Shashijit Infraprojects Ltd Management Discussions

INDIAN ECONOMY

The fiscal year 2023-24 witnessed the Indian economy navigating through various external and internal challenges with resilience. Despite ongoing global uncertainties and inflationary pressures, the Indian economy maintained a strong growth trajectory, supported by sound macroeconomic policies and robust domestic demand.

Indias growth at 8.2% in FY 2023-24 is a reflection of the efforts for Viksit Bharat by 2047 and is highest among the leading advanced, emerging economies. The growth momentum is expected to continue and strengthen in the coming times. Despite deepening geopolitical distress and global macroeconomic headwinds, India remains resilient.

Inflation remained a critical concern throughout the year. The RBIs monetary tightening measures, including repo rate adjustments, were aimed at containing inflation within the target range. Despite these efforts, inflationary pressures from global supply chain disruptions and volatile commodity prices persisted. The RBI maintained a cautious approach by keeping the repo rate at levels necessary to control inflation while supporting economic growth. The repo rate stood at 6.5% by the end of FY 2023-24, reflecting the central banks balanced stance.

Indias economy is becoming more and more robust as growth is strengthening quarter after quarter; the Q4 growth at 7.8% indicates a strong growth trajectory to continue in the coming quarters too. Manufacturing, construction and electricity sectors have become the major growth drivers in recent quarters.

The Government continued its emphasis on infrastructure development, with substantial investments in transportation, energy, and urban development projects. These efforts not only boosted economic growth but also created employment opportunities across the country.

The Indian economys performance in FY 2023-24 was commendable, but challenges remain. The prolonged geopolitical conflict in Europe and global supply chain disruptions continue to pose risks. Additionally, inflationary pressures and volatility in commodity prices require vigilant monitoring and policy adjustments.

Looking ahead, the Indian economy is well-positioned to sustain its growth momentum. Structural reforms, continued infrastructure investments, and supportive monetary policies are expected to drive economic growth. The focus on digitalization, renewable energy, and sustainable development will further strengthen Indias economic foundation in the coming years.

INFRASTRUCTURE AND CONSTRUCTION SECTOR OVERVIEW

The infrastructure and construction sector continues to be a key pillar of Indias economic growth and development. As we move into FY 2024-25, the sector is expected to maintain its vital role in advancing national infrastructure and supporting overall economic progress. Government spending on infrastructure projects remains a cornerstone of this growth. Despite ongoing challenges such as inflationary pressures and fluctuating material costs, the

Governments commitment to investing in infrastructure is unwavering. Significant expenditures on both commercial projects and new data centers are projected to drive the sectors expansion over the next three to four years.

In the residential construction segment, demand for housing is anticipated to sustain its upward trajectory. The sector has demonstrated resilience in the face of rising construction costs and monetary policy adjustments by the Reserve Bank of India. The recovery in residential sales volumes is expected to continue, further revitalizing the real estate market and contributing to overall sector growth.

The Government has outlined an ambitious pipeline of infrastructure projects for FY 2024-25, encompassing a range of sectors including transportation, energy, and urban development. To support these initiatives, the Government has secured continued financial backing, including agreements with international financial institutions such as the Asia Development Bank. This ongoing investment is critical for fostering sector growth and meeting infrastructure development goals.

Our Company remains focused on identifying and pursuing new opportunities in the construction sector, particularly within engineering, procurement, and construction (EPC) projects. We are currently reviewing several promising proposals and aim to integrate high-value projects into our portfolio during FY 2024-25. Our strategy includes expanding into new geographies and sectors, thereby enhancing our market presence and leveraging emerging opportunities.

Overall, the infrastructure and construction sector is set to experience continued growth in FY 2024-25, supported by substantial government investments, sustained demand in the residential market, and a strong pipeline of infrastructure projects. Our Companys proactive approach in seeking new opportunities aligns with the sectors positive outlook, positioning us well to contribute to and benefit from ongoing sector advancements.

GOVERNMENT INFRASTRUCTURE (HOSPITALITY SECTOR)

The hospitality sector in India, which includes a diverse array of services such as hotels, resorts, restaurants, event venues, and recreational parks, continues to play a significant role in the countrys economy. With a steady increase in both domestic and international tourism, the sector is experiencing notable growth. The resurgence of travel and tourism post-COVID has positively impacted the hospitality industry, reflecting a strong rebound in market activity.

Recreational parks, offering a range of attractions like amusement rides, water rides, adventure sports, and entertainment options, have also seen a revival. This segment, characterized by its appeal to families and friends seeking leisure and enjoyment, is expected to create substantial market opportunities if current trends persist.

The Company remains committed to exploring new opportunities within this vibrant segment. We are currently evaluating several promising proposals and anticipate adding value-accretive projects to our portfolio in FY 2024-25. Our focus includes identifying and leveraging growth opportunities within the hospitality sector to enhance our market position.

Overall, the hospitality sector presents substantial growth potential, driven by increasing travel and tourism, as well as the evolving demand for recreational activities. The Company is poised to capitalize on these opportunities, despite the operational hurdles faced, and remains dedicated to expanding its footprint in the hospitality industry.

OPERATIONAL OVERVIEW

Shashijit Infraprojects Ltd is a renowned name in the industrial and infrastructural contracting sector, headquartered in Vapi, Gujarat. The company offers a comprehensive suite of services, including civil project management, construction, design, procurement, and development for industrial, commercial, residential, public utility buildings, and infrastructure projects.

In the industrial and civil construction sector, which is our core competency, Shashijit Infraprojects Ltd excels in general contracting, pre-construction management, and turnkey development. Over the years, we have diversified industrial projects. This diversification reflects our commitment to leveraging our expertise across a broad range of construction and development services.

Our company is equipped with a team of skilled professionals and robust logistical support, enabling us to execute various types of real estate projects with efficiency and precision. With extensive experience in construction management and a proven track record of delivering successful projects, Shashijit Infraprojects Ltd is well-positioned to continue its growth and expand its reach in the industry. We remain dedicated to enhancing our capabilities and pursuing new opportunities to drive our success.

STRENGTHS AND OPPORTUNITIES

1) Shashijit Infraprojects Ltd boasts a robust execution track record, showcasing our ability to deliver projects competitively. Our consistent performance underscores our capacity for high-quality project delivery.

2) Our management team, comprising skilled engineers, project managers, and technical experts, brings a wealth of experience and a deep understanding of industry complexities. This expertise is pivotal in addressing challenges and achieving project goals.

3) The successful completion of numerous projects has solidified our reputation and fostered strong client trust. Our extensive experience demonstrates our proficiency in handling diverse challenges and delivering successful outcomes.

4) As an established player in the industry, Shashijit Infraprojects Ltd is well-positioned to capitalize on emerging opportunities, particularly within the industrial sector. Our long-standing presence and sector expertise enhance our competitive edge.

5) The rise in government budget allocations for infrastructure development presents significant growth opportunities. This investment is likely to drive demand for our construction services across various sectors.

6) The ongoing expansion of Indias tourism and hospitality sector creates opportunities for developing hotels, resorts, convention centers, and other facilities catering to a growing influx of domestic and international visitors.

7) We are focused on identifying and adding strategic engineering, procurement, and construction (EPC) projects to our portfolio. This approach aims to enhance our project offerings and drive long-term growth.

SEGMENT-WISE PERFORMANCEL:

Segment	FY 24 (In Lakhs)	Contribution (%)	FY 23 (In Lakhs)	Contribution (%)	YoY growth (%)
Construction and Development of Immovable Properties	2727.99	99.74%	3506.58	99.22%	-22.20%
Operate and maintain Government Infrastructure	7.17	0.26%	27.43	0.78%	-73.86%
Total	2735.17	100.00%	3534.01	100.00%	-22.60%

CONSTRUCTION AND DEVELOPMENT OF IMMOVABLE PROPERTIES:

The Companys business in Civil Project Management, as well as the construction of residential and industrial properties, infrastructure facilities, driveways, public utilities, buildings, factories, and other infrastructure development projects, experienced a decline of 22.20%. Despite this, the segment contributed 99.74% to the total revenue compared to the last financial year.

The Company serves a wide range of clients across various industries, including Heavy & Light Engineering, Textile, Chemical, Healthcare & Pharma, Paper & Packaging, Hospitality, and Educational Institutions & Residential Premises. Several initiatives have been taken within this segment, which remains a key focus area for growth.

OPERATE AND MAINTAIN GOVERNMENT INFRASTRUCTURE:

The Companys has started running the business of operation and maintenance of lakes taken on lease from Vapi Nagarpalika where Company has started various recreational activities for the general public for the entertainment during the year under review but since the execution of the lease agreement, many of the basic facilities at Lakes were not being provided by them in the capacity of lessor, which was agreed upon at the time of execution of the lease agreements and which has impacted the revenue growth.

In the absence of basic facilities, as stipulated in our lease agreement with them, has begun to significantly impact our ability to operate effectively in that segment and provide a satisfactory experience to our customers. The lessor is responsible for providing certain basic facilities that are integral to our recreational activities. Unfortunately, despite multiple attempts to address the issue, the lessor has not fulfilled their obligation to provide these facilities. The absence of these facilities is directly affecting our operational efficiency, customer satisfaction, and revenue generation and due to that this segment has contributed only 0.78% of the total revenue during the financial year under review.

During FY 2023-24, the Company encountered significant operational challenges related to an issue with Vapi Nagarpalika. Despite our best efforts to address the situation, Vapi Nagar Palika has compelled us to suspend all business operations within the lake property premises. This issue has impacted our operations. Despite these challenges, we are actively exploring new business opportunities and potential partnerships in this segment to enhance our offerings and mitigate the impact on our operations.

OUTLOOK:

For industrial construction companies in India, FY 2024-25 presents a favorable and dynamic outlook, driven by an evolving economic landscape and increased focus on industrial development. The Indian governments emphasis on infrastructure and manufacturing growth, exemplified by initiatives like the Production Linked Incentive (PLI) scheme and the National Industrial Corridor Development Programme, is expected to generate substantial demand for industrial construction services. These programs are designed to enhance the countrys manufacturing capabilities and infrastructure, offering significant opportunities for industrial construction firms engaged in building factories, warehouses, and industrial facilities.

Additionally, the growing trend towards industrialization, particularly in emerging sectors such as pharmaceuticals, electronics, and automotive, is likely to further drive demand for specialized construction services. Investments in upgrading and expanding industrial infrastructure, alongside a push towards creating industrial hubs and smart logistics solutions, will also contribute to a positive growth trajectory for these companies. However, challenges such as navigating regulatory requirements, managing supply chain complexities, and addressing the need for skilled labor may impact project timelines and costs. Overall, the industrial construction sector is set for growth, with a supportive policy environment and increasing industrial investments paving the way for a prosperous fiscal year ahead.

THREATS/RISKS AND CONCERNS

The Company operates in a dynamic environment where various factors both within and beyond our control pose potential risks. To navigate these challenges, we have established a comprehensive Risk Management Framework that aligns with leading industry standards and practices. This framework is designed to identify, assess, manage, and report risks in a manner that meets our business needs while remaining straightforward and effective. Below are the key risks identified and the corresponding mitigation strategies:

1) Regulatory Compliance Risk:

Risk: The construction industry is subject to numerous regulations and compliance requirements. Failure to comply with environmental, labor, and safety regulations can result in fines, legal actions, and project delays. Mitigation: The Company maintains a dedicated compliance team to ensure adherence to all regulatory requirements. Regular audits and compliance checks are conducted to prevent any lapses.

2) Technology Risk:

Risk: As the construction industry increasingly adopts new technologies, there is a risk of falling behind competitors who implement advanced digital tools, automation, and other innovations. Mitigation: The Company is committed to staying at the forefront of technological advancements by investing in state-of-the-art construction technologies and training its workforce to effectively use these tools.

3) Reputation Risk:

Risk: Negative publicity, whether due to project delays, safety incidents, or client dissatisfaction, can harm the Companys reputation, leading to loss of business and difficulty in securing new contracts.

Mitigation: The Company prioritizes client satisfaction, quality, and safety in all its projects. Regular communication with stakeholders and prompt resolution of issues are key strategies to safeguard the Companys reputation.

4) Margin erosion due to higher costs:

Risk: Volatility in input prices can lead to increased costs, potentially eroding profit margins.

Mitigation Plan: The Company actively monitors market prices and competitor actions to implement timely pricing adjustments, minimizing the impact on margins.

5) Execution Risk

Risk: Construction projects face various execution risks, including regulatory delays, labor shortages, and supply chain disruptions. Such challenges can lead to cost overruns and project delays, adversely affecting operations.

Mitigation Plan: The Company employs a robust standard operating procedure from project planning to delivery, incorporating extensive due diligence and internal checks to ensure smooth execution.

6) Skilled/Unskilled Labour Shortage:

Risk: As a labor-intensive business, any shortage of skilled or unskilled labor can significantly slow down construction activities.

Mitigation Plan: To mitigate this risk, the Company is investing in additional machinery to reduce reliance on manual labor, ensuring continuous progress even during labor shortages.

7) Project delay risk

Risk: Delays in project completion can result in increased costs, potential penalties, and damage to the

Companys reputation, ultimately impacting the order book.

Mitigation Plan: The Company leverages strong project management processes, systems, and human capital to enhance project delivery capabilities. Careful bid preparation and resource management are also prioritized to prevent overextension.

8) Environment, Health, and Safety

Risk: EHS incidents can disrupt business operations, harm employee morale, and negatively impact the Companys reputation.

Mitigation Plan: The Company has implemented a comprehensive EHS compliance framework that includes preventive measures for fire safety, electrical safety, and safe working practices at all sites.

9) Liquidity Risk

Risk: The ongoing liquidity crunch in the infrastructure sector poses a risk, particularly as many clients may face financial difficulties.

Mitigation Plan: The Company conducts rigorous screening of customer profiles, including due diligence on their financial stability, both before bidding and during contract execution, to mitigate liquidity risks.

10) Bank Loan Risk:

Risk: The Company is exposed to the risk associated with bank loans, including the potential for rising interest rates, tighter credit conditions, timely repayment and the impact of debt on financial stability.

Mitigation: The Company actively manages its debt portfolio, including monitoring interest rates and negotiating favorable terms with lenders. Financial planning and maintaining adequate cash flow reserves are also key strategies to mitigate this risk.

Our projects are exposed to various implementation and other risks and uncertainties. We may be further subject to regulatory risks, financing risks and the risks that these projects may ultimately prove to be unprofitable.

INTERNAL CONTROL SYSTEMS & ADEQUACY

The Company has established robust Internal Control Systems that are commensurate with the nature, size, and complexities of its business operations, and these systems are fully integrated with the Companys policies. The primary objective of these internal controls is to manage business risks effectively, enhance shareholder value, and safeguard the Companys assets. These systems play a crucial role in identifying, assessing, and mitigating risks that could potentially impact the Companys performance and the achievement of its business objectives. The risks are continuously monitored and reviewed by respective business heads and functional heads across the organization.

Significant processes within the Company have been identified based on a thorough risk evaluation of the business operations, and the corresponding internal financial controls have been embedded within these processes. All such processes and controls have been meticulously documented. To ensure objectivity and rigor, professional internal audit firm is engaged to review the Companys systems and processes, providing an independent and professional opinion on the effectiveness of the internal control systems. The Audit Committee of the Board periodically reviews the internal audit reports, evaluates the adequacy of the internal controls, and assesses the risk management framework.

These internal control systems, tailored to the Companys activities, are further supplemented by ongoing management reviews to ensure that all aspects of the Companys operations are adequately monitored and controlled. Additionally, the Statutory Auditors of the Company conducted an audit of the Internal Financial Controls over Financial Reporting as of March 31, 2024, and their report forms an integral part of the Independent Auditors Report.

FINANCIAL PERFORMANCE

Net Revenue from Operations: The Company recorded standalone net revenue of Rs. 2735.17 Lakhs for the financial year 2023-24, reflecting a 22.60% decrease compared to Rs. 3534.01 Lakhs in the previous financial year.

Net Profit (Before Discontinued Operation): The Company achieved a net profit of Rs. 32.78 Lakhs for the financial year 2023-24, a decrease from the net profit of Rs. 45.07 Lakhs in the previous financial year.

Net Loss (After Discontinued Operation): The Company incurred a net loss of Rs. 61.41 Lakhs for the financial year 2023-24, contrasting with the net profit of Rs. 45.07 Lakhs reported in the previous financial year.

Total Comprehensive Income: Total Comprehensive income is Rs. -60.61 Lakhs for the financial year ended 31st March, 2024 as against Rs. 47.20 Lakhs in the previous financial year.

Earnings per Share (EPS): Earnings per Share (EPS) of the Company is Rs. -0.117 comparing to Earning per Share (EPS) of the Company of Rs. 0.091 of previous financial year.

Overall, despite the challenging environment, the Company has demonstrated resilience in its business performance within the construction segment. While the financial metrics have been impacted by the difficult conditions, the Company remains confident in its long-term potential. With a strong foundation in construction, high-quality project execution, an extensive network, and deep industry relationships, the Company is well-positioned to achieve sustainable and profitable growth in the coming years.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES

The Company recognizes that its ability to sustain and accelerate growth is significantly dependent on its capability to develop, motivate, and retain talent. The Company firmly believes that highly motivated and empowered employees are its greatest assets, providing a critical competitive edge in the marketplace. To this end, management is committed to the continuous enhancement of skills and competencies at all levels through comprehensive training programs. Furthermore, the Company remains dedicated to ensuring safe working conditions and fostering social awareness among its employees. As of March 31, 2024, the employee strength of SIPL stands at over 42 employees.

The Companys workforce is equipped with the requisite qualifications and technical expertise necessary to execute projects across the construction services domain effectively. The HR department continues to prioritize maintaining an excellent work culture, focusing on employee development, and offering competitive compensation packages to ensure a motivated and empowered workforce.

The Company continues to place significant emphasis on developing and facilitating optimal human performance. Throughout the period under review, the Company has maintained excellent relations with employees at all levels of the organization. Efforts have consistently been made to ensure high employee satisfaction, including implementing adequate measures to enhance employees skill sets. The Companys ongoing goal is to create a workplace where every individual can reach their full potential and contribute meaningfully to organizational growth. Additionally, the Company has cultivated strong relationships within the industry, providing valuable leads for construction projects.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND RETURN ON NETWORTH

Pursuant to the amendments under Schedule V to the Listing Regulations, in accordance with Regulation 34(3) of the Listing Regulations, the Company is required to disclose details of significant changes defined as a change of 25% or more compared to the immediately preceding financial year in Key Financial Ratios, as well as any changes in Return on Net Worth, along with explanations for such changes. The relevant details for the financial year under review are provided below:

Ratio	Numerator	Denominator	March 31, 2024	March 31, 2023	% Change	Reason for Variance
Current ratio	Current assets	Current liabilities	1.22	1.19	2.58%	N.A.
Debt - Equity ratio	Total debt	Shareholders equity	1.01	1.02	-0.87%	N.A
Debt service coverage Ratio	Earnings available for debt service = Net Profit after taxes + depreciation and amortisation expenses + finance costs + other non-cash operating expenses	Debt service = Interest and lease payments + principal repayments	0.2	0.18	10.63%	N.A.
Return on equity ratio	Net profit after Tax	Average shareholders equity	-0.05	0.04	-233.46%	Due to discontinuing of operation of one segment, Company incurs heavy losses
Inventory turnover ratio	Cost of goods sold	Average inventory	0.93	1.50	-38.17%	Due to improper inventory management inventory turnover ratio decreased.
Trade receivable turnover ratio	Net sales	Average trade receivables	3.37	4.47	-24.56%	N.A.
Trade payable turnover ratio	Net purchases	Average trade payables	1.14	1.7	-33.20%	Due to fund problem and heavy loan repayment, the company is unable to pay trade payables on time
Net capital turnover ratio	Net sales	Average Working capital	6.03	6.27	-3.82%	N.A.
Net profit ratio	Net profit after tax	Net sales	2.25%	1.28%	276.04%	Due to discontinuing of operation of one segment, Company incurs heavy losses.
Return on capital employed	Earnings before interest and tax	Capital employed	-0.15	-0.02	658.89%	Due to discontinuing of operation of one segment, Company incurs heavy losses.
Return on investment	Income generated from invested funds	Average invested funds (excluding investment in subsidiaries and other investments)	0.00	0.00		There is no Sale of Investment during the year.

DISCLOSURES BY MANAGEMENT TO THE BOARD

The management ensures that all disclosures concerning financial and commercial transactions, where Directors may have a potential interest, are fully communicated to the Board. In such instances, the concerned Directors abstain from participating in discussions and do not cast votes on the relevant matters.

CAUTIONARY STATEMENT

The forward-looking statements contained in this Management Discussion and Analysis of the Companys financial condition and operational results, including those describing the Companys objectives, expectations, or predictions, are made in accordance with applicable securities laws and regulations. These forward-looking statements are based on certain assumptions and expectations of future events. However, the Company cannot guarantee that these assumptions and expectations will prove to be accurate or will be realized.

The Company undertakes no obligation to publicly amend, modify, or revise any forward-looking statements in light of subsequent developments, information, or events. Actual results may differ materially from those expressed or implied in these statements. Factors that could significantly influence the Companys operations include changes in government regulations, tax laws, economic developments within the country, and other global factors.

	For and on behalf of the Board of Directors
	Shashijit Infraprojects Limited
	Sd/-
	(Ajit Jain)
Place: Vapi	Chairman & Managing Director
Dated: 26th August, 2024	DIN: 01846992