SAB Industries Ltd Management Discussions

Infrastructure sector is a key driver for the Indian economy. It has witnessed considerable progress in the past few decades. Most of the infrastructure development sectors moved forward, but not to the required extent of increasing growth rate up to the tune of 8 to 10 per cent. In the years ahead, the construction industry in India has to overcome various challenges with respect to housing, environment, transportation, power or natural hazards.

India offers a favorable business environment and a stable political system. The one and five-year risks of investing in the Indian infrastructure sector are less than the world average. The countrys infrastructure sector presents lower risks than the other sectors of the economy.

Indian infrastructure and construction industry has grown exponentially, in part due to massive government impetus and in part due to high market sentiments. The country, which has initially targeted the low-hanging fruits, is now poised to take up more complex and technologically intense projects. The focus has moved from cost efficiency to time and competence. The Indian regulatory environment is expected to further boost the construction industry in order to provide the basic physical infrastructure for the nation. Careful selection of project, in-depth understanding of taxation structure, proper feasibility analysis and tie-up of funding would considerably smoothen the way forward.

The infrastructure sector has become the biggest focus area for the Government of India. Indias GDP is expected to grow by 8% over the next three fiscal years, one of the quickest rates among major developing economies, according to S&P Global Rating. Despite global challenges, including low productivity and geopolitical tensions, Indias comprehensive infrastructure approach positions it as a beacon of resilience and economic vitality.

With the present emphasis on creating physical infrastructure, massive investment is planned in this sector. This requirement is of an immense magnitude. Better construction management is required for optimizing resources and maximizing productivity and efficiency. The outstanding performance under demanding situations in the past will stand in good stead and give confidence to the Indian construction industry to bring about an overall development in the infrastructure of the nation.

Indias infrastructure sector is poised for strong growth, with planned investments amounting to US$1.4 trillion by 2025. Government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India and the production-linked incentives (PLI) scheme to augment the growth of the infrastructure sector. NIP program outlines the injection of massive capital into various sub-sectors, including energy, roads, railways, and urban development. This unprecedented push is expected to spawn associated industries, create jobs, and stimulate the economy. Specific focus areas are the expansion of public digital infrastructure, clean and renewable energy projects, and establishing resilient urban infrastructure. This ambitious undertaking seeks to enhance Indias global competitiveness and improve the quality of life across its vast populace. However, Companies also face challenges related to financing, Land acquisition and environmental clearances.

India is witnessing significant interest from international investors in the infrastructure space. Emphasizing the importance of investment for creating modern infrastructure, seven engines of growth have been identified-roads, railways, ports, airports, mass transport, waterways and logistics infrastructure, Indian government has given the much-needed push to the infrastructure sector. As per the Department for Promotion of Industry and Internal Trade (DPIIT), FDIs in the development and construction sector stood at US$ 26.54 billion and US$ 33.52 billion, respectively, between the period of April 2000 and December 2023.

India has to enhance its infrastructure to reach its 2025 economic growth target of US$ 5 trillion. The governments focus on building infrastructure of the future has been evident given the slew of initiatives launched recently. In 2025, Indias infrastructure sector is expected to see significant growth and development, fueled by increased government investment and a focus on both traditional and emerging infrastructure areas.

• The US$ 1.3 trillion national master plan for infrastructure, Gati Shakti, which is a Rs.100 lakh-crore project has been a forerunner to bring about systemic and effective reforms in the sector, and has already shown a significant headway. access to relevant data and maps from the PM Gati Shakti portal will be provided to private sector in project planning.

• In the Union Budget 2025-26, capital investment outlay for infrastructure has been increased to Rs.11.21 lakh crore (US$ 128.64 billion), which would be 3.1% of GDP from Rs.10 lakh crore in 2023-24.

• The Indian government has introduced various formats to attract private investments, especially in roads and highways, airports, industrial parks and higher education and skill development sectors. The Second Asset Monetization Plan aims to reinvest Rs.10 lakh crore (US$ 115.34 billion) in capital for new projects over the period 2025-30 to recycle capital and attract private sector participation.

• 2025-26 is contemplated with a continuation of the 50 year interest free loan to states for capital expenditure and incentives for reforms, with a significantly enhanced outlay of Rs.1.5 lakh crore (US$ 17.30 billion).

The Company has a well diversified business portfolio spread across various business verticals viz., Buildings & Housing, Roads, Water & Environment, Irrigation, Power and Railways. The Company has significant experience in construction sector and is recognized as one of the key construction players in the country. It has carried out variety of projects across the country. Our core strength is our people who carry several years of industry experience in various domains including engineering, design, construction, procurement, planning, etc.

During the year under review, there is no change in capital of the Company. We are glad to inform that real estate project i.e. Steel Strips Highway Towers has received good response from the home buyers. Encouraged by the interest shown by buyers in this housing project, your Company has made changes in the layout plan of Phase-2 of this project, which will bring in substantial additional saleable area which will result in improved revenues in the current & future years as compared to last year.

The Company owns big chunks of land at prime locations in the State of Punjab and Haryana and intends to use these for following projects: - Company owns prime piece of land comprising 44 Kille (appox 36 acres) at Village Sarsini near Lalru (Punjab) on Chandigarh-Ambala Highway and intends to develop this land into Mix Use Land Project comprising industrial plots alongwith the residential complex for the users. Company owns another 16 acres of land in Distt Sangrur (Punjab) on State Highway and 11 acres of land at Amloh in Distt. Fatehgarh Sahib (Punjab). Both these lands are situated close to industrial zones and Company intends to develop these lands to be sold as industrial plots of different sizes.

Company also owns premium piece of land at Sohna, Gurgaon (Haryana). Gurgaon is also known as financial and technology hub and is home to many of Indias and Fortune 500 companies and is one of the most promising real estate market which has huge demand for Luxury, Ultra Luxury Housing and Farm Houses. Company plans to enter this lucrative market in near future and develop this land for upscale farm houses. This will significantly increase the Companys topline & bottomline in the coming years.

During the year under review, the total revenue has been to the tune of Rs.4973.95 lakh as against Rs.4859.29 lakh during the previous year. The Company earned a profit of Rs.825.51 lakh before interest & depreciation as against profit of Rs.644.77 lakh in the previous year. The net profit after tax is to the tune of Rs.176.43 lakh as compared to net profit of 84.63 in the previous year.

The Company has effective and robust system of internal controls to help management review the effectiveness of the financial and operating controls and assurance about adherence to companys laid down systems and procedures. Proper controls are in place, which are reviewed at regular intervals to ensure that transactions are properly authorized & correctly reported and assets are safeguarded. The Audit Committee periodically reviews the findings and recommendations of the Auditors and takes necessary corrective actions as deemed necessary.

The Company has a robust Enterprise Risk Management process in place, which is a holistic, integrated and structured approach to manage risks with the objective of maximizing shareholders value.

The risk management process broadly consists of identification, assessment, mitigation, prioritization and monitoring of risks. The ERM process allows the company to:

• Enhance confidence in achieving its desired goals and objectives

• Effectively restrain threats to acceptable levels

• Take informed decisions about exploiting opportunities

Owing to the nature of the industry the Company operates in, it is exposed to a variety of risk factors which are broadly categorized into technical, physical, construction, performance and legal risks.

A tight risk process is carried out from initial stage to project completion stage to manage, mitigate and monitor these risks by adopting specific risk mitigation measures. During the year, the Board has reviewed the process and the Risks that have been identified for the business. Some of these key risks that the Company faces along with their mitigation strategies adopted are listed below:

Statements in this report on Management Discussion and Analysis describing the Companys Objectives, projections, estimates, expectations or predictions may be "forward looking" within the meaning of applicable Securities laws and regulations. Actual results could differ materially from those expressed or implied.