Sadbhav Engineering Ltd Management Discussions

CAVEAT

Certain statements in this report are "forward-looking statements" that reflect managements expectations regarding Sadbhav Engineerings future growth, results of operations, performance and business prospects and opportunities. statements are presented for the purpose of assisting the stakeholders and financial analysts in understanding the Companys operating environment and may not be appropriate for other purposes. Such forward-looking statements reflect managements current beliefs and are based on information currently available to management. However, such forward-looking statements involve a certain number of risks and uncertainties, including those discussed under the heading "Risks and Uncertainties" and elsewhere in this report. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Although the forward-looking statements contained in this report are based on what management believes to be reasonable assumptions, Sadbhav Engineering Limited cannot assure investors that actual results will be consistent with these forward looking statements. Actual results, performances, achievements or subsequence of events may differ materially from those expressed or implied. The case of data and information external to the Company, though the same are based on sources believed to be reliable, no representation is made on its accuracy or comprehensiveness. Therefore, all concerned are requested to caution themselves from putting undue reliance on these statements and are advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regards to their own specific objective. Furthermore, the discussion following herein reflects the perception on major issues that could influence the Companys operations substantial downside risks are as on date and the opinions expressed herewith are subjected to change without prior notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report, consequent to any new information, future events or otherwise. Hereby, we at Sadbhav Engineering Limited present our report for the financial year 2024-25.

Since its inception in 1988, Sadbhav Engineering Limited (hereafter referred to as ‘SEL) has undertaken and executed projects national importance, including the construction of roads and highways, bridges, and mining and irrigation infrastructure. SEL has successfully constructed 9,621 lane kilometers of roads and highways (encompassing both state and national highways) and is recognized as one of the leading infrastructure companies in India. The company is listed on both the National Stock Exchange of India Ltd. (NSE) and BSE Ltd. (BSE), and has had the privilege of collaborating with prominent organizations such as NHAI, Coal India, GIPCL, GHCL, L&T, HCC, Punj Lloyd, and Sardar Sarovar Narmada Nigam, among others. As SEL progresses, it continues to adapt to various factors influencing growth, including emerging market trends, evolving policies, geopolitical uncertainties, and other dynamic conditions.

1. INDUSTRY STRUCTURE AND DEVELOPMENT

Indias drive toward a USD 5 trillion economy hinges on accelerating infrastructure development, with a strong emphasis on transport, roads, railways, aviation, shipping, and inland waterways to meet the demands of its expanding population and economic growth. Robust investments in these sectors bolster connectivity and facilitate efficient costs and fostering regional development. The road sector is witnessing significant expansion driven by large-scale government projects such as Bharatmala Pariyojana, Sagarmala Programme, and Parvatmala, with the total length of National Highways reaching 146,204 km as of March 2025. In FY26, the government set a target to construct 10,000 km of new highways, focusing on high-speed corridors and expressways. Innovative financial arrangements, including public-private partnerships and asset monetization, continue to drive investment, with NHIT completing four fund-raising rounds exceeding Rs. 46,000 crore, while FY26 budget allocation for the Ministry of Road Transport and Highways reached Rs. 2.87 lakh crore. Private equity and venture capital activity remains strong, and new projects such as 35 multimodal logistics parks further signal momentum in sectoral growth. Technological advances and policy support, including 100% FDI, reinforce Indias vision for integrated, modernized, and sustainable infrastructure expansion into 2025.

2. GLOBAL ECONOMIC OVERVIEW

In 2025, the global construction and infrastructure industry maintains steady growth despite macroeconomic pressures, with the market expected to reach approximately $16.46 trillion, up from $15.78 trillion in 2024, reflecting an annual growth rate of around 4%. Expansion is fueled by urbanization, public investments, and stimulus-driven in Asia-Pacific, which contributes nearly 40% of global output. Major nations like China, the U.S., and India account for nearly 60% of global construction output, with large-scaleprojectsintransport,utilities, green buildings, and digital infrastructure driving progress. The sectors focus is increasingly on sustainability and technology adoption, as investments in smart cities and modular construction accelerate, while building information modeling (BIM) and AI enable improved planning and productivity However, persistent labor shortages and rising material costs temper sectoral optimism. Stimulus packages in the U.S. and Europe, alongside government infrastructure initiatives worldwide, underpin the industrys resilience. As governments and private players prioritize efficiency and environmental responsibility, the construction and infrastructure sector is poised remain a key driver ofglobaleconomicgrowthandmodernizationin . 2025

3. PANORAMA OF INDIAN ECONOMIC SITUATIONS

Indias economic outlook for 2025-26 remains strong, with infrastructure as a key growth driver and roads as the main focus. The governments increased capital outlay is supporting vital transport, housing, logistics, and energy sectors, helping create jobs and boost economic inclusion.

The road sectors focus in 2025-26 is on constructing10,000kmofnational -speed corridors and particularlyhigh highways, expressways. This has created major economic impacts such as improved national and regional connectivity, lower logistics costs, higher freight movement efficiency, and increased private investment through public-private partnerships and asset monetization. Modern road networks reduce travel time, enhance safety, and facilitate trade across states, directly contributing to faster supply chains and industrial growth.

In irrigation, watershed and modernization initiatives target higher agricultural productivity and climate resilience, supporting rural demand and economic stability.

Mining sector reforms and digitalization have energized growth in critical minerals, supporting employment, energy transition, and overall economic diversification.

Collectively, these infrastructure moves, especially in roads, make the sector the backbone of Indias strategy for sustainable growth, deeper economic integration, and long-term prosperity in 2025-26.

4. OUTLOOK OF OPPORTUNITIES AND STRENGTHS

Indias roads and highways sector demonstrated exceptional opportunity and resilience in FY 2024-25, continuing to anchor the nations infrastructure-led growth story. The National Highways network, strategic expressways, and flagship programmes like Bharatmala Pariyojana have strengthened Indias arterial routes, logistics hubs, and rural-urban linkages, catalyzing socioeconomic transformation. The sectors strengths include an extensive, rapidly expanding network, a high implementation pace, ongoing upgrades to new technologies, and growing participation of private capital through Public-Private Partnerships and asset monetization models.

Major completed and ongoing projects such as the Delhi-Mumbai Expressway, Frontier Highway, and Char-Dham connectivity underline engineering acumen, improved safety, and accelerated mobility for both freight and passengers. The PM Gati Shakti National Master Plan has further streamlined project approvals, prioritized logistics efficiency, and reduced transaction costs for industry, commerce, and rural supply chains.

Policy impetus has ensured roads remain crucial for job creation, export competitiveness, and global supply chain integration. offer fresh opportunities for warehousing, ancillary logistics, and cross- Multimodallogistics sectoral investments, while rural connectivity programs help drive inclusive development and increase market access for farmers.

Indias roads and highways are thus positionedas a backbone of economic growth, with strengths in scale, innovation, financing, and integrated planning. These advantages offer a robust platform for future expansion and increased stakeholder value in the years ahead.

Countrys irrigation sector displayed robust growth and significant modernization in FY 2024-25, presenting extensive opportunities and notable strengths for the future. Government-led initiatives and dedicated funding, particularly through the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), have vastly increased the coverage of irrigated areas and brought water-efficient technologies to rural landscapes. The sectors strength lies in its expanding irrigation coverage rising from 49.3% to 55% of gross cropped area in recent years coupled with increased irrigation intensity and improved project completion rates Irrigation Benefits Programme and Har Khet Ko Pani. underflagship Innovations such as micro-irrigation, IoT, GIS, and SCADA integration into water management systems have helped optimize water delivery, reduce waste, and enhance resilience in drought-prone regions. These advances not only boost on-farm water use efficiency by 20%, but also enable digital water distribution networks and precision scheduling, benefiting smallholder farmers and improving productivity. The governments investment in modernization and repair of water bodies further strengthens rural water security, ensuring reliable supply even as climate variability grows in importance.

Favourable monsoon trends in 2024 and improved rainfall forecasts for 2025 bolster sectoral performance, enhancing crop yields and stabilizing food prices. The successful integration of climate-resilient practices, demand-driven systems, and digital technologies positions Indias irrigation sector as a vital opportunity for investors, technology providers, and agri-businesses. This foundation offers sustainable growth and resilience for the nations agricultural economy in the coming years.

The mining sector in India showcased rstrong growth and considerable opportunities in FY 2024-25, reinforcing its pivotal role in the economic landscape. Record production was achieved in key minerals including iron ore, manganese, bauxite, aluminium, and copper, driven by strong demand from industries such as steel, infrastructure, automotive, and energy. India stands as the worlds fourth-largest iron ore producer, second-largest aluminium producer, and a top-ten refined copper producer, underscoring its global competitiveness.

Strengths in the sector include a vast mineral resource base with over 95 minerals, increasing adoption of transparent auction-based allocation models, and growing investments in exploration and technological advancements. These reforms have enhanced efficiency, attracted private and foreign investments, and boosted revenue generation for state governments, supporting socioeconomic development in mineral-rich regions.

The sectors contribution to GDP was significant, with mining and quarrying showing steady growth, supported by initiatives emphasizing sustainability, pollution control, and community development. Opportunities lie in critical minerals for energy transition, export growth, and strategic resource security, alongside advancements in automation and digital technologies . e focusedonefficiency and Overall, the mining sectors strategic strengths and forward-looking reforms position it as a cornerstone for Indias industrial growth, job creation, and sustainable development in the years ahead.

5. THREATS

Sadbhav Engineering Limited being infrastructure company, envisages several key threats. Financing and liquidity challenges, including delayed payments and cautious lending, continue to strain project cash flows and delay execution. Regulatory and policy uncertainties, especially regarding environmental clearances and land acquisition, create risks of project delays and legal disputes. Cost inflation in materials like steel and cement further threatens project margins. Execution challenges, including limited skilled manpower and capacity bottlenecks, can lead to time and cost overruns. Additionally, as extreme weather events impact infrastructure durability and operations. Political and social opposition, resistance to land acquisition, may cause disruptions and delays. These multifaceted threats require vigilant risk management and adaptive strategies to safeguard project viability and maintain sustainable growth across Roads & Highways, Irrigation and Mining Sectors.

6. RISKS & ITS MITIGATION:

The managementofcompanyhasidentifiedrisks in two categories i.e. (1) Internal and Business Risk and (2) External Risk.

These are the risks that arise out of processes which are managed internally.

Project execution risks remain significant due to challenges such as land acquisition delays, resource cause cost overruns and timeline slippages. Financial risks include fluctuations in andsupply chaindisruptions, material costs, interest rates, and liquidity pressures impacting cash flows and project funding. Operational risks arise from dependence on skilled manpower, machinery breakdowns, and maintenance of quality standards under tight deadlines. Regulatory compliance and environmental clearancedelaysposeadditionalthreatstotimelyproject completion. In the mining sector, challenges related to resource depletion and exploration uncertainties can affect production continuity. Meanwhile, irrigation projects face risks from climate variability affecting water availability.

Sadbhav Engineering Limited anticipates several external risks that could impact its business and operations. One major risk is project execution delays, particularly in hybrid annuity model (HAM) projects, exposing the company to financial and reputational risk impacts. Furthermore, delays in receipt of funds from stake sales and other fund-raising plans have potential to strain liquidity, potentially impacting ongoing and future project investments. The company operates in a highly competitive and cyclical infrastructure industry, where fluctuating raw material prices especially for steel, cement, and fuel can pressure margins and cost structures. Regulatory and environmental clearances remain a challenge, with uncertainties potentially leading to project slowdowns or revisions in design and timelines.Political and social factors, including local community opposition and land acquisition hurdles, Macroeconomic factors, such as interest rate hikes and inflation, may increase borrowing costs and operating expenses. Furthermore, the sector remains vulnerable to disruptions in the supply chain and labour availability amid economic or geopolitical shocks. Managing these external risks will require proactive stakeholder engagement, diversified financing, robust project management, and ongoing compliance to maintain Sadbhav Engineering Limiteds competitive position and financial health in FY 2024-25.

Sadbhav Engineering Limited adopts a comprehensive risk mitigation approach to safeguard its business and ensure sustainable growth across roads and highways, irrigation, and mining sectors. The company emphasizes robust project management practices cost overruns by closely monitoring timelines, resource deployment, and contractor aimed atminimizingexecution performance. To mitigate financial risks, Sadbhav prioritizes diversified funding sources and maintains banks and financiers to ensure liquidity and manageable debt servicing.

Operational risks are addressed through implementation of SAP S4 Hana across the organisation, continuous workforce training, adoption of advanced construction technologies, and preventive maintenance of machinery, helping maintain quality and reduce downtime. The company actively engages with regulatory bodies to secure timely environmental and land acquisition clearances, reducing compliance-related disruptions.

Sadbhav also undertakes proactive stakeholder engagement, including local communitiesand government agencies, to manage social risks and minimize resistance to projects. For its mining operations, the company incorporates sustainable mining practices and adheres to environmental standards to address ecological risks and ensure long-term resource availability.

Climate-related risks and water availability concerns in irrigation projects are managed through the integration of digital water management tools and climate-resilient infrastructure designs. The company leverages real-time data analytics and risk assessment frameworks to identify potential threats early and implement corrective actions promptly. Sadbhav Engineering Limiteds risk mitigation strategy integrates technological innovation, financial prudence, regulatory compliance, and stakeholder collaboration to build resilience, optimize operations, and maintain competitive advantage in a challenging and dynamic infrastructure environment.

7. SEGMENT WISE PERFORMANCE

As on March 31, 2025 the Company has a reportable business segment of construction, development on Stand Alone basis.

8. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACIES

An internal control for business processes across departments is required to not only ensure efficient operations but to also comply with internal policies, applicable laws and regulations, protection of resources and assets as well as accurate reporting of the financial transactions. Aiding the effectively of this system of internal control is extensive internal the management team and standard policies and guidelines to ensure the reliability of financial and all other records. Therefore, the ERP-SAP system of the company, which is already operative, was established. It connects all the project sites with the corporate office by providing real time information to the top management of the Company. Ideation to centralize the entire data process is being acted upon by Sadbhav Engineering Limited so as to assure transparency to each and every stakeholder of the Company.

9. FINANCIAL OVERVIEW - STANDALONE a) Income Analysis:

The Companys revenues for the current year stood at Rs. 210.53 crores as against Rs. 1013.44 crores in the previous year, thereby registering an Increase of 13.98%. b) Expense Analysis:

Manufacturing and Construction expenses Material consumed for the year ended March 31, 2025 amounted to Rs. 3.82 crores, construction expenses Incurred was Rs. 153.25 crores during 2024-25. c) Depreciation, Interest and Finance Cost:

Depreciation during 2024-25 amounted to Rs. 9.39 crores as against Rs. 26.01 crores recorded in 2023-24. Finance cost decreased from Rs. 170.71 crores in 2023-24 to Rs. 156.60 crores in 2024-25. d) Profit (Loss) Analysis:

Profit (Loss) Before Tax during 2024-25 stood at Rs. (111.92) crores as against Rs. (261.60) crores recorded during 2023-24. Profit (Loss) after tax for 2024-25 stood at Rs. (153.55) crores as compared to Rs. (264.67) crores during 2023-24. e) Net Worth:

The Net worth of the company in the year Rs. 847.70 in the year 2024-2025 Compared to Net worth in the year Rs. 1001.37 in the year 2023-2024.

On consolidated basis, the Total revenue stood at Rs.1132.50 crores during the financial year under review as compared to Rs. 2067.15 crores in the previous year, Loss before tax was Rs.92.37 crores as compare to Loss of Rs. 795.46 crores in the previous year and Loss after tax was Rs.165.70 crores as compare to Loss of Rs. 799.87 crores in the previous financial year. Net worth of the Company stand to Rs (241.18) crores as of 31st March, 2025 as compared to Rs. (125.39) crores as on 31st March,2024.

Employees are one of the most important stakeholders for Sadbhav Engineering Limited. Sadbhav considers its Human Capital as its core strength in achieving the sustainable growth path charted by our strategic apex. Sadbhav is among a very few companies having implemented SAP S4 HANA, world renowned system to manage payroll & HR activities. We have identifying the right talent, training them, performance management, monitoring, appraisals, rewards and recognitions for our employees. Our policy entails all our employees to the benefits like Medical Expense, Provident Fund, Gratuity, and Leave Travel Allowance etc. We frequently organise medical check-up camps and safety training, mock drills across all project sites as per our health and safety policy. A dedicated Human Resource team at Sadbhav Engineering Limited, keep on engaging with employees at sites and address their concerns. We put major thrust on ergonomics for their comfort while they perform their duties and invest in latest technologies and amenities as well as safety gadgets. We continuously upgrade employees skills and knowledge to keep them updated on the best practices from across the world. Our growth strategy and value driven approach and congenital environment has led us build an excellent team.