SKIL Infrastructure Ltd Management Discussions.

INDUSTRY STRUCTURE & DEVELOPMENTS:

The Company is in the business of developing pioneering high-growth infrastructure projects having successfully developed various first-of-its-kind-in-the-country projects such as port, railway, special economic zone, shipyard etc.

Infrastructure sector is a key propeller of Indias overall development and has drawn high focus and thrust from the government for creation of world class infrastructure in the country. Infrastructure includes key sectors such as power, bridges, dams, roads, railways, ports, airports, and urban infrastructure development. Government has planned to invest around Rs. 6 lakh crore in creating and upgrading infrastructure in FY 2018-19.

OPPORTUNITIES & THREATS:

With the governments MAKE-IN-INDIA policy, greater impetus is being accorded to set up huge manufacturing sector in five industrial corridors coming up across the country. To accommodate the manufacturing sector related workforce, world-class urban infrastructure is required to be developed along these corridors. The government, in Union Budget 2018, has proposed an outlay of Rs.2.04 lakh crore for building 100 smart cities, many of them along the industrial corridors across the country.

To obviate traditional cost and time overruns associated with government-led project execution, the government is looking forward to private sector participation in infrastructure development with a target of meeting 50% investments from private sector (of the proposed Rs. 6 lakh crores). This has opened new vistas for private players, especially EPC companies, to become a partner in national infrastructure building by grabbing the opportunity.

However, considering the magnitude of the governments infrastructure development plans, major threats and challenges are: (a) To ensure adequate and timely funding given the stressed balance sheets of major banks.

(b) To maintain environment sustainability despite massive urbanisation/industrialization. (c) To engage capable domestic EPC players who can deliver within stipulated time and cost. (d) To have expeditious litigation-free land acquisition to complete the projects as planned.

(e) To have a faster and improved dispute resolution mechanism whereby project related issues are settled in reasonable time to avoid project stalling for a lengthy period.

SEGMENT WISE or PRODUCT-WISE PERFORMANCE:

The Company has a very strong brand and presence in the industry as being one of the leading infrastructure development companies in India with proven track record of having successfully conceptualized and developed various mega green field infrastructure projects.

The Company is suitably placed and poised to exploit the huge opportunity horizon of Indias infrastructure space.

OUTLOOK:

With initiatives like ‘Housing for All and ‘Smart Cities Mission, the Government is working on reducing bottlenecks impeding growth in the infrastructure sector. Apart from recapitalization of public sector banks which will bolster credit flows further and ease their stressed assets situation; the permission for 100% FDI under the automatic route across various infrastructure sectors will have positive impact on investment demand. The government is also looking forward to effective improvement in its policies implementation especially with respect to infrastructure related reforms so that the sector is attractive enough for private sector.

The Company will continue to focus on development of infrastructure projects such as Smart City, Urban Infrastructure, SEZ, Port,Logistics Park, Industrial Park, Industrial Township, Recreational Infrastructure etc. critical for the country perspective and also for the benefit of all the stake holders on its own or through suitable joint ventures. The Company will utilize its experience and expertise in the sector of port, railways, logistics, urban infrastructure and other such skill oriented sectors while making full use of governments Make In India policy.

The Company, as part of its strategy to pare its debt, is making efforts to divest from specific assets by unlocking the value of such investments.

RISKS & CONCERNS:

Indias regulatory framework and safety standards for infrastructure development are still evolving and requires systemic considerations for risk mitigation. However, given the pace and scale of urban growth insufficient India, current efforts may be to ensure planned urbanisation across the country. Existing infrastructure standards may not factor in resilience adequately thereby potentially increasing the risk. At the same time, the urbanisation (and the resultant increased concentration of population and assets) poses greater challenges for equivalent and effective disaster/risk management.

Another major concern is the infrastructure deficit which needs expeditious and enhanced investment currently not at par with the needs of the economy. However, industry is hopeful that RBI would lower interest rates to boost investment and consumption activity resulting into higher economic growth.

It is also imperative that infrastructure development occurs in a sustainable manner in India, if the impact of climate change is to be slowed to broadly acceptable levels. The government must ensure that rapid growth does not happen at an untenably high environmental cost and success of ‘green growth is achieved as desired. New infrastructure must not only support social and economic goals, it must also do so within acceptable environmental parameters.

Your Company is in a highly capital intensive segment of the industry and the Companys growth will be influenced, to a large extent, by availability of affordable funding. Slow and high-cost funding causes pressure on the working capital ultimately impacting the profitability of the business. Further, while there is strong optimism about the governments infrastructure reforms; yet still the industry remains guarded about its long-term sustainability considering that infrastructure projects are long-term delivery oriented.

DISCUSSION ON RESULTS OF OPERATIONS:

The Company has adopted Indian Accounting Standards (Ind-AS) with effect from 1st April, 2017 which mandates calculating/ re-measuring the Companys investment, financial liabilities and assets at fair value as at 1st April, 2016.In accordance with this transition from previous GAAP to Ind AS, the Company had to factor in certain finance costs on account of said re-measurement of its financial liabilities resulting into addition to its total finance cost. The Company management reviewed the financial statements and noted the changes arising out of transition from GAAP to Ind AS.

The Companys total revenue stands as Rs. 207.54 lacs during the FY 2017-18 compared to Rs. 1,493.35 lacs for the previous financial year. The loss before exceptional items and tax is Rs. 27,140.45 lacs for the FY 2017-18 as against loss of Rs. 16,484.06 lacs for the previous financial year.

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY:

As part of internal control systems, the Company has set up following Committees: i) Audit Committee of the Board ii) Nominations and Remuneration Committee iii) Stake Holders Relationship Committee iv) Independent Directors Committee v) Finance Committee vi) Corporate Social Responsibility Committee vii) Security Allotment and Transfer Committee

The Company continues to follow effective system of internal controls ensuring the accurate, reliable and timely preparation of accounting/financial information, securing the assets and interest of the Company as well as shareholders and adhering to various laws and regulations.

The Audit Committee reviews at periodic intervals the adequacy and effectiveness of the Internal Control Systems with the internal and statutory auditors. Recommendations on improvement, if any, pointed out during such reviews are reported to the top management and compliance of the same is implemented.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS:

The Company understands the value of its Human Resources and therefore focuses on creating a healthy and creative working culture and environment that enables the Company to attract and retain the competent talent. The employees are provided motivation to remain encouraged to contribute to the Companys growth on a continuous basis. The industrial relations during the year continued to be cordial and peaceful.

CAUTIONARY STATEMENT:

The Management Discussion and Analysis Report contains forward looking statements based upon the data available with the Company, assumptions with regard to global economic conditions, the government policies, etc. The Company cannot guarantee the accuracy of assumptions and perceived performance of the Company in future. Therefore, it is cautioned that the actual results may materially vary from those expressed or implied in the report.

SUBSIDIARY COMPANIES AND THEIR ROLE AND INPUTS:

The subsidiary companies created for the purpose of different projects, be it Gujarat Dwarka Port West Ltd., SKIL Singapore Pte Ltd., Chiplun FTWZ Pvt. Ltd., SKIL-Himachal Infrastructure and Tourism Ltd., are in the process of getting the desired approvals for respective projects.