S.S. Infrastructure Development Consultants Ltd Management Discussions.

Company Overview

Being a Leading Consultancy provider in the field of Architectural & Engineering services to Government departments and Public and Private sector undertakings, the Companys vision is to deliver cost-effective innovative and sustainable infrastructure solutions for a greener future.

Our strategic objective is to deliver world class consultancy services to its valuable Clients at affordable cost in align with the firms core values- Client Value, Honesty, Integrity and Transparency.

We have successfully offered consultancy services for the development of various infrastructure facilities which involve development of various types of buildings along the shore. The projects include: large span warehouses, various Technical Buildings, Office Buildings, Process Design and Bridges. We also offer Principal Engineering Consultancy Services for the marine structures like wharfs, jetties. We have rich experience in designing facilities like explosive storage buildings, blast resistant structures, tunnels, underground storage facilities etcetera.

(a) Industry Structure and Developments

Introduction

This COVID-19 pandemic has impacted the entire Indian economy and SSIDC is no exception to this. The COVID-19 virus pandemic has given unanticipated and extraordinary challenges to the global economy and to the people. The Government has taken steps for containing the spread of COVID-19. Research on vaccination, medicinal cure and preventive methods are being undertaken, the success of whom would bring the economic activity to normalcy soon. SSIDC has well adapted Work from Home model. Increased focus on remote operations and paperless transactions is being given. Digital platforms are being utilized for Meetings / Reviews /Approvals. With the lifting up of restrictions regarding the lockdown, partial as well as work from home has been efficiently adapted in the company. The additional measures on financial and economy of the country by RBI and Government of India would provide energy to the construction industry and public spending to come out of the impact of this pandemic.

In the year 2020, All orders received for the Consultancy comprising of major contributions in inflows which include orders from Government of India, Ministry of Defence for preparation of DPRs, Medical college and Hospital project at Amalapuram for state government of Andhra Pradesh, NDT and Rehabilitation measures for the AP school buildings, Establishment of new factory at Ibrahimpatnam for Bharat Electronics Limited Hyderabad in Telangana, and other industry expansion projects in around Hyderabad.

We are confident that we will emerge out stronger and continue to remain one of the best consultants in engineering and architectural consultancy segment and would continue to contribute positively in the growth of the nation.

APPROACH TO ENGINEERING & CONSULTANCY SERVICE INDUSTRY ANALYSIS

Analysis of Engineering & Consultancy Service Industry needs to be approached at both macro and micro levels, whether for domestic or global markets. Engineering & Consultancy Service Industry forms part of Consultancy Service Sector at a macro level. Hence, broad picture of Service Sector should be at preface while analysing the Engineering & Consultancy Service Industry.

Market Size

Even before the pandemic, India had been heading towards an economic slowdown owing to demand contraction. GDP growth in FY 2019-20 has sequentially fallen from 5.8% in Q4 FY 2018-19 to 5% in Q1 2019-20, 4.5% in Q2 2019-20, 4.7% in Q3 2019-20 and further to 4.2% in Q4 2019- 20. In an effort to stem this slowdown, government announced a slew of interventions last year, the most important of them being a substantial cut in corporate tax rate from 30% to 22% announced in September 2019. This reform has positioned India as a more attractive destination, with tax rates being aligned with its Asian peers.

Indias FDI inflows in FY 2019-20 have remained strong at around USD 68 billion, which is up by 10% YoY. Further, the country has continued its upward journey on the World Banks Ease of Doing Business rankings, and jumped 14 positions to be at 63rd position from 77th position previous year, primarily on account of more efficient building permit processes and the process for insolvency resolution. The higher ranking acknowledges the focused efforts put in by the government and improves perception about doing business in India. Further, on a bright note, after more than a decade Indias current account turned surplus by 0.1% of GDP in Q4 2019-20 as compared to a current account deficit of 0.7% GDP for the same period last year, mainly fuelled by software services income, inward remittances and lower oil prices. The year 2019-20 also witnessed a major change in monetary policy stance from neutral to accommodative guided mainly by low inflation and low GDP growth. During the year, repo rate was cut from 6.25% in April 2019 to 4.40% in March 2020. On Insolvency and Bankruptcy code (IBC), of the total 3,774 cases filed since IBC came into force, 43% have been resolved till date. However, in line with the fall in GDP, industrial activity did contract during 2019-20. Index of Industrial Production (IIP) registered a fall of 0.8% as compared to a rise of 3.8% in 2018-19. IIP for Infrastructure/ Construction goods also fell 4% during the year as compared to a 7.3% rise during the previous year. On the positive side, National highway construction registered an increase of 20% over previous year. Additionally, while Indian Railways witnessed strong revenue growth, the power generation capacity also rose at a healthy pace with significant addition of renewable energy capacity.

On the COVID-19 front, India being one of the most populous countries in the world may find itself in a vulnerable spot. Given the negative impact of COVID-19 on the countrys economic activities, IMF has forecasted a GDP contraction of 4.5% for FY 2020-21. The pandemic has aggravated an already weak demand scenario. This is inspite of several policy reforms undertaken by the government. Infrastructure Initiatives announced For India, investments in infrastructure equal to 1% of GDP will result in GDP growth of atleast 2% due to multiplier effect on growth across other sectors (S&P Global Ratings, 2016). Recognising the role of infrastructure in driving the growth of the economy, starting with the Union budget February 2020, the Government launched the National Infrastructure Policy (NIP) for 2020-25. Under the policy, INR 100 Lakh crore of investment in infrastructure was envisaged. The scheme is expected to be funded by Central and State governments (39% allocation each) and remaining 22% by the private sector. Areas to be covered under NIP include housing, logistics, modern railways, airports, clean energy, safe drinking water, etc. Under the policy, 100 more airports shall be added under the UDAN scheme. Further, in a major relief to Indian Inc., the government abolished dividend distribution tax.

(B) OPPORTUNITIES AND THREATS:

Our Strengths include expertise in infrastructural designing consulting services, Vintage with the Defence and other organizations, High Value Order Book, Experienced Management Team, Promoters and Board of Directors.

The threats posing for us are: Problem of out-dated Technology, Working capital crunch may affect the profitability of the company, and Changes in Government Policies.

(C) SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The Company has single segment. The performance of the company can be analyzed on the basis of the Audited Financial Statements for the financial year 2019-20 annexed with this report.

(D) OUTLOOK

Indias requirements on defence are catered largely by imports. The opening of the Defence sector for private sector participation will help foreign Original Equipment Manufacturers (OEMs) to enter into strategic partnerships with Indian companies. This will enable them to leverage the domestic markets as well as aim at global markets. Besides helping in building domestic capabilities, it will also bolster exports in the long term.

Favourable government policy which promotes self-reliance, indigenisation, and technology upgradation. The policies also aim at achieving economies of scale, including the development of capabilities, for exports in the defence sector.

(E) RISKS AND CONCERNS

This section lists forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these statements as a result of certain factors. Our risks and concerns are as follows:

Economic slowdown or other factors may affect the economic health of the government and industries where our revenues are concentrated. A large part of our revenues is dependent on our top clients, and the loss of any one of our major clients could significantly impact our business.

Intense competition in the market for detailed engineering services could affect our win rates and pricing, which could reduce our share of business from clients and decrease our revenues and / or our profits.

Our success depends largely upon our highly-skilled technical professionals and our ability to hire, attract, motivate, retain and train these personnel. Our success depends in large part upon our management team and key personnel and our ability to attract and retain them.

Our failure to complete fixed-price and fixed-timeframe contracts, or transaction-based pricing contracts, within budget and on time, may negatively affect our profitability. Our work with governmental agencies may expose us to additional risks.

Our reputation could be at risk and we may be liable to our clients or to regulators for damages caused by inadvertent disclosure of confidential information and sensitive data.

(F) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate and efficient internal control systems that provide protection of all the assets against losses from unauthorized use and for appropriate reporting of transactions. The Company has implemented proper controls which are reviewed at regular intervals to ensure that the authenticity of the transactions.

(G) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

FINANCIAL PERFORMANCE:

Capital Structure:

The Paid-up Share Capital of the Company as on 31st March 2020 is Rs. 14, 17, 03,500 divided into 141, 70,350 Equity Shares of Rs.10/- each fully paid up.

Other Equity:

The Reserves and Surplus of the company as on 31st March 2020 stand at Rs. 36,02,10,785/- as compared to Rs. 33,55,69,670/- in the previous year.

Sundry Debtors:

Sundry debtors increased to Rs. 27, 98, 19,406/- as on 31st March 2020. These debtors are considered good and realizable.

Loans and Advances:

Long Term Loans and Advances is Rs. 1, 03, 35,131 as against Rs. 80, 91,470/- in the previous year. Short Term Loans and Advances is Rs. 7, 04, 98,935/- as against Rs.5, 95, 45,531 /- in the previous year.

Current Liabilities:

Current Liabilities as on 31st March 2019 is Rs.8, 56, 32,415/- as against Rs. 7, 41, 95,889/- in the previous Year.

OPERATIONAL RESULTS:

Turnover:

During the financial year 2019-20, the turnover of the Company was Rs.25,23,22,230/- as against Rs.28,05,18,955/- in the previous year and income from other sources as on 31st March 2020 was Rs.20,59,318 /- as against Rs. 39,39,241/- in the previous year.

Depreciation:

The Company has provided Rs.1, 35, 39,170/- for depreciation during the financial year 2019-20 as against Rs. 117,05,570/- in the previous year.

Provision for Tax:

The Company has provided for tax Rs.1, 37, 03, 802/- in the financial year 2019-20 as against Rs. 237, 36,587 /-in the previous financial year.

Earnings per Share:

The Earnings per Share of the Company as on 31st March, 2020 is Rs. 2.13 per share for Face Value of Rs. 10 as against Rs. 4.41 /- per share for Face Value of Rs.10 in the previous year.

(H) MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company believes that the Companys growth and future success depend largely on the skills of the Companys workforce, including executives and officers, as well as the designers and engineers and the attraction of critical skills. The Companys focus is on identifying gaps in its employees competencies and preparing employees for changes in competitive environments, as well as to meet organizational challenges.

Our culture and reputation as a leader in architectural and engineering consultancy services and project management services for the last three decades with goodwill from both government and private sectors enables us to attract and retain some of the best talent.

Human capital

Our employees are our most important assets. We believe that the quality and level of service that our professionals deliver are among the highest in the architectural and engineering infrastructure services industry. We are committed to remaining among the industrys leading employers.

The Company has a mix of both experienced with 20 plus years in the industry as well as others with 10 plus and some with 2 to 3 plus years experience which gives us fresh lease and extra edge to the competitors. As on 31st March, 2020 we had 97 employees in total. The key aspects of our HR practice include recruitment, training and development, and compensation.

(I) DETAILS OF SIGNIFICANT CHANGES (KEY RATIOS)

DESCRIPTION FY 2019 FY 2020 CHANGE
Debtors turnover 1.24 0.91 -27% A
Interest Coverage 4.71 7.08 50% F
Current Ratio 5.73 4.34 -24% A
Debt Equity Ratio 0.08 0.09 13% A
Operating Profit Margin 30% 18% -40% A
Net Profit Margin 22% 11% -50% A
Return on Net Worth 13.09% 0.06% -100% A
A - Adverse F - Favourable

Reasons for significant changes:

• Due to increase in Short term Borrowings, there has been significant change in the Debt Equity ratio and Interest coverage when compared to F.Y 2019.

• Debtors Turnover has declined due to the limited flow of revenue from government clients due to the prevailing Covid-19 Pandemic.

• Profit has declined by 50% since invoicing for March is delayed which has impacted on returns.

For and on behalf of the Board of Directors
S.S. Infrastructure Development Consultants Limited
Sd/-
Satyanarayana Sundara
Date: 26.11.2020 Chairman & Managing Director
Place: Hyderabad DIN 02062896