bitumen is used in India in road construction with the balance of 10% shared for roofing and waterproofing, adhesives, insulation, etc. In the construction and industrial sector, bitumen is an important raw material for manufacturing road, water tanks, dams and bridges due to its high viscosity, stickiness and water-resistance properties. According to government data, highway construction works are done on an average to 25 kms per day but due to the pandemic impact it fell to 21.3 kms in the last fiscal year.

Government of India under its flagship schemes - Sagarmala Project, Bharatmala Project, Parvatmala Project, etc. aims to enhance the logistics sector by building new mega ports, connecting waterways to coastline and make an alternative to conventional roads in difficult hilly areas. The goal is to improve commuter connectivity and convenience while also promoting tourism.

India is the one of the largest importers of Bitumen and imports most of its Bitumen from United Arab Emirates, Iraq and Belgium. It is sure that in coming times, demand and supply for Bitumen Storage will enhance. Capacity to store Bitumen is limited in India as it requires insulated tanks, pipelines & allied infrastructure and skilled labour. Company is well placed to capitalize by initiating construction of tanks dedicated for storage of Bitumen.

Tank Farm Industry is on the threshold of phenomenal growth in India. There is a good demand for SS tanks, Floating Roof Tanks, storage tanks for specialized products like Bitumen & Coal Tar and bunkering fuels supply.

The factors influencing the aggregate demand are as follows:

1. Consumption led demand by increase in per capita income, booming e-commerce and Quick-Commerce industry for FMCG.

2. Manufacturing led demand - Make in India campaign is expected to increase the manufacturing activities in India, entailing demand for warehousing.

3. Improvement in International trade (Export and Import).

4. Emergence of organized retail.

5. Increasing private and foreign investments in infrastructure and logistics.

6. Easing of Government regulations in Agriculture sector.

7. Rapid expansion of highway and expressway infrastructure.

8. Government focus to increase the reach of fertilizers to all the corners of the country.

9. Growth for data centers.

The new growth drivers such as organised retail, information technology (IT), telecommunications and health care can be considered as high potential sectors. The growth of these drivers, backed by the advent of technological advancements, is likely to raise the demand for organised and automated warehouses.

The industry is trying to address the structural limitations of the warehousing industry viz. lack of alignment of capacity, absence of appropriate scale to support value-oriented pricing, low capital and operating efficiencies, inappropriate level of automation. Established players are also bringing in new technologies in the market. This is leading to focus on mechanization and better cost management.

From a mere combination of transportation and storage services, logistics is fast emerging as a strategic function that involves end to end value added solutions to improve the efficiency of the supply chain and to offer better value to the consumers of the services. Growing demand for better services at lower costs has led to the emergence of organized warehousing in the country. Appropriate size of storage, locational factors to facilitate better connectivity among the provider, aggregator and end user, Efficient inventory management systems, Modern storage solutions, automation of warehouses for the effective utilization of space and management information system implementation are key differentiating factors which would be considered in future investments in the sector for the organized players, keeping in view the long term and sustainable advantage.

It is believed that the following initiatives would contribute towards creating a sustainable roadmap for the growth of the logistics sector in the years to come:

(a) Infrastructure enablement

The government has reiterated its steadfast commitment to modernizing the functionalities of Indian logistics with a key focus on infrastructure development. Further Central Governments grant of ‘Infrastructure Status to the logistic sector including warehousing, has also proved to be catalyst. The ambitious Delhi Mumbai Industrial Corridor is passing through MP and some of existing and planned warehouses are falling on strategic locations near corridor. The Sagarmala initiative is a key step in doubling Indias coastal shipping share in the countrys broader model mix and aims at formulating a comprehensive shipping policy and optimizing the countrys maritime assets. The high-speed, freight-only Dedicated Freight Corridor Project aims at decongesting a heavily saturated road network and reducing freight transit times from industrial heartlands in north India to ports on the eastern and western coast of the country.

(b) Regulatory support

Key reform measures and policy interventions like the unveiling of the Goods and Services Tax, (GST), relaxed FDI regulations and granting of infra status has boosted the core competencies of the Indian logistics industry. The ongoing trade policy related matters between the US and China presents India with the key opportunity to expand its export trade and correct its trade imbalances with the Asian economic powerhouse. There are also some reforms being implemented in mandi operations in Madhya Pradesh, the state in which the warehouses of the Company are located, with the objective of creating environment of ease of doing business. Further, Governments plan to create buffer stock in various states is going to give boost to warehousing demand.

(c) Technological leverage

The emergence of new-age empowering technologies like artificial intelligence, internet of things and machine learning will disrupt the conventional workings of the countrys logistics sector. The impact of these technologies is anticipated to enhance productivity across the supply chain spectrum and streamline operational processes thus resulting in boosting efficiencies of supply networks, reduce wastages and lead to supply chain optimization.

The above growth will have a positive cascading impact on the growth of storage infrastructure opportunities in India. The Company is in the process of developing capabilities to customize the set up for existing and potential customers to derive mutual benefits. Several initiatives like online monitoring, digital stock management etc., are the systems being implemented already.

(a) Liquid Storage Business Vertical : Your Company has storage infrastructural facilities at strategic locations across the country. Your Company is exploring a number of options to leverage the strengths of the Company viz. being the major player in the bulk liquid storage industry, having experienced and well-trained manpower and a strong track record in terms of strategic alliance with third parties. Your Company focuses on further expanding and optimizing its network of storage terminals, providing specialist logistic concepts and entering into strategic alliances that provide related logistic services. This year Company has expanded its liquid storage capacity and the revenue from the expanded capacity is expected to be added up in coming years. Company is also diversifying into other segments like storage facility of Nitric Acid which requires specialized SS tanks. Entry into such niche segment is expected to increase higher return on investment.

(b) Warehouse Storage Business :This vertical of the Company is performing consistently and has achieved more than 20% CAGR in EBDTA for past few years. Company has transformed its warehouse business with more than 70% EBDTA being contributed by Fixed/Non-Agri clients. This business transformation, achieved in the past 12-14 quarters has established your Company as one of the leading warehouse and service provider in M.P. Further, your Company is poised to generate even higher annual profitability in the financial year 2025-26. Construction of additional capacities in certain warehouses was completed in the year under review and the revenue has been generated from their operations. The Company has not only enlarged the product portfolio to include storage of various non-agriproducts but also has successfully started construction of customized warehouse for the prospective customers. This will enable the Company to utilize the facilities efficiently, unlock the potential value, from time to time, due to better economies of scale and visibility in the growing space with better connect with the existing and potential consumer base. Company is gearing up to counter the prevailing challenges and convert these to opportunities, which has resulted into diversified portfolio of customer and visible growth in revenue. This will entail investments, strengthening of the existing systems, strategic partnerships/alliances etc. to cater to growing supply chain dynamics. The competition in this industry is, however, increasing due to many factors including technological factors, capacity orientation, efficiency in costs, dynamic changes in the needs of user industry apart from seasonality. Your Company is aware of the changing nature of the storage industry and reviewing action plans to be constantly relevant to the user industry and facilitate value addition.

(c) Renewable Energy: Your Company has 10.8 MW wind power project which has been in operations for around 14 years and the project is Debt free. Also a 14.7 MW wind project in successful operation in its 100% subsidiary. In this project also the debt is reduced to less then 40% of initial sanction and the generation and revenue is at par with the expectations with clear visibility of next 17 years. Both the projects are running successfully. With seasoned and experienced team and good network, your company is now exploring opportunity to enter into Solar power as well.

Government policies have always played very important role. Despite that the policies are progressive in the infrastructure segment owing to various factors including infrastructural needs, demand supply gap, economic growth, technological advancement to achieve operational/cost efficiencies and equitable view towards various stakeholders, the Company is keenly tapping the private market to minimize the risks associated with changes in government policies. Still the portion of business which is being done with Government brings in the risk of delayed payment. Company is concerned with duty structure of the imported edible oil which changes the business dynamics even when there is slightest change in the duty structure. The management reviews the potential risk factors on an ongoing basis and appropriate measures are taken to mitigate the risks.

Construction costs have increased due to rising material prices such as crude oil, steel, aluminum, cement, labour, equipment rental costs, and costs of plumbing and fixtures. There have been some severe cable theft incidents at the wind project site of the company and this has resulted in revenue loss. Although, company along with the O&M partner is taking up the issue at appropriate forum still the risk of recurrence of such events cannot be ruled out.

The Companys internal control systems are adequate and ensure that all corporate policies are strictly adhered to and that transparency is maintained at all levels and functions throughout the organization. Systems have been put in place at all levels to ensure optimum usage of resources and to minimize risks across all activities undertaken by the Company. The internal control systems are designed to ensure the safety of all assets of the Company and also to ensure that all transactions are carried out as per the documented policies, guidelines and procedures. Detailed framework of internal financial controls and adequacy thereof is included in the Directors Report.

Your Company is focused towards the energy conservation at macro as well as micro level. Its renewable energy business is already generating approximately 40 million green energy units (including generation of subsidiary company) which is sufficient to light up around 15000 homes for a year. Further, at micro level and as a continuous process company is actively pursuing towards reducing its carbon footprint by way taking small measures including but not limiting to usage of only 5 star rated components/equipment in office space.

1) Debtors Turnover ratio has reduced in financial year 2024-25 as compared to the previous year due to better recoveries.

2) Inventory turnover ratio has increased in financial year 2024-25 as compared to previous year due to lower turnover of soap division.

3) Interest coverage ratio has decreased in financial year 2024-25 as compared to the previous year due to lower profit.

4) Current Ratio has decreased in financial year 2024-25 as compared to the previous year due to increase in current liabilities.

5) Debt Equity ratio has improved in financial year 2024-25 due to preferential issue of equity shares and repayment of debt.

6) Operating profit margin has decreased during the financial year 2024-25 as compared to previous year due to increase in expenses.

7) Net Profit Margin has decreased during the financial year 2024-25 as compared to previous year due to increase in expenses in current year and exceptional profit recorded in previous year.

8) Return on net worth has decreased in financial year 2024-25 as compared to the previous year due to lower profit.

The detailed analysis of operations and financial results is provided in the Directors Report. The financial statements have been prepared in accordance with notified Ind AS. The detailed segment-wise performance is given in Note No. 48 to the standalone financial statements of the Company. There were no material changes/developments in human resources requirement during the year under review.