Udayshivakumar Infra Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Global growth is forecast to slow from the 3.1% 2023 pace to 2.9% in 2024 and rebound to 3% next year. Inflation is expected to continue to cool, although in many countries the price pressure will take longer to unwind than it took to emerge.

Geopolitical uncertainty is elevated, with nearly half of the worlds population already voting or heading to the polls this year. Hot wars and trade tensions are flaring, which could fuel more isolationist policies. The resulting risk is more frequent bouts of inflation and activist monetary policies.

A slower expected glide path on rate cuts by the U.S. Federal Reserve, which plays an outsized role in global financial markets, will have a larger impact on rate decisions by developing economies. These markets are more sensitive to the exchange rate movements than we have seen in the past. Weakening currencies relative to the U.S. dollar are inflationary for those economies. To further complicate matters, foreign exchange markets have been reacting to unexpected election outcomes.

Between interest rate uncertainty and the elections, business leaders remain hesitant to engage in major investment projects. Consumers are cutting back on financed goods due to elevated rates, while governments face higher financing costs as debt rolls over at higher interest rates.

Friend-shoring, re-shoring and near-shoring are reshuffling supply chains as producers hedge against geopolitical risk, often at higher costs. The conflict in the Middle East has caused seaborne trade to be rerouted, while higher- than-expected demand and weather have also increased shipping costs. The National Atmospheric and Oceanic Administration expects a record number of major storms for 2024, which will only add to shipping times and snarled travel.

Prospects for 2025 are better, with inflation expected to return towards target and central banks more confident to cut policy rates from the current restrictive levels. The silver lining is a tailwind for big-ticket consumer purchases and business investment. Mergers and acquisitions activity could also gather steam, as financial conditions ease and dry powder is deployed. However, the uncertainty remains around the policy shifts, which will likely fuel more insular and protectionist policies.

The much-vaunted productivity boost from generative artificial intelligence (GenAI) is unlikely to appear at the global level for several years. One of the largest hurdles is the energy needed to run the large language models. Those costs could exacerbate inequality between the developed and developing economies. While advances in AI could also disrupt the labor markets during the transition period, our forecast is nonetheless consistent with a broadly stable unemployment rate globally.

Indias journey towards becoming a developed nation by 2047 hinges significantly on improving its infrastructure, a cornerstone for fostering liveable, climate-resilient, and inclusive cities that drive economic growth. The governments commitment is evident through its allocation of 3.3% of GDP to the infrastructure sector in the fiscal year 2024, with particular focus on the transport and logistics segments.

Roads & Highways account for the highest share, followed by Railways and Urban Public Transport. The government has set ambitious targets for the transport sector, including development of 2 lakh-km national highway network by 2025 and expanding airports to 220. Additionally, plans include operationalizing 23 waterways by 2030 and developing 35 Multi-Modal Logistics Parks (MMLPs). The total budgetary outlay for infrastructure-related ministries increased from around INR 3.7 Lakh Cr in FY23 to INR 5 Lakh Cr in FY24, offering

investment prospects for the private sector across various transport sub-segments. As the transport sector gears up to address sustainability challenges, the private sector stands poised to capitalize on the conducive policy environment to accelerate infrastructure investments. Public-Private Partnerships (PPPs) have served as a vital mechanism for private sector engagement across various infrastructure domains, notably in the construction of airports, ports, highways, and logistics parks throughout India. Besides support from the central government and states across various schemes, India needs a significant push from Public-Private Partnerships to achieve its goal of reaching a $5 Trillion economy by 2025.

In 2021, the government launched the PM Gatishakti National Master Plan (NMP) with a focus on major transport sectors to enhance multimodal connectivity infrastructure in various economic zones. It aims to bring together the infrastructure schemes such as Bharatmala, Sagarmala, UDAN etc. under a digital platform. The NMP offers a detailed database of trunk and utility infrastructure, ongoing and future projects from different ministries/departments of both the Central Government and States/UTs. Integrated with the GIS-enabled PM Gatishakti platform, this allows for streamlined planning, design, and monitoring of next-generation infrastructure projects on a single portal. As per the India Investment Grid (IIG) database, there are currently 15,580 projects worth $2388.93 Bn at various stages of development.

Alongside this, the National Logistics Policy, addresses the development of integrated infrastructure and efficiency in services, including processes and regulatory frameworks, through its Comprehensive Logistics Action Plan (CLAP). Together, the NMP and the National Logistics Policy provide a framework for creating a data- driven decision support mechanism to enhance logistics efficiency and reduce costs in the countrys logistics ecosystem.

About 65% of the freight traffic and 80% of the passenger traffic is carried by road. National Highways constitute only about 2% of the road network but carry about 40% of the total road traffic. The number of vehicles has been growing at a compounded annual growth rate of around 10% over the last five years. Road density is 2.75 km. per 1000 persons and 770 km. per 1000 sq km. area against the average of 6.7 km. and 840 km. respectively in developed countries for a country of Indias size, an efficient road network is necessary both for national integration as well as for socio-economic development. Of the central programmes, the Rs. 3,314 Billion National Highways Development Project (NHDP) undertaken by Government of India through National Highways Authority of India (NHAI) provides a very significant opportunity for the development of national highways including construction of bridges, flyovers and elevated structures. Spread across seven phases, the project includes the up-gradation of more than 50,000 km. of National Highways Industry Structure and development.

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:

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

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

In the Financial year 2023-24 the company has work order in hand as on 31.03.2024 Rs.91966.00 Lakhs consisting of 25 projects in the State of Karnataka. Out of these work orders Rs.33597.00 Lakhs completed till 31.03.2023 and balance to be carried out is Rs.58399.00 Lakhs.

The Companys revenue from operations stood at Rs.57,714.78 Lakhs in financial year 2023-24 vis-a-vis Rs. 28,689.81 lakhs in 2022-23, with a growth rate up by 101.17 % by volumes over last year.

Operating expenses for the year stood at 54,673.04 lakhs as against 26,639.40 lakhs in the financial year 2022-23. The Company generated EBITDA of Rs. INR 5231.73 Lakhs vis-a-vis Rs. 3,218.98 lakhs during 2022-23.

The major reforms in the Indian infrastructure sector came with the implementation of the 12th five-year plan (FY 2012-17), where the Government of India began to place a significant emphasis on the infrastructure sector by announcing investments to the tune of US$ 1 trillion with 40% of the funds coming from the private sector. From FY 2008-17, infrastructure investment in India stood at Rs. 60 lakh crore (US$ 750.01 billion). The 11th five- year plans infrastructure investment (FY 2008-12) stood at a total of Rs. 24 lakh crore (US$ 300 billion), and that in the 12th five year plan (FY 2013-17) totalled Rs. 36 lakh crore (US$ 450 billion). As a part of its policy reforms, the government of India also allowed 100% foreign direct investment through an automatic route ensuring minimal interference from governmental entities. According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflows in the infrastructure sector stood at US$ 54.12 billion between April 2000- March 2022.

India Set to Double Infrastructure Spending to Rs 143 Lakh Crore By 2030

India is embarking on an ambitious journey to transform its infrastructure landscape, with a significant surge in investment expected between fiscal years 2024 and 2030. CRISIL, a prominent research and rating agency, unveiled these staggering projections during the India Infrastructure Conclave 2023 in New Delhi.

According to CRISIL, India is set to double its infrastructure spending, reaching approximately Rs 143 lakh crore in the seven fiscal years leading up to 2030. This is a substantial increase compared to the roughly Rs 67 lakh crore spent between fiscal years 2017 and 2023. A remarkable portion of this investment, approximately Rs 36.6 lakh crore, is earmarked for green initiatives, marking a fivefold increase compared to the previous seven fiscal years.

Amish Mehta, Managing Director & CEO of CRISIL Ltd, highlighted the implications of this surge in investment, projecting Indias gross domestic product to grow at an average rate of 6.7% through fiscal year 2031. As a result, per capita income is expected to rise from around $2,500 to approximately $4,500 by 2031, elevating India to the status of a middle-income country.

The focus of the conclave was on "Building and financing sustainable infrastructure," with special emphasis on funding and capacity-building for sustainable solutions in energy, transportation, and urban development. Key policymakers, industry leaders, and representatives of funding agencies gathered to discuss the future of Indias infrastructure landscape.

Shri Nitin Gadkari, Union Minister for Road Transport and Highways, launched the CRISIL Infrastructure Yearbook 2023 at the event, which introduced a unique national index, the CRISIL InfraInvex. This index measures the investment attractiveness of select infrastructure sectors, now incorporating environmental sustainability to reflect its increasing importance in investment decisions.

CRISIL emphasised the need for consistent policies and timely regulatory interventions to maintain Indias compelling infrastructure investment thesis over the long term. The future of infrastructure development in India will feature larger projects and an increasing number of mega-scale endeavours, requiring the active involvement of all stakeholders.

The yearbook also shed light on the funding requirements and interventions needed to address the funding- related challenges, particularly in the realms of green financing and the emergence of electric vehicles, renewable energy, battery storage, and hydrogen in shaping sustainable infrastructure development.

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.

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 Human Resources/industry

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 182. 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.

In the preparation of financial statement for the year ended March 31, 2023, no treatment different from that prescribed in the Accounting Standards has been followed by the Company.