Udayshivakumar Infra Ltd Management Discussions

Global Economic Scenario

Global economic prospects are weakening, with substantial barriers to trade, tighter financial conditions, diminishing confidence and heightened policy uncertainty projected to have adverse impacts on growth.

The Outlook projects global growth slowing from 3.3% in 2024 to 2.9% in both 2025 and 2026. The slowdown is expected to be most concentrated in the United States, Canada, Mexico and China, with smaller downward adjustments in other economies.

GDP growth in the United States is projected to decline from 2.8% in 2024 to 1.6% in 2025 and 1.5% in 2026. In the euro area, growth is projected to strengthen modestly from 0.8% in 2024 to 1.0% in 2025 and 1.2% in 2026.

Chinas growth is projected to moderate from 5.0% in 2024 to 4.7% in 2025 and 4.3% in 2026.

Inflationary pressures have resurfaced in some economies. Higher trade costs in countries raising tariffs are expected to push inflation up further, although the impact will be partially offset by weaker commodity prices. Annual headline inflation in the G20 economies is collectively expected to moderate from 6.2% to 3.6% in 2025 and 3.2% in 2026.

Indian economic scenario opportunities

Real GDP is projected to grow by 6.3% in fiscal year 2025-26 and 6.4% in 2026-27. Private consumption will gradually strengthen, driven by rising real incomes that are helped by moderate inflation, recent tax cuts and a strengthening of the labour market. Investment will be supported by declining interest rates and substantial public capital spending, but higher US tariffs will weigh on exports. Inflation will remain contained at around 4% as economic activity grows around trend. A less benign monsoon season or higher global commodity prices could drive up food prices and inflation.

The Union Budget for the fiscal year 2025 26 foresees a moderate fiscal consolidation, aiming to reduce the headline budget deficit from 4.8% of GDP in fiscal year 2024-25 to 4.4% in 2025-26. With inflation firmly within the target range, monetary policy is gradually expected to become more accommodative. Better targeting of energy and fertiliser subsidies, and an overhaul of tax expenditures, could enhance spending efficiency and free resources for other policy priorities. Improving logistics efficiency, upgrading digital infrastructure, and enhancing policy predictability, particularly in tax administration, could bolster private investment.

Domestic demand supports activity

Real GDP expanded by 6.2% year-on-year in the third quarter of FY2024-25, supported by robust domestic demand and strong investment. High-frequency indicators suggest that economic activity remained solid in the fourth quarter. Industrial production rose by 3.7% year-on-year in the first four months of 2025, with the manufacturing sector regaining strength. Indias current account deficit widened in the first three quarters of

FY2024-25, due to a persistent merchandise trade deficit that was only partially offset by strong services exports. More recent data suggest a slight improvement in the trade balance. The labour market was resilient in 2024 with the labour force participation rate increasing to 45.1% and employment continuing to rise. Survey data from early 2025 show optimism in the labour market, especially in sectors such as information technology, retail, and finance.

Monetary conditions remain restrictive, despite policy rate cuts in February and April. Headline inflation eased to 3.2% in April 2025 and is now within the central banks target range of 4% ? 2%, largely due to a substantial moderation in food inflation, which accounts for nearly half of the CPI basket, and declining energy prices. Easing food prices reflect a strong autumn harvest, and government interventions, such as export restrictions. As a major oil importer, India has benefited from lower global crude oil prices in recent months, which reduced domestic fuel costs and helped contain input costs in energy-intensive sectors such as transport, manufacturing, and agriculture. While core inflation remains slightly above 4%, wage growth remains moderate. High merchandise export exposure to the United States, which is Indias largest export market, increases the vulnerability of private investment to shifts in trade policy. Tariff increases and broader trade tensions may damp investor sentiment, particularly in export-oriented sectors such as chemicals, textiles, and electronics. However, the overall GDP effects will be limited by the moderate share of exports in GDP, with merchandise exports towards the United States accounting for only 2.1% of GDP.

Industry structure and developments.

Over the last decade, India has embarked on an ambitious journey of infrastructure development to reinvigorate the economy. To foster economic growth and development, government has allocated Rs 11.11 lakh cr towards capital expenditure (3.4% of GDP), marking an increase of over 5 times in the last 10 years. Most of the capex surge has been witnessed in the last 5 years, with an annual growth of 27% witnessed between the same period. Government has consistently established its commitment and focus on creation of world-class, good-quality infrastructure assets. This is exemplified through the substantial allocation of overall capital expenditure for

Infrastructure focused sectors, with share of Centres capex in infrastructure increasing from 28% in FY2014 to ~60% in FY2025. Over the next 5 years also, Government assures continued focus on infrastructure through strong fiscal support, in conjunction with other priorities.

Infrastructure has witnessed significant advancement in last 10 years, with expansion of National Highways (NH) network by 1.6 times, electrification of 94% of the rail network, operationalization of 100 high-speed Vande Bharat trains, modernization of 1,318 railway stations, expansion of metro rail network by ~4 times whilst serving 21 cities, operationalization of 84 Airports and increase in Power generation capacity by 70%. These developments have been accelerated by governments programmatic interventions such as creation of National

Infrastructure Pipeline (NIP) of project worth Rs 111 lakh cr, National Monetization Pipeline (NMP) of projects worth Rs 6 lakh cr and PM GatiShakti National Master Plan. Implementation of sector-focused large-scale national level programmes like Bharatmala, Sagarmala, Regional Connectivity Scheme-UDAN, Dedicated Freight Corridors, High Speed Rail network, Redevelopment of Railway Stations, BharatNet, Jal Jeevan Mission, AMRUT, Smart Cities Mission, etc. have also contributed to fast-tracking development. Phase IV of PMGSY aims to provide connectivity to 25,000 rural habitants.

Risks and Concerns

Threats are described as anything that would contribute to the interruption of infrastructure development in the country. Threats can be either in the form of major policy changes by the Government, implementation of stringent qualification criteria and insurgency threats in a specific region. These have been described below:

Policy Changes

Policies for development of infrastructure projects are now prepared keeping in view longer gestation period and are being given equal importance by all the ruling Governments as development of the road sector is an example and which is given top most priority at all levels in Government. However, there are chances of major policy changes by the Government either National or at State level which can affect the development of a particular segment of infrastructure. Looking at the current scenario and demand for infrastructure development in the country, the chances of any major policy change which can adversely affect infrastructure business in the country are negligible Selection Criteria In certain cases the project awarding authorities keep stiff qualification criteria which may disallow small or mid size developers having inadequate financial or technical scores to bid for the project. The Company has sufficient scores both in terms of financial or technical aspects to be able to qualify for all categories of projects being implemented or which are in the pipe line

Force Majeure Threats

There are certain regions in the country which may carry the risk of the project having to be abandoned due to force majeure events like natural perils, war, terrorism etc. However, all the Concession Agreements signed provide proper risk cover in such circumstances with no adverse financial impact on the Company as it is backed by Government guarantee and covered through insurance Change in Law In case the Government makes changes in law which could have an impact on infrastructure projects, the Concession Agreement provides for the Concessionaire to be insulated from any adverse impact arising from such change in law Outlook

Discussion on financial performance with respect to operational performance

In the Financial year 2024-25 the company has work order in hand as on 31.03.2025 Rs.194890.00 Lakhs consisting of 29 major projects in the State of Karnataka. Out of these work orders Rs.46580.00 Lakhs completed till 31.03.2025 and balance to be carried out is Rs.148306.00 Lakhs. In next 2 to 3 Years

The Companys revenue from operations stood at Rs.28712.73 Lakhs in financial year 2024-25 vis-?-vis Rs. 57714.78 lakhs in 2023-24, with a decline over last year due to loss in the National Highways Authority of India Ltd. Toll collection contracts and delay in the start of the major projects due to land acquisition by the National Highways Department.

Operating expenses for the year stood at 30270.36 lakhs in Financial year 2024-25 as against 54673.04 lakhs in the financial year 2024-24. The Company EBITDA is reduced for Rs. INR 257.24 Lakhs vis-?-vis Rs. 5231.73 lakhs during 2023-24.

Outlook

One of the major initiatives, Gati Shakti, led to a shift within the infrastructure sector. Also known as the National Master Plan for Multi-modal Connectivity, the project is worth US$1.2t and aims to streamline the planning process and ensure that resources are effectively directed towards development planning. The different divisions of the governments will now have a platform to work together on infrastructure projects such as roads, railways, airports, ports, mass transport and waterways.

To further augment infrastructure development, the Indian government introduced the National Infrastructure Pipeline (NIP). The pipeline involves an estimated funding of more than US$1t over five years and includes projects in the renewable energy sector expected to actively involve private participants.

India also made headway in its plans for infrastructure development through a sovereign wealth fund. The fund is the National Investment and Infrastructure Fund (NIIF). NIIF was set up to manage investments and is intended to serve as a platform for co-investment by global and domestic investors and multilateral development banks (MDBs). The funds primary focus is on infrastructure and growth equity. In October 2023, the government announced the launch of an India-Japan Fund through a partnership with the Japan Bank for International Cooperation (JBIC). The fund has sanctioned US$600m and is dedicated to investments in efforts promoting sustainability and low carbon emissions. Further fostering the India-Japan strategic partnership, on February 20, 2024, the Japan International Cooperation Agency (JICA) announced that it has signed loan agreements for up to ?232,209m. These loans are dedicated to funding certain projects, which include road network connectivity projects, a freight corridor project and projects for climate change response and enhancement of ecosystem services in specific areas within India.

The recent shift in Indias focus on the infrastructure sector has led to the launch of several high-scale projects across the country. The highway connecting the capital city, Delhi, with the financial city, Mumbai, is one of them. This unprecedented project is expected to be completed this year and significantly reduce travel time between the two megacities. With the projects first phase already inaugurated this month, India continues its push to enhance infrastructure.

2024 will also be marked by the completion of the worlds highest railway bridge. Launched on February 20 of this year, this bridge is predicted to promote supply chain and economic growth significantly. The completion of this project is seen as evidence of Indias capabilities in civil engineering. More than a dozen of other highway projects are in progress. Plans to develop and modernize railway corridors are also underway.

With the launch of the UDAN scheme, the countrys aviation sector is also expected to boom. The scheme has led to a doubling of the number of airports. The culmination of these projects is expected to strengthen the countrys supply-chain sector significantly.

The government is aiming to strike a balance between urban transformation and schemes promoting responsible commuting. The "PM-eBus Sewa Scheme" launched last year is one of such schemes. This initiative will re-invent the countrys bus operations and encourage the use of public transport through payment security mechanisms.

The interim budget allocation announced for 2024/25 earlier this month signals Indias continued commitment to build infrastructure. The Indian government will devote about US$134bn to projects within the infrastructure sector. This step will raise the countrys spending in the sector by around 11 percent compared to last year.

Risk Management

Risk Management is a key aspect of the "Corporate Governance Principles and Code of Conduct" which aims to improvise the governance practices across the Companys activities. Risk management policy and processes will enable the Company to proactively manage uncertainty and changes in the internal and external environment to limit negative impacts and capitalize on opportunities.

The Board of Directors ("the Board") of Udayshivakumar Infra Limited (‘the Company) has adopted the following policy and procedures with regard to Risk Management as defined below. The Board may review and amend this policy from time to time.

Internal Control system and their Adequacy

The compliance certificate from the Whole Time Director and the Chief Financial Officer provided in the Annual Report confirms the adequacy of our internal control system and procedure. The Audit Committee in every meeting evaluates Internal Financial control and Risk Management Systems

Material Development in Human Resources/Industrial Relations Front including number of people employed

Our strategic objective is to build a sustainable organization while creating growth opportunities for our employees and generating profitable returns to our investors. The total work force of the Company is 256. Number will be increased with the growth of business of the Company. The Company is aware that satisfied highly motivated and loyal employees contribute to the growth of the Company. The employee relations remained cordial throughout the year.

Disclosure of Accounting Treatment

In the preparation of financial statement for the year ended March 31, 2025, no treatment different from that prescribed in the Accounting Standards has been followed by the Company.

Details of Significant Changes in Key Financial Ratios

		2024-25		2023-24		% of
Ratio	Formula	Values Rs. In Lakhs	Ratio	Values Rs. In Lakhs	Ratio	Change
	Current Assets	17,274.44		17,853.87
1. Current Ratio	Current Liabilities	16,117.78	1.07	11,160.52	1.60	-33.13%
Explanation: Decrease in the Current ratio due to increase in Trade Receivables and WIP
	Short Term Debt +
2. Debt Equity	Long Term Debt +	5,998.77	2.81	3,807.68	4.59	-38.78%
	Other Fixed Payments
	Share Holders Equity	16,845.12		17,492.56
Explanation: Decrease in Total Debts and decrease in shareholders equity caused the ratio to decline.
3. Debt Service	Earnings available for debt service	908.17	0.73	5,231.73	4.65	-84.30%
Coverage Ratio	Debt Service	1242.93		1126.10
	Net Profits after taxes
4. Return on Equity (ROE)	Preference Dividend (if any)	-720.68	-4.28	3,012.81	18.88	-122.67%
	Average Shareholders Equity	16,845.12		15,955.94
Explanation: Decrease in earning due to loss on the Toll collection Business and delay in start of new projects
5. Inventory to	Cost of Goods Sold	26,918.00	5.22	51,580.33	15.38	-66.06%
Ratio	Avg. Inventory	5,153.28		3,353.17
Explanation: More times increase in average inventory to COGS caused the ratio to decline.
6. Trade Receivables to	Net Credit Sales	28,912.73	2.63	57,714.78	5.76	-54.34%
Ratio	Avg. Trade Receivables	10,991.87		10,012.27
Explanation: Decrease in net credit sales and a slight increase in average trade receivables caused the ratio to declined
7. Trade Payables	Net Credit Purchases	10,269.29	1.55	10,269.29	1.75	-11.43%
to Ratio Explanation: NA	Avg. Trade Payables	6,626.32		5,867.76
8. Net Capital	Net Sales	28,912.73	3.63	57,714.78	8.82	-58.84%
Turnover Ratio Explanation: NA	Average Working Capital	7,972.69		6,544.19
9. Net Profit Margin	PAT	-720.68	-2.44	3,012.81	5.22	-146.74%
(In %)	Total Revenue	29,547.62		57,714.78
10. Return on capital employed	Earnings before interest and taxes	-71.81	-0.30	4,614.07	21.66	-101.39%
(ROCE)	Capital Employed	23,661.14		21,300.25
Explanation: Decrease in earning due to loss on the Toll collection Business and delay in start of new projects