sonu infratech ltd share price Management discussions


Annexure – C

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Real estate sector is one of the most globally recognized sectors. The Real Estate Industry in India is segmented By Property Type (Residential, Office, Retail, Hospitality, and Industrial) and By Key Cities (Mumbai, Delhi, Pune, Chennai, Hyderabad, and Bangalore).

The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect, and induced effects in all sectors of the economy.

INDIAN REAL ESTATE MARKET ANALYSIS:

The Real Estate Industry in India is estimated at USD 265.18 billion in 2023, and is expected to reach USD 828.75 billion by 2028, growing at a CAGR of 25.60% during the forecast period (2023-2028).

The real estate sector is the second-highest employment generator, after the agriculture sector in India. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term. Bengaluru is expected to be the most favored property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs.

According to Savills India, real estate demand for data centers is expected to increase by 15-18 million sq. ft. by 2025. Demand for residential properties has surged due to increased urbanization and rising household income. India is among the top 10 price-appreciating housing markets internationally. According to IBEF (India Brand Equity Foundation), FDI in this sector (including construction development & activities) stood at USD 55.18 billion from April 2000-September 2022.

SUMMARY OF OUR BUSINESS:

Sonu Infratech Limited, a young and Striving Company Stands out as Gateway for Engineering Excellence in Civil Construction, Structural Painting, Mechanical Scaffolding, and Project Management field. Dedicated and experience team of Planners, designers and Construction engineers are ever ready to contribute their expertise together and turn vision into reality. This has led us to the position of one of the leading Construction Companies in the Western Part of India.

The Company began life as a Civil Construction and Contracting Company has successfully executed many prestigious Industrial projects.

Our business segment are broadly categories in:

1) Civil Construction services

2) Building Construction

3) Mechanical Scaffolding

4) Plant Maintenance

5) Repairs and Maintenance

Above segment are further divided into following business services:

PILING:

Piling is a basic pre-requisite for any construction project-be it buildings, bridges, antenna towers and even small bungalows or villas. It builds the base or foundation of the project and provides the necessary support needed for the structure to be built.

EXCAVATION:

Excavation is very crucial task for any infrastructure or construction project. It is one of the most important processes done at the beginning of any construction work. Carrying out excavation work requires adequate experience, skills and close attention. The most part of excavation is to understand the excavation site and identify risks and hazards resulting from the type of soil, fractures, presence of water, excavation in adjacent areas, adjoining structures like buildings, bridges etc.

ROAD PREPARATION:

We have been into development and road preparation and adjacent areas. Our in house team possess the expertise and knowledge to take on any type of construction project-be it highway, expressway, Samrudhi Express Highway, Wardha to ARVI state highways, Purvanchal Express way, Gorukhpur Link Express Ways, Jagdishpur to Ayodhya, road preparation for small town or city, commercial road inside private properties. Road preparation is stage prior to road constructions.

PRESTRESSED ROCK ANCHORING:

Prestressed rock anchoring is a technique used to restrict structural movement due to steel elongation, resist cyclic or dynamic loading caused due to wind or changing water tables. It is most common application to lay foundations for highrise towers, provide stability to slopes and dams and tie back walls and tunnel bloating. The rock anchor installation process includes activities like drilling, grouting, re-drilling and consolidation grouting if required, percolation tests etc.

STRUCTURAL PAINTING SERVICES:

Structural Painting can make your structure look like new by removing scratches, holes and other blemishes from your interior or exterior structures. Provide painting services for tanks, silos, pipes and other storage structures.

REPAIR AND REHABILITATION OF STRUCTURES:

The rehabilitation envisages restoration of structural system as close as possible to the original position. The distressed structure needs to be brought in line, level and to required strength so that it can be put into service without endangering its safety and utility.

Our other services include:

1) Industrial and Commercial Contracts/Projects

2) Repairs and Maintenance

3) Cleaning & Grubbing

4) Erosion & Soil Control Measures

5) Basement Digging

6) Back Filling

7) Handling and transportation of limestone and coal

8) Civil work for internal storm water surface drainage

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has a proper and adequate system of internal financial controls, commensurate with its size and business operation. It ensures timely and accurate financial reporting in accordance with applicable accounting standards, safeguarding of assets against unauthorised use or disposition and compliance with all applicable regulatory laws and Company policies. Internal Auditors of the Company review the internal financial control systems on a regular basis for its effectiveness, and necessary changes and suggestions are duly incorporated into the system. Internal audit reports are also reviewed by the Audit Committee of the Board.

Discussion on Financial Performance with respect to Operational Performance:

The key strategy will be focused around:

1. Timely completion of Orders

2. Financial strength & liquidity

3. Professional Management

4. Customer care

5. Brand Equity

FINANCIAL HIGHLIGHTS:

(Rs. in Lakhs)

Particulars

F.Y. 2022-23 F.Y. 2021-22
Revenue From Operations 6405.16 5317.88
Other Income 17.17 71.08

Total Income

6422.33 5388.96
Operating expenditure before Finance cost, depreciation and amortization 5305.84 4541.04
Earnings before Finance cost, depreciation and amortization (EBITDA) 1116.49 847.93
Less: Depreciation 496.96 411.30
Less: Finance Cost 252.09 193.81

Profit Before Tax

367.44 242.82
Less: Current Tax 101.09 73.99
Less: Deferred tax Liability (Asset) -7.06 -6.30

Profit after Tax

273.41 175.13

All activities of the company revolve around the main business and as such there is no separate reportable business segment and all the operations of the company are conducted within India as such there is no separate reportable geographical segment.

OUTLOOK:

We believe, the Company has a great deal of opportunities for future growth. We believe our management team has a long-term vision and has proven its ability to achieve long term growth of the Company. Our strengths lie in our track record of completing our projects efficiently and effectively within the stipulated time period. It is critical in the construction industry that projects are completed as per contracted schedule. We have a track record of timely execution of the projects, which minimizes cost overruns and eliminates any possibilities of penalties and liquidated damages, while earning repeat orders from our clients. We have never been penalized for delayed execution of a project. We intend to take advantage of the growing opportunities in infrastructure development by strengthening our expertise in civil construction, mechanical scaffolding, Plant maintenance business and identifying new prospects for growth.

To be recognized as the leading Construction Company in the areas, we operate, through our Performance, our People & Commitment to our Core Values. Our Vision is to become the preferred construction company in the Infrastructure Industry. Your ideas reflect the demand of the next century. We are committed to facilitate their realization in the field of Construction technology, to achieve excellence in execution in works. Sonu, Envisages establishing itself amongst top Construction Companies of globe. We wish to Collaborate with leading Construction companies across the World in Order to achieve best results as results of synergy of their individual resources such as experience, Knowledge, labour, finance plant and equipment.

HEALTH, SAFETY AND ENVIRONMENT:

We are committed to complying with applicable health, safety and environmental regulations and other requirements in our operations. To help ensure effective implementation of our safety policies and practices, at the beginning of every project, we identify potential material hazards, evaluate material risks and institute, implement and monitor appropriate risk mitigation measures. We have been awarded from Reliance Industries Limited, Refinery Division/ SEZ Refinery Division/DTA Refinery Division, C2 Complex, Jamnagar for Best Contractor safety Performance Awards/Civil and Admin/Operation in the year 2011, 2013, 2014, 2015, 2016, 2018, 2019, 2021 and Essar Oil Limited, Refinery Division, Vadinar for Appreciation for contribution towards safety promotion in the year 2017.

THREATS, RISKS AND CONCERNS:

Almost entire sales of our company is in the state of Gujarat especially in Jamnagar region and also we did projects in the state of Maharashtra and Uttar Pradesh. Such geographical concentration of our business in this region heightens our exposure to adverse developments related to competition, as well as economic and demographic changes in this region may adversely affect our business prospects, financial conditions and results of operations. We may not be able to leverage our experience in these regions to expand our operations in other parts of India, should we decide to further expand our operations.

Further, factors such as competition, culture, regulatory regimes, business practices and customs, customer tastes, behaviour and preferences in the cities where we may plan to expand our operations may differ from Gujarat, and our experience in the Gujarat may not be applicable to these states. In addition, as we enter new markets and geographical areas, we are likely to compete not only with national developers, but also local developers who have an established local presence, are more familiar with local regulations, business practices and customs, have stronger relationships with local contractors, suppliers, relevant government authorities, and who have access to existing land reserves or are in a stronger financial position than us, all of which may give them a competitive advantage over us. Our inability to expand into areas outside Gujarat market may adversely affect our business prospects, financial conditions and results of operations.

OPPORTUNITIES:

Industrial and Infrastructural growth in India has been propelled in the past decade with reforms and benefits extended by the government. Increased allocation of resources to the Industrial and infrastructural construction sector, facilitation of incremental lending to the infrastructure sector and increased social sector projects benefiting infrastructure development are contemplated as part of current government plan. Our Company believes that the increasing level of investment in infrastructure by central and state governments will be a major growth driver for its business in the future and its demonstrated expertise and experience in the infrastructure segment will provide it with a significant advantage in pursuing such opportunities. The Company believes that it is in an advantageous position because of its operating history, industry knowledge, experience and familiarity with the Sector.

Building our own execution capabilities:

Quality of product and timely completion of projects are critical to success in the construction industry. As a result, we aim to:

• consistently deliver by meeting all relevant specifications and requirements;

• achieve enhanced customer satisfaction through cost effective and timely completion; • develop our in house design and engineering team; • motivate and train our staff for continual improvement of productivity and quality standards;

Capture the high growth opportunities in the India Infrastructure sector:

We believe that the increasing levels of investment in infrastructure by governments and private industries will be major driver for growth in our business in the foreseeable future. We intend to take advantage of the growing opportunities in infrastructure development by strengthening our expertise in civil construction, mechanical scaffolding, Plant maintenance business and identifying new prospects for growth.

Owned fleet of construction Equipments:

We believe that our strategic investment in construction equipments enables us to rapidly mobilize our equipment to project sites as needs arise. We have our owned fleet of construction equipment which would serve as advantageous to us and will be adding to strategic gains.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS:

The Companys relations with the employees continued to be cordial and harmonious with its employees. It considers manpower as its assets and that people had been driving force for growth and expansion of the Company. The Company acknowledge that its principal assets is it employees. The Company has continued its efforts in building a diverse and inclusive workforce.

The total number of employees on roll in the Company as on 31st March, 2023, including factory workmen, was 217. The Company will continue to create opportunity and ensure recruitment of diverse candidates without compromising on meritocracy.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFORE:

Ratios

Numerator Denominator Current Reporting Period Previous Reporting period % of Change Reason

Debt Equity Ratio

Debt Capital Shareholders Equity 1.75 2.75 (36.15) In the current reporting period with increase in profit, shareholders equity has increase, and also due to increase in share capital as a result of IPO in the current year, ratio varies significantly.

Debt Service coverage ratio

EBITDA- CAPEX Debt Service (Int+Principal) 0.56 0.52 5.96 -

Return on Equity Ratio

Profit for the year Average Shareholders Equity 0.16 0.17 (5.53) -

Inventory Ratio Turnover

COGS Average Inventory 1.43 1.46 (1.52) -

Trade Receivables turn over ratio

Net Sales Average trade receivables 2.84 3.53 (19.48) -

Trade payables turnover ratio

Total Purchases (Fuel Cost + Other Expenses+ Closing Inventory- Opening Inventory) Avg. Closing Trade Payables 3.66 3.89 (5.84) -

 

Ratios

Numerator Denominator Current Reporting Period Previous Reporting period % of Change Reason

Net capital turnover ratio

Sales Avg. Capital employed 2.23 2.40 (7.34) -

Net profit ratio

Net Profit Sales 4.27 3.29 29.62 Revenue has increased in the current year with increase in turnover, hence ratio increases positively.
Current ratio Current asset Current Liability 1.34 1.11 20.85 -

Return on Net Worth

Net Profit Average Shareholders Equity 0.16 0.17 (5.53) -

Operating Profit Margin (%)

Operating Profit Sales 0.09 0.08 17.15 -

Net Profit Margin (%)

Net profit Sales 4.27 3.29 29.62 Revenue has increased in the current year with increase in turnover, hence ratio increases positively.

DISCLOSURE OF ACCOUNTING TREATMENT:

The financial statements of the Company have been prepared in accordance with Accounting Standard ("AS") notified under the Companies (Accounting Standards) Rules, 2021 read with section 133 of the Companies Act, 2013.

CAUTIONARY STATEMENT:

Statement in this report describing the Companys objectives projections estimates and expectation may constitute "forward looking statement" within the meaning of applicable laws and regulations. Forward looking statements are based on certain assumption and expectations of future events. These Statements are subject to certain risk and uncertainties. The Company cannot guarantee that these assumption and expectations are accurate or will be realized. The actual results may different from those expressed or implied since the Companys operations are affected by many external and internal factors which are beyond the control of the management. Hence the Company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments information or events.