Sadbhav Infrastructure Projects Ltd Management Discussions

CAVEAT

This Annual Report contains certain forward-looking statements, and may contain certain projections. Forward-looking statements and projections are subject to risks, uncertainties and assumptions. Actual results may differ materially from those suggested by forward-looking statements or projections due to risks or uncertainties associated without expectations with respect to, but not limited to, regulatory changes pertaining to the infrastructure sector in India and the Companys ability to respond to them, ability to successfully implement its strategy and objectives, growth and expansion plans, technological changes, exposure to market risks, general economic and political conditions in India that have an impact on the business activities or investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws and competition in the infrastructure sector. Certain important factors that could cause the Companys actual results to differ materially from expectations include, but are not limited to, The business and investment strategy of the Company, Expiry or termination of the project Special Purpose Vehicles (SPVs) respective concession agreements, Future earnings, cash flow and liquidity, Potential growth opportunities, Financing plans, the competitive position and the effects of competition on the Companys investments, The general transportation industry environment and traffic growth and future government policy relating to the transportation industry in India. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future, there can be no assurance that the expectations reflected in the forward-looking statements and projections will prove to be correct. Due to uncertainties involved, readers are cautioned not to place undue reliance on such forward-looking statements and projections and not to regard such statements to be a guarantee or assurance of the Companys future performance or returns to investors.

1. BUSINESS OVERVIEW

Sadbhav Infrastructure Project Limited ("SIPL") was incorporated in 2007. The Company is among Indias leading infrastructure developers specializing in roadways and highways. It enjoys robust in-house of Operation and Maintenance (O&M)— across all its business verticals: 1. Build Operate Transfer (BOT) 2. Hybrid Annuity Model (HAM) Over the years, the Company has developed rich in-house expertise in O&M verticals. The Companys clients primarily comprise government agencies such as NHAI, AUDA, PWD, among others. SIPL is strategically growing its presence beyond its stronghold states of Maharashtra, Rajasthan, Haryana, Karnataka, Uttar Pradesh, Telangana and Gujarat.

2. ROAD INFRASTRUCTURAL PERIPHERI IN THE INDIAN ECONOMY

Road Infrastructure plays a pivotal role as a growth engine for Indias economy, especially for the rapidly expanding urban and industrial peripheries. During the fiscal year, macroeconomic stability was evident, with Indias real GDP growing robustly— driven by infrastructure investments that address the evolving needs of connectivity, economic decentralization, and logistics efficiency.

The year saw continued policy focus on infrastructure as a catalyst for national growth. Indias GDP growth surpassed 8% in FY 2023-24, bolstered by resilient private consumption and capital formation, notably in highways and industrial corridors. Road infrastructure development, especially in peripheral urban zones has directly stimulated regional economic activity by reducing logistics costs, fostering entrepreneurship, and supporting MSME clusters.

Central government initiatives underpinned sectoral expansion in FY 2024-25. The Bharatmala Pariyojana and Pradhan Mantri Gram Sadak Yojana (PMGSY) remained core to expanding national and rural road networks, respectively, with a cumulative 18,926 km delivered under Bharatmala by November 2024. The Union Budget allocated ^2,87,333 crore, with ^1,16,292 crore specifically for roads and bridges, marking a 5% increase over the previous fiscal. Strategic approvals included eight new national high-speed road corridors, ring roads, bypasses, and multimodal logistics parks to decongest cities and boost peri-urban infrastructure.

Expanded road infrastructure has translated into substantial economic and social returns. National Highways now span 146,195 km, a 60% rise over the past decade, making Indias network the worlds second largest. Project execution in peripheral areas is creating millions of jobs, integrating rural and urban value chains, and enhancing market accessibility for agriculture and industry. Multimodal parks and new corridors are poised to handle 700 million metric tonnes of cargo, further raising Indias competitiveness and driving significant increases in both national GDP and states gross state products (GSP), especially in emerging peripheral urban regions.

3. OPPORTUNITIES & STRENGTHS

The Indian road and infrastructure sector in FY 2024-25 stands on the threshold of remarkable growth, validated by World Bank and IMF observations. Indias road network, now over 146,000 km of National Highways, has become the second largest globally, a testament to its expansive reach and modernization drive.

World Bank reports highlight a $2.4 trillion investment need for resilient and green infrastructure by 2050, unlocking significant potential for private equity, foreign direct investment, and innovative PPP models. Policy momentum through Bharatmala and Pradhan Mantri Gram Sadak Yojana, together with targeted urban and peripheral urban development, an approach endorsed by both IMF and World Bank offer lucrative opportunities in project construction, logistics, technology, and allied service sectors. The sector is poised to directly benefit from frameworks like PM Gati Shakti, promoting unified planning and faster clearances for large-scale projects.

Consistent capital outlay—rising by 570% over the last decade—has enabled network expansion, improved last-mile connectivity, and fostered rural-urban market integration, aligning with IMF recommendations for infrastructure-led growth. The World Bank applauds Indias success in leveraging innovative models (Hybrid Annuity Model, asset monetization), regulatory reforms, and technology (e.g., green roads, digital project management) to drive both efficiency and resilience. The sectors absorptive capacity, robust policy pipeline, and resilience against shocks (pandemics, climate) reinforce its reputation as a key enabler of

sustainable economic advancement.

This strategic direction, guided by global best practices, positions Indias road infrastructure sector as a cornerstone for prosperity, employment, and inclusive growth through FY 2024-25 and beyond.

4. RISKS & CHALLENGES

Indias road infrastructure has seen significant advancements over the past decade, driven by dedicated government efforts and strategic initiatives. However, the sector still faces numerous risks and challenges that need to be addressed to ensure sustainable and efficient development. One of the primary challenges in road infrastructure development is land acquisition. Acquiring land for road projects often leads to delays due to legal disputes and resistance from landowners. Additionally, environmental concerns such as deforestation, loss of biodiversity, and pollution need to be managed carefully to ensure sustainable development. Despite increased government spending, funding remains a significant challenge. The high cost of road construction and maintenance requires substantial financial resources. Public-Private Partnerships (PPPs) have been promoted to bridge the funding gap, but these come with their own set of risks, including financial viability and return on investment. Construction delays are common due to various factors such as bureaucratic red tape, lack of coordination among different agencies, and unforeseen technical challenges. These delays not only increase project costs but also affect the quality of the infrastructure. Ensuring high-quality construction is crucial to prevent premature road failures like potholes and disintegration. Road safety is a major concern in India, with a high number of road accidents resulting in fatalities and injuries. Poor road design, lack of proper signage, and inadequate enforcement of traffic laws contribute to these accidents. Improving road safety requires a multi-faceted approach, including better road design, stricter enforcement of traffic regulations, and public awareness campaigns. The road infrastructure sector faces challenges in adopting new technologies and ensuring the availability of skilled human resources. Advanced construction techniques and materials are essential for building resilient and long-lasting roads, but their adoption is often slow due to lack of expertise and high costs. Additionally, there is a shortage of trained professionals in the sector, which hampers efficient project execution. Maintaining the existing road network is as important as building new roads. Regular maintenance is often neglected due to budget constraints and lack of proper planning, leading to deteriorating road conditions. Sustainable practices, such as using eco-friendly materials and promoting green highways, are essential to ensure the long-term viability of road infrastructure.

Addressing these risks and challenges requires a comprehensive and coordinated approach involving government agencies, private sector participants, and the public. By focusing on sustainable development, improving funding mechanisms, adopting advanced technologies, and enhancing road safety, India can build a robust and efficient road infrastructure that supports its economic growth and development.

5. MINIMIZING RISKS

A risk management exercise not only identifies risks but also reduces them to an acceptable level. Your company has risk management policies to manage and overcome these risks, ensuring the smooth functioning of business operations. These policies are reviewed periodically by the companys directors, allowing for quick decision-making. SIPL, a subsidiary of Sadbhav Engineering Ltd., effectively maneuvers to supply materials and minimize cost escalation risks. Before entering any joint venture agreement, we thoroughly analyze the prospective partners past performances and credentials. We meticulously plan to execute all our projects ahead of schedule and have a proven track record of completing work within the stipulated time.

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.

As a company, our ability to foresee and manage business risks plays a crucial role in achieving positive results, even during economic downturns. We also regularly conduct third-party audits of the toll management and toll collection systems to identify gaps and improve operational performance.

6. SEGMENT WISE PERFORMANCE

During the year 2024-25, 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 possesses a suitable mechanism for internal controls. It follows a well-designed documentation system for policies and procedures covering all financial and operating functions. These controls have been developed and designed in a manner to properly maintain accounting records for ensuring reliability of financial reporting, monitoring of operations, protecting assets from unauthorised use or losses and compliance with regulations. The Company has digitalised all key process controls through the SAP S/4 HANA - systems to maximise automated control transactions. The auditor verifies IT-enabled controls as part of the review of functions and processes as part of the Internal Audit function. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism. The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit Auditor reports 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 31^st March, 2025 are as follows:

*As there is Negative Networth 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, 2025, the company had 53 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.