Tantia Constructions Ltd Management Discussions.

GLOBAL ECONOMIC REVIEW

The Indian infrastructure sector has witnessed high growth in recent times with the rise in demand. Foreign Direct Investment (FDI) received in Construction Development sector (townships, housing, built up infrastructure and construction development projects) from April 2000 to March 2019 stood at US$ 25.05 billion, according to the Department of Industrial Policy and Promotion (DIPP). The logistics sector in India is growing at a CAGR of 10.5 per cent annually and is expected to reach US$ 215 billion in 2020.

In 2018, a decade after the global economy collapsed, a revival manifested wherein major economy expanded. It wouldnt be relevant to indicate that crude oil prices increased in 2018.

MACRO ECONOMIC OVEREVEW

Infrastructure development has been fuelling Indias economic growth over the past decade or so. Increasing population, rapid industrialization and urbanization, rising middle-class income, and the rise of nuclear families are driving the demand for consistent investment in infrastructure development. Further, India is not only among the worlds fastest growing major economies, but also one of the few economies enacting major structural reforms. The Central Statistics Office (CSO) has estimated the GDP growth to be 6.8% in 2018-19 as compared to 7.2% in 2017-18. In 2018-19, the agriculture and industry sectors are expected to grow at 2.9% and 6.9% respectively, while the service sector is estimated to grow at 7.5%. The overall industrial sector growth was 6.9% as per the estimate of national income for 2018-19. This was higher than the industrial growth in 2017-18 at 5.9%. The manufacturing sector experienced a growth of 6.9% during 2018-19. The contribution of industry to the GVA was 29.6% in 2018-19.

The year under review was marked by structural reforms by the Government. In addition to GST introduction, the year witnessed significant resolution of problems associated with bank nonperforming assets, FDI liberalization, bank recapitalization and privatization of coal mines. However, we are observing signs of recovery as the triple effects of demonetization, RERA and GST have begun to shape up the sector with new standards of delivery, accountability and transparency.

Foreign Direct Investment

Apart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc.

The Indian governments favorable policy regime and robust business environment have ensured that foreign capital keeps flowing into the country. The government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others. According to Department for Promotion of Industry and Internal Trade (DPIIT), FDI equity inflows in India in 2018-19 stood at US$ 44.37 billion, indicating that governments effort to improve ease of doing business and relaxation in FDI norms is yielding results.

Infrastructure sector in India Infrastructure is a key driver of the overall development of Indian economy. This sector focuses on major infrastructure sectors such as power, roads and bridges, dams and urban infrastructure. The dynamics of infrastructure development has evolved with time. As China built its economy on the back of robust infrastructural development, India is on its way to the same route. The development activities have gathered pace coupled with the thrust by government that can be seen through various initiatives like Housing for All, Smart Cities, AMRUT, increased budgetary spending, among others. The changing infrastructure landscape in India has generated significant interest from international investors. FDI received in construction development sector (townships, housing, built up infrastructure and construction development projects) from April 2000 to December 2017 stood at US$24.67 billion; and in construction (infrastructure) activities stood at US$12.36 billion.

BUSINESS OVERVIEW

Tantia Constructions Limited 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 and over the years, strongly anchored itself to Indias development effort. It started its operations through entry in the railways segment and over the years extended its activities to other infrastructure segments along with production of Ready Mix Concrete (RMC). The Company continues to operate in its existing markets whilst exploring avenues and opportunities for further diversification of its market presence. Our pledge is to establish lasting relationships with our customers by exceeding their expectations and gaining their trust through exceptional performance by every member of the construction team.

SECTOR REVIEW

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling Indias overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, jetty, roads and urban infrastructure development.

ROADS

India has the second-largest road network across the world across 5.5 million kilometers, comprising of national and state highways, urban and rural roads. In India sales of automobiles and movement of freight by roads is growing at a rapid rate. Cognizant of the need to create an adequate road network to cater to the increased traffic and movement of goods, the Government of India is planning to expand the national highway network to over 200,000 km. Besides attracting investors, the Government of India has lined up numerous investments for the road sector.

RAILWAYS

Indias railway network is recognised as the third largest railway systems in the world under single management. The government has focused on inviting investments in railway infrastructure by fostering investor-friendly policies. The Government of India is focused on investing in Railway Infrastructure by making investor friendly policies. The total FDI inflows in this sector in the period between April 2000 to December 2018 stood at US$ 940.92 million. The Indian Railway is growing at a healthy rate.

OUTLOOK

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 employment generation, increased production efficiency, reduction in cost of doing business and improved standard of living.

Construction industry expects to employ 80 million workers by the year 2020. BAI, in association with the government as well as private bodies, has taken up training of construction workers. For the construction industry, Construction Skill Development Council of India (CSDCI)is formed , and Builders Association of India is one of the promoters The outlook for the construction sector is very positive with the government ready to mobilize $1 trillion investment plan over the next five years.

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. The Company is among the first in India to be accredited with the ISO 9001:2000 from DNV, the Netherlands in 2001, which was further upgraded as ISO 9001:2008 in the year 2010. The Company renewed the Certificate TUV Nord Management System as per DIN EN ISO 9001:2008 awarded to our RMC units at Narayanpur and Taratala, in Kolkata.

RISKS AND CONCERNS

Owing to the nature of the Industry the Company operates in, it is exposed to a variety of risk factors which are broadly categorized into Financial, Technical, Marketing, Legal and Policy & Political.

Further 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.

• The increasing backlog of infrastructure projects, mounting losses due to delays and cost overruns could slow momentum.

• Factors such as delays in land acquisition and environmental clearances, capacity constraints, weak project management, and dependency on human labor need immediate attention.

• In real estate and construction, financing, changes in government regulations, foreign direct investments, approval processes, environment clearances and legal hassles & proceedings affect the execution project, and lead to significant cost overrun.

• In the EPC business, delay in projects execution, stall of projects due to non-payment by developers, steep cost escalation in inputs affect the execution of projects, resulting in significant cost overrun.

Your Company has fortified its business operations and functions to withstand risks and deliver value in the face of all adversities by providing the best services to its customers, at a sustainable cost and in a responsible manner.

STRENGTHS AND OPPURTUNITIES

• Wide range of expertise spanning over 50 years in the construction sector, professional and competent senior management team.

• Well established brand recognition and goodwill owing to innovative marketing strategies.

• Strategically located projects with high selling potential.

WEAKNESSES AND THREATS

• 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;

• Shortage of skilled manpower;

• Stagnant and low construction margins.

INTERNAL CONTROL SYSTEMS

There are well designed internal control systems and procedures to help Management review the effectiveness of the Financial and Operation Controls and assurance about the adherence to Companys laid down Systems and Procedures.. Audit Committee reviews the reports and monitors effectiveness and operationalefficiency of internalcontrol systems. Audit Committee is giving valuable recommendations and suggestions for corrective actions from time to time for improving the business processes, systems and internal controls. Annual internal audit plans are prepared by internal auditors in consultation with Audit Committee and audit is conducted in accordance with this plan. Separate department headed by a senior officer looks after internal control systems and assists internal auditors and the Audit Committee and provides desired inputs to them. The Committee also meets the Companys statutory auditors to ascertain, inter alia, their views on the adequacy of internal control systems in the Company and keeps the Board of Directors informed of its major observations from time to time.

FINANCIAL PERFORMANCE

Your Company has succeeded in reducing the loss of the company by 98%. The following table show the Consolidated and Standalone reducing loss figures:

(र in Lakhs)
PARTICULARS

CONSOLIDATED

STANDALONE

2017-18 2018-19 2017-18 2018-19
Total Revenue 19,484 25,334 24,060 25,221
Total Expenses 25,992 44,324 27,718 40,815
PBT (6,508) (18,950) (3,658) (15,594)
PAT (1,944) (18,950) (69) (16,457)

HUMAN RESOURCE DEVELOPMENT

The performance of every sectors Company is depending on its Human Resource Assets. Human resource development efforts of your Company are aligned with industry best practices. We understand that a positive workplace forever remain, the foundation on which a company can realize its goals and achieve competitive advantage. Strengthening our human capital is, therefore, core to our operations. We are adopting Progressive policies for junior employees and special leadership development programs for senior employees and also tailoring the organization structure to be more productive and lean. Your Company is an equal opportunity employer, embracing diversity in race, religion, marital status, gender, age, ethnic origin, and physical ability; and providing its diverse workforce with a stimulating environment to aid both their personal and professional development. But irrespective of adopting above mentioned efforts, the number of employees as on March 31,2019, has been reduced and its about 250 number of employees are working with the company and its subsidiaries, across the country.

CAUTIONARY STATEMENT

Statements made in the Management Discussion and Analysis Report describing the Companys objective, projections, estimates, expectations may be forward looking statements within the meaning of applicable laws and regulations, based on beliefs of the management of the Company. Such statements reflect the Companys current views with respect to the future events and are subject to risks and uncertainties. Many factors could cause the actual result to be materially different from those projected in this report, including among others, changes in the general economic and business conditions affecting the segment in which the Company operates, changes in business strategy, changes in interest rates, inflation, deflation, foreign exchange rates, competition in the industry, changes in Governmental regulations, tax laws and other Statutes & other incidental factors. The Company does not undertake any obligation to publicly update any forward looking statements, whether as a result of new information, future events or otherwise.