Tantia Constr. Management Discussions


ANNEXURE VI TO THE DIRECTORS REPORT

Tantia Constructions Limited (hereinafter referred to as "TCL" or "Your Company"), is a world-class Infrastructure Services Company, operating across the infrastructure lifecycle with strong positions in major markets. As a pre-eminent Indian Infrastructure Company, established over five decades ago, your Company strongly anchored itself to Indias development effort over the past few years.

The Honble National Company Law Tribunal, Kolkata Bench, (hereinafter referred to as "the Honble NCLT" or the "Adjudicating Authority") vide its order dated March 13, 2019 (hereinafter referred to as the "Insolvency Commencement Date"), initiated Corporate Insolvency Resolution Process (hereinafter referred to as "CIR Process") of your Company in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the Code"). Pursuant to the Order passed on March 13, 2019, Mr. Kshitiz Chhawchharia was appointed as the Interim Resolution Professional (hereinafter referred to as the "IRP") to manage the affairs of the Company, and was subsequently confirmed as the Resolution Professional (hereinafter referred to as the "RP") by the Committee of Creditors (hereinafter referred to as the "CoC") via e-voting conducted in the first meeting of the CoC, which concluded on April 18, 2019, to carry out the CIR Process for the Company.

On February 24, 2020, the Honble NCLT approved the Resolution Plan (hereinafter referred to as the "Approved Resolution Plan") submitted for your Company by the consortium of EDCL Infrastructure Limited (hereinafter referred to as "EDCL Infra") and Upendra Singh Construction Private Limited (hereinafter referred to as "USCPL") (hereinafter EDCL Infra together with USCPL, is referred to as the "Consortium" or the "Successful Resolution Applicants" or the "RA").

A meeting of the Monitoring Committee was held vide an order of the Honble NCLT dated 14th November 2022, wherein decisions were made to resolve the issues being faced in the implementation of the approved resolution plan. The Monitoring Committee has apprised the Honble NCLT of the outcome of the meeting vide an application filed on 28th December 2022. which inter alia included prayers for resolving the anomaly of the Equity shares.The adjudicating authority duly allowed the prayers sought by the MC vide its order dated 1st day of May 2023 read with the Corrigendum order dated 18th day of May 2023.The MC is currently in the process of implementing the Resolution Plan as per the above directions issued by Adjudicating Authority.

In terms of the Approved Resolution Plan, a Monitoring Committee (hereinafter referred to as the "MC") has been constituted comprising of seven members- three representatives from the Financial Creditors (as decided by the CoC), three representatives from the Successful Resolution Applicants and the Erstwhile Resolution Professional- to manage the affairs of the Company as a going concern and supervise the implementation of the Approved Resolution Plan until the transfer of control of your Company to the Successful Resolution Applicants.

During the year under review, this Monitoring Committee has been entrusted with the management of the affairs of your Company.

1. Economic Overview:

1.1Global Economic Overview

The July 2023 World Economic Outlook Update anticipates a moderation in global growth to 3.0 percent in both 2023 and 2024. However, this forecast indicates a notable rebound from the challenges faced during the pandemic. Inflationary pressures are expected to ease gradually, with global headline inflation set to decline from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. This decline is primarily attributed to lower commodity prices. However, underlying (core) inflation is projected to decrease at a slower pace, delaying its return to target levels until around 2025 in most cases. Chinas recent reopening has paved the way for a faster-than anticipated recovery, but global inflation is still expected to remain above pre-pandemic levels, with a forecast of 6.6 percent in 2023 and 4.3 percent in 2024. Initiatives such as the

Connecting Europe Facility and the UKs National Infrastructure Strategy aim to boost growth through infrastructure investments.

In North America, stimulus bills totalling $1.6 trillion will support the expansion of infrastructure. Developed economies have strong labour markets, leading to robust household spending. Record-high employment rates and narrowing gender gaps are positive indicators. Overall, the global economy shows uncertain recovery, persistent inflation, and intermittent financial turmoil.

In this scenario, multilateral efforts to respond to the humanitarian crisis, prevent further economic fragmentation, maintain global liquidity, manage debt distress, tackle climate change, and end the pandemic are essential.

1.2 Indian Economic Overview

Indias economic growth in 2023 and beyond will be significantly influenced by strides made in key sectors, with infrastructure development playing a catalytic role in this progress.

The global economy was recovering from the pandemic until the Russia-Ukraine conflict disrupted global supply chains and led to inflationary pressures. Despite this, Indias economy continues to be one of the fastest-growing major economies. Four factors that have been responsible for the recovery post-pandemic include higher government spending on infrastructure creation and welfare schemes that boosted the construction sector, buoyant global demand post-pandemic which lifted exports from the manufacturing sector, IT/ITES and other professional services, an inflow of abundant global liquidity into Indian markets and policy intervention supporting financial sector and consecutive years of good rainfall a pronounced slowdown, with inflation not returning to the target until after 2025, while Emerging Markets and Developing Economies (EMDE) are recovering faster. EMDEs are expected to grow in 2023, supported by robust policy support, moderate commodity prices and improved external demand

Furthermore, Indias infrastructure development has attracted international attention for foreign investment. For instance, Saudi Arabia plans to invest up to $100 billion in sectors such as energy, petrochemicals, refinery, infrastructure, agriculture, minerals, and mining.

2. Indias Infrastructure Sector:

Over the years, the Indian government has introduced many initiatives to strengthen the nations economy. The government has been effective in developing policies and programmes that are not only beneficial for citizens to improve their financial stability but also for the overall growth of the economy. Over the recent decade, Indias rapid economic growth has led to a substantial increase in demand for exports.

The Indian construction industry is experiencing tremendous growth. The Union budget 2023-24 lays down the blueprint for a prosperous and inclusive India, which recognises the infrastructure sector as a key contributor to achieving sustainable growth. The enhanced capital outlay of Rs. 10 Lakhs Crores i.e. 3.3% of GDP provides the required boost for the development of infrastructure in India and opportunities for the construction sector players.

Between 2024 and 2027, the Indian construction industry is expected to achieve an average annual growth of 6%2. This growth will be supported by investments in transport, electricity and housing projects, as the Indian government plans to invest ~US$ 1.5 trillion in infrastructure through National Infrastructure Pipeline (NIP).

Many structural changes such as identification of upcoming and under-construction infrastructure projects under NIP, setting-up dedicated infrastructure finance institutions such as the National Bank for Financing Infrastructure and Development (NaBFID), PM Gati Shakti for coordination between various infrastructure ministries, identification of projects under National Monetisation Programme, mandating monthly pay-outs by central and state governments for infrastructure projects and increase reliance on its own funds for capex spend to support the growth of the sector.

3. Company Business Overview

Pursuant to the order passed by the Honble NCLT, on February 24, 2020 and 1st May, 2023 read with the corrigendum order dated 18th May, 2023, as stated above, a Monitoring Committee has been constituted comprising of seven members- three representatives from the Financial Creditors (as decided by the CoC), three representatives from the Successful Resolution Applicants and the Erstwhile Resolution Professional- to manage the affairs of the Company as a going concern and supervise the implementation of the Approved Resolution Plan until the transfer of control of your Company to the Successful Resolution Applicants.

The office of the Resolution Professional ceasing to exist since the approval of the Resolution Plan on February 24, 2020, your company is currently being monitored by the above stated Monitoring Committee.

Your company started its operations with projects in the railways segment and extended its activities to other infrastructure segments along with production of Ready Mix Concrete (RMC), over a period of few years. Your Company continues to operate in its existing markets whilst exploring avenues and opportunities for further diversification.

Major Achievements:

Orders Won: Construction of Kailasahar District Jail at Kailasahar, Unakoti District, Tripura / SH: Construction of

i] 100 Seated Prisoners Ward (Male)

ii] 25 Seated Prisoners Ward (Female)

iii] 10 Seated Prisoners Cell

iv] Administrative Block

v] Office & Visitor room

vi] Guard room

vii] Kitchen Room

viii] Dining Hall

ix] Barrack for 15 person

x] Internal boundary wall

xi] Internal boundary wall surrounding female ward

xii] Perimeter Wall

xiii] Watch Tower and

xiv] Staff Quarters {Type-I - 8 Units - (02 Block twin-double storied), Type-II - 8 Units - (02 Block twin-double storied) & Type - III- 8 Units - (02 Block twin-double storied)}/Building portion including internal water supply and sanitary installation / Balance work.(5th call).

4. Quality Control:

Your Company maintains a robust quality control system based on the result of the experience of its founders and the priorities placed by the management evolved to meet day-to-day needs as well as, size and operational necessities.

5. Risks and Concerns:

Owing to the nature of the industry, the construction industry continues to face challenges regarding contractual obligations, availability of resources, deliverables, health and safety measures, and project delays or cancellations. Owing to the nature of the industry your Company operates in, it is exposed to a variety of risk factors which are broadly categorized into Financial, Technical, Marketing, Legal and Policy & Political. However, Your Company has taken suitable measures to mitigate the various risks associated with its operational activities. Adequate insurance policies have been taken to protect health and safety of its employees and limit property loss. Growth and demand is dependent on general economic conditions and a decline can adversely affect the Companys business.

With respect to the current Government which has set the ball rolling with several announcements to reform the sector and boost investor sentiments, some challenges remain to be addressed to sustain the growth trajectory (a) The increasing backlog of infrastructure projects, mounting losses due to delays and cost overruns could slow momentum (b) Factors such as delays in land acquisition and environmental clearances, capacity constraints, weak project management, and dependency on human labour need immediate attention (c ) changes in government regulations, foreign direct investments, approval processes and legal hassles & proceedings affecting the execution project, also lead to significant cost overrun (d) steep cost escalation

6. SWOT Analysis:

Strengths

•Geographical spread of operations in India allows proximity to a large and diversified customer base _Skilled, experienced and diversified workforce with proved credentials _Well established brand recognition and goodwill owing to innovative marketing strategies.

Weaknesses

• Bureaucracy causing delay in approvals and change in policies

• Low entry barriers in the industry causing several unorganized regional players

• Cautious approach of Banks and low exposure in Infrastructure Sector

• Rising input costs for cement, steel and other construction materials

• Longer working capital cycle

• Delays in obtaining environmental clearances, land acquisitions and rehabilitation

• Stagnant and low construction margins

Opportunities

Basis its strengths and effective Government initiatives towards development of Indian Infrastructure, your Company is realistically optimistic and finds immense opportunity in acquiring new orders for construction of roads, bridges, water treatment system etc.

Threats

•Political Instability •Wars •Terrorism •Multinational conflicts •Natural disasters

•Fuel shortages and their prices;

• Heavy fluctuation in prices of steel and cement

7. Strategy and Outlook:

The Indian Infrastructure Sector has the potential to generate upto US$5 trillion in annual revenue by 2025, create additional jobs and contribute over to Indias GDP. Increased urbanisation is firmly placed in the centre of this progress. As per World Bank study, by 2031, some 600 million people are expected to live in Indias cities. Therefore, construction houses are slated to be one of the greatest contributors to this futuristic plan.

A revival of the economy post-demonetization and implementation of GST are putting the country back on track. Your Company is looking to be the major beneficiary for the increased infrastructure spending on roads, airports and expected high GDP. Sustained increase in infrastructure is expected to be one of the crucial factors for sustaining strong growth during the current decade. Significant investment in physical infrastructure will also lead to increased production efficiency, reduction in cost of doing business and improved standard of living. The outlook for the construction sector is very positive with the government ready to mobilize US$1 trillion investment plan over the next five years.

Government Initiatives

The government of India announced larger outlays for infrastructure development. The government announced Rs. 1.1 Lakh Crore for the Indian Railways to improve infrastructure, Rs. 1.07 Lakh Crore allocated towards capital expenditure, a growth opportunity for the company.

Road Ahead

The rapidly globalizing world is opening up newer avenues for the Infrastructure industry, especially while it makes a shift towards more efficient, safe and reliable modes of operation. Over the next decade, this will lead to newer verticals and opportunities for infrastructure development companies.

TCL-Way Forward

TCL aims to be equipped for adding to the developments in the Infrastructure Industry. Your Company strives to enhance its core business by aligning with the changing times and the demands of its customers, most of them being market leaders in the respective industry segments. Your Company continues to adapt and structure its business in a way so as to be able to capitalise its growth opportunities from other future growth areas, with an aim at diversifying its customer base; ensure efficient conversion of the Order Book into healthy margins through execution, operational excellence and digitalisation initiatives; manage financial resources for the growth of the business and strong financial health to facilitate access to capital markets as and when required; incubate new business to tap future growth opportunities; engage with start-ups to access innovations to enhance capabilities and develop new offerings; focus on businesses contributing to environment sustainability and thrust on opportunities linked to achieving the Sustainable Development Goals, like access to clean water for everyone, reduction in consumption of virgin material in construction, energy efficient solutions, etc.

Your Company has a well laid out plan to meet its goals, which includes:

•Maintaining adequate liquidity on the Balance Sheet to exploit growth opportunities and fund emerging and high growth businesses

•Prudent allocation of resources (Capex and Working Capital) to fund growth in different businesses. Financial resources are monitored and directed at a central level with mandates for control at a local level

•Attracting and retaining a robust and thriving talent pool through employee engagement programmes, monetary and non- monetary incentives, leadership development initiatives, offering professional development opportunities and fostering a conducive organisation climate. Your Company has evolved a series of structured HR policies to enable this resource allocation

•Long-term lasting engagements with labour sub-contractors to ensure a steady augmentation of resources at project sites

•Long-term engagement with vendors of services, materials and equipment to provide adequate resources for business growth in various business verticals

•Maintaining strong financial health to facilitate raising of resources from Capital Markets as and when required

•Ensuring judicious allocation of manpower and monetary resources to company-wide sustainability and growth initiatives such as CSR, Digitalisation and operational excellence programs

8. Internal Control Systems and their Adequacy:

In terms of the SEBI (Listing Obligation and Disclosure Requirements) (Third Amendment) Regulation, 2018, May 31st, 2018 read with the Resolution Plan as approved by the NCLT Order dated February 24th, 2020 and 1st May, 2023read with the corrigendum order dated 18th May, 2023, all the roles and responsibilities of the Board of Directors/ Committees shall be fulfilled by the Resolution Professional in accordance with Section 17 and Section 23 of IBC and powers of the Board of Directors/ Committee stands suspended.

The office of the Resolution Professional ceasing to exist since the approval of Resolution Plan on February 24, 2020 your Company is currently being monitored by the Monitoring Committee. It has an adequate system of internal controls in place. It has documented policies and procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, protecting the assets from unauthorised use or losses, compliances with regulations. Your Company has continued its efforts to align all its processes and controls with global best practices. The effectiveness of your Companys internal controls are reviewed periodically with a view to obviating material weaknesses.

9. Discussion on Financial Performance with respect to operational performance:

TCLs performance in the last fiscal year is a reflection of the challenges faced by the Company along with the Indian Infrastructure industry and certain other regions internationally. In the Financial Year ending March 31, 2023, the consolidated revenues of your Company including revenue from other income stood at Rs 10,878/- Lakhs.

As of March 31, 2023, your Company had a consolidated liability of Rs48,254/- Lakhs. The Consolidated Cash and Cash Equivalents stood at Rs 1,630/- Lakhs. The Consolidated EBITDA, before exceptional items, for the Financial Year ended March 31, 2023 stood at Rs 3,64/- Lakhs. Your Company, during this period remained focused on cost optimization and value enhancement. The Consolidated Profit after Tax for the Financial Year 2022-2023 stood at Rs (241)/- Lakhs. TCLs business operations and affairs after being managed by the Resolution Professional of your Company, being appointed as the Interim Resolution Professional vide the Honble NCLTs order dated March 13, 2019, continues to be managed by the Monitoring Committee vide the Adjudicating Authoritys order dated February 24, 2020.

(Rs. in Lakhs)

Particulars

Standalone Consolidated
2022-2023 2021-2022 2022-2023 2021-2022
Total Revenue 17,237.00 16,077.00 10,878.00 10,662.00
Total Expenses 11,050.00 10,837.00 11,094.00 10,866.00
P B T (before exceptional items) 6,187.00 5,240.00 (216.00) (204.00)
PAT 4,534.00 3,832.00 (241.00) (226.00)

10. Human Resources:

Human resource development efforts of your Company are aligned with the industrys best practices. Your Company is an equal opportunity employer, embracing diversity in race, religion, marital status, gender, age, ethnic origin, and physical ability, providing its diverse workforce with a stimulating environment to aid both their personal and professional development. Your Company respects each employee, motivates them and tries to offer opportunities based on the skill sets and in this process builds mutually benefiting relations between the Company and its employees. Strengthening your Companys human capital is, therefore, core to its operations.

11. Statutory Compliance:

In terms of the SEBI (Listing Obligation and Disclosure Requirements) (Third Amendment) Regulation, 2018, May 31st, 2018 read with the Resolution Plan as approved by the NCLT Order dated February 24th, 2020 and 1st May, 2023 read with the corrigendum order dated 18th May, 2023, all the roles and responsibilities of the Board of Directors/ Committees shall be fulfilled by the Monitoring Committee in accordance with Section 17 and Section 23 of IBC and powers of the Board of Directors/ Committee stands suspended.

The office of the Resolution Professional ceasing to exist since the approval of Resolution Plan on February 24, 2020 your Company is currently being monitored by the Monitoring Committee.

12.Caution Statement:

Statements made in the Management Discussion and Analysis Report are only "forward looking statements" based on certain assumptions and expectations of the Company. Your Companys actual performance could differ materially from those expressed/ projected depending upon changes in various factors. Your Company does not assume any responsibility to any change(s) in "forward looking statements", on the basis of subsequent developments, information or events etc. Data, figures and statements are from publicly shared reports and opinions of experts and Infrastructure association and organisations.

Important developments that could affect your Companys operations include a downward trend in the domestic Infrastructure industry, competition, rise in input costs, exchange rate fluctuations, and significant changes in the political and economic environment in India, environmental standards, tax laws, litigations and labour relations.