Sadbhav Infrastructure Projects Ltd Management Discussions

CAVEAT

This Annual Report contains certain forward-looking statements and projections that inherently involve substantial risks, uncertainties, and assumptions. Actual outcomes and results may differ materially from those anticipated or implied, owing to a variety of critical factors. These factors include, but are not limited to, the following:

Regulatory Landscapes: Variations in the regulatory frameworks governing the Indian infrastructure sector, adjustments to domestic legislation, and the Companys institutional capacity to respond effectively to such changes.

Strategic Imperatives: The successful execution of corporate strategies, growth objectives, expansion initiatives, and financing structures.

Macroeconomic Variables: Prevailing economic and political conditions within India, shifts in monetary and fiscal policies, inflationary or deflationary pressures, and unanticipated volatility in interest rates, foreign exchange rates, equity prices, or capital markets globally and domestically.

Operational Environment: Technological advancements, exposure to market risks, and intensifying competitive dynamics within the infrastructure sector.

Asset-Specific Provisions: The potential expiration or termination of concession agreements relating to specific project Special Purpose Vehicles (SPVs), general developments within the transport sector, traffic volume fluctuations, and evolving governmental policies impacting the transportation industry in India.

1. BUSINESS OVERVIEW

Established in 2007, Sadbhav Infrastructure Project Limited (SIPL) is one of Indias premier infrastructure developers, specializing in the construction and management of roadways and highways.

• The company possesses comprehensive in-house Operations and Maintenance (O&M) capabilities, which it leverages across two primary business models: Build-Operate-Transfer (BOT) and Hybrid Annuity Model (HAM)

Through years of project execution, SIPL has cultivated extensive internal expertise in asset management and long-term operations. The companys client portfolio consists chiefly of statutory bodies and government authorities, including the National Highways Authority of India (NHAI), Ahmedabad Urban Development Authority (AUDA), and various state Public Works Departments (PWDs).

While maintaining a dominant footprint in Maharashtra, Rajasthan, Haryana, Karnataka, Uttar Pradesh, Telangana, and Gujarat, SIPL is actively executing a strategic expansion to capture high-value infrastructure opportunities across new geographies.

2. ROAD AND INFRASTRUCTURAL MECHANISM IN THE INDIAN ECONOMY

Infrastructure and network of roads is the most basic requirement for the most advanced operational economy of any country. For effective management of supply chain, balance of timely demand and supply operational needs in the economy, faster public transportation and to reduce the commercial distance between rural areas and urban areas, better road network is essential and crucial.

Indias road network has multiplied since 2014, improving connectivity across regions and economic corridors. At 63.73 lakh km, India has the second-largest road network in the world. Length of National highways increased by about 61%, from 91,287 km in FY14 to 1,46,572 km in March 2026. The length of four-lane and above national highways increased from 18,371 km in 2014 to 45,516 km. A total of 3,644 km of access-controlled high-speed corridors/expressways have been operationalized across the country. Initiatives focused on high-speed corridor development, economic node connectivity, and urban decongestion, supported by policies for highways, roads and bypasses.

3. OPPORTUNITIES & STRENGTHS

Over the past decade, India accelerated infrastructure creation across transport, housing, water, energy, logistics, and digital networks. Large-scale investments improved mobility, strengthened service delivery, widened digital access, and supported economic activity across regions. Integrated planning initiatives like PRAGATI, PM GatiShakti, the National Logistics Policy, Sagarmala, PM-WANI, Jal Jeevan Mission and UDAN have shaped the vision of a connected and competitive India. These initiatives have improved competitiveness and supported Indias transition towards a modern and integrated economy.

Infrastructure today shapes everyday life and daily experiences across the country. Roads, railways, airports, digital networks, housing, water supply, and clean energy systems have expanded access to essential services. These systems also influenced how people travel, connect digitally, and participate in economic activity. After 2014, infrastructure development has increasingly focused on scale, integration, and long-term capacity creation.

A major shift during this period was the integration of infrastructure planning, as opposed to the earlier practice of fragmented project execution. Public capital expenditure increased from about ^2 lakh crore in FY2014-15 to ^12.2 lakh crore in FY2026- 27. This reflects sustained focus on long- term infrastructure creation across sectors. Major programmes such as Sagarmala, Bharatmala, PM GatiShakti, PMAY, Jal Jeevan Mission, PM Ujjwala Yojana, and UDAN expanded infrastructure access. These initiatives linked infrastructure growth with household welfare, economic opportunity, and regional development.

Transportation networks serve as the backbone of economic integration. From highways and railways to airports, waterways, and urban transit systems, investments across multiple modes of transport have strengthened connectivity. Together, these networks are creating a more seamless and integrated mobility ecosystem.

4. RISKS & CHALLENGES

Large infrastructure projects require massive investments, creating pressure on public finances and increasing dependence on private capital. Also imperative to note that Delays due to disputes, rehabilitation concerns, and lengthy approval processes increase project costs and timelines. Further, Bureaucratic hurdles, litigation, and coordination problems among multiple agencies often slow project execution. At this juncture, it shall also be reported that extreme weather events, floods, cyclones, and heatwaves pose increasing risks to infrastructure resilience which also affects the timely completion and delivery of project.

Road and highway projects historically accounted for a major share of infrastructure stress in India. Earlier BOT-based concession models often relied on aggressive traffic projections and highly leveraged financing structures that became difficult to sustain.

Although the transition toward Hybrid Annuity Models (HAM) and EPC-based structures has reduced certain categories of project risk, financial stress remains a continuing concern in several operational projects. Key stress triggers continue to include Traffic and revenue underperformance, Construction disputes, Delayed annuity payments, Land acquisition issues, Refinancing pressure, Concession-related dispute etc.

5. MINIMIZING RISKS

Although the challenges and risks in project completion have increased summarily over past few years due to the global supply chain disturbance, continuous changing geo political situation, many war remaining continued over a long period of time affecting the valuation of Indian rupee as currency in global economy, company is focused in policy implementation mode of Indian government. Indian infrastructure is growing on a fast pace and in upcoming years there can be the most high-speed development in the industry which can be sensed from the recent budget of the nation. Therefore, even in the global tensed situation, we are focusing on the infrastructural demands within the country.

Also, our full-fledged team of technical experts at the workshop is responsible for the repairs and maintenance of equipment, ensuring work continues without stoppages or significant labor disruptions. This is supported by our extensive employee welfare scheme, which looks after their health and safety. We have taken contractors all-risk insurance policies for projects and workmens compensation policies to protect against losses caused to workmen through accidents. Most of the critical work during the operation period is done by us, with only a minimal portion subcontracted. We always insist on performance guarantees and quality assurance from subcontractors.

6. SEGMENT WISE PERFORMANCE

During the year 2025-26, the Company has only one reportable business segment, i.e. infrastructure development includes "Built Operate and Transfer (BOT) / Hybrid Annuity Projects and its related activities. A segment performance on standalone and consolidated basis is given in the financial statements of the Company.

7. INTERNAL CONTROLS SYSTEMS AND ADEQUACY

The Company maintains a robust internal control framework supported by a comprehensive documentation system for all financial and operational policies and procedures. These controls are designed to ensure accurate financial reporting, optimize operational monitoring, safeguard assets against unauthorized use or loss, and guarantee regulatory compliance. To maximize automation, the Company has digitized all key process controls within the SAP S/4HANA ecosystem. The internal audit function regularly evaluates these IT-enabled controls during its routine process reviews.

The Audit Committee of the Board of Directors actively monitors the adequacy and effectiveness of the internal control systems, recommending enhancements where necessary. This framework is further strengthened by an integrated Management Information System (MIS). The Audit Committee, Statutory Auditors, and respective Business Heads receive periodic updates on internal audit findings and subsequent corrective actions.

Internal audit plays a pivotal role in providing independent assurance to the Board. Significant audit observations and managements remediation plans are regularly presented to the Audit Committee. To preserve objectivity and independence, the Head of Internal Audit reports directly to the Chairman of the Audit Committee.

8. FINANCIAL OVERVIEW

We generate revenues primarily from toll collection, user fee and annuity receipts. The company also provides operation, maintenance, advisory and project management services for our projects. Review of financial performance for the financial year ended 31st March, 2026 are as follows:

*As there is Negative Net worth and Loss in Current year and previous year on Consolidated basis, hence ratio is not calculated

9. HUMAN RESOURCE DEVELOPMENT

The company takes immense pride in the commitment, competence, and dedication of its employees across all business areas. It has a structured induction process and management development programs to upgrade the skills of managers. Objective appraisal systems based on key result areas are in place for senior management staff. The company strongly believes that people are its prime assets and continuously implements new initiatives to train and motivate them. It believes in the potential of its people to drive business transformation and success, harnessing this potential by fostering an open and inclusive work culture. This culture enables breakthrough performance and comprehensive development of employees through the three pillars of Leading Self, Leading Teams, and Leading Business. As of March 31, 2026, the company had 34 employees, excluding trainees and contractors employees.

10. CAUTIONARY STATEMENT

Certain statements made in this report relating to the Companys objectives, projections, outlook, expectations, estimates, among others may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections etc., whether express or implied. Several factors could make a significant difference to the Companys operations. These include climatic conditions, economic conditions affecting demand and supply, government regulations and taxation, natural calamity, currency rate changes, among others over which the Company does not have any direct control.