PNC Infratech Management Discussions


As per World Economic Outlook (April 2022 edition) by the International Monetary Fund, the worldwide economic recovery was expected in the 2nd quarter of the calendar year 2022 after facing lower than expected challenges due to the covid-19 pandemic. However, it worsened owing to heightened geopolitical conflicts, which resulted in a sudden and sharp increase in the commodity prices and consequent high inflation across the globe. In addition to the conflict, China experienced frequent and broader lockdowns, including in important manufacturing areas.

These geopolitical uncertainties added to a series of supply disruption that hit the global economy resulting in shortages of the energy. Production problems in one country quickly ripple across the globe due to the integrated global supply chains. As per the World Economic Outlook, global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023 which is 0.8 and 0.2 percentage points lower for 2022 and 2023, than projected in January by the International Monetary Fund. Beyond 2023, global growth is expected to decline to about 3.3% over the medium term.

Indian Economic Overview

When the domestic economy was at the cusp of a strong bounce-back leaving behind the worst of Covid-19, prices of food grains and commodities went up in India, due to the geopolitical tension between Ukraine and Russia. Indias growth prospects have also been affected by this crisis. Crude oil prices tested above US$ 100 per barrel levels and edible oil prices increased considerably, which are crucial imports from the two warring states. This situation has pushed economic analysts to forecast lower-than-expected growth in 2022. As a result, growth in Government receipts is expected to reduce along with increased subsidy expenses. Capital withdrawals and rising import costs will also have an impact on the current account balance and currency valuation.

High-frequency indicators such as air traffic, automobile sales number, manufacturing, and services PMI, and overall consumer sentiments are pointing towards slow growth, especially during H1 FY 2022-23. The domestic economy grew 8.7% in FY 2021-22. This was followed by a contraction of 6.6% on a y-o-y basis. However, the overall growth was lower than expected due to subdued recovery in a few sectors, including agriculture, manufacturing, and contact-intensive services.

However, looking beyond the short-term challenges, we remain sanguine about the opportunities India offers. The impact of upcoming waves of Covid-19, if any, on the economy is expected to be minimal mainly due to high vaccination coverage and increased general awareness. The Government and the RBI are working in close coordination to contain inflation, while supporting sustainable growth. As per FICCI Economic Outlook Survey, Indias GDP growth is expected to be 7.4% for FY 2022-23, which would be one of the best among the emerging markets.


The project awarding activity witnessed healthy growth in FY 2021-22. The total length of highway projects awarded in FY 2021-22 stood at 12,731 kilometres, an increase of ~22% y-o-y. The execution, however, remained affected owing to incessant rains across the country, disruptions caused by multiple waves of Covid-19 and the resultant lockdowns, and labor scarcity. At the same time, the industry continued to witness challenges such as increase in raw material costs due to increasing freight, fuel, and commodity prices. In terms of highway construction, the pace of construction declined by almost 21% y-o-y in FY 2021-22, to 10,457 km of national highways, down from 13,327 km in FY 2020-21.

NHAI awarding activity was slow until February 2022, which picked up the pace in March 2022. In FY 2021-22, the NHAI awarded or opened bids for projects with a length of 4,970 km and a value of roughly ? 1.4 lakh Cr, compared to 4,818 km and a value of nearly ? 1.3 lakh Cr, y-o-y. The speed of road project awards increased considerably in the month of March 2022, to around 5,113 Km.

In the Union budget, allocation to MORTH grew by ? 80,000 Cr from about ? 1.11 lakh Cr to ? 1.9 lakh Cr, representing a 70% YoY growth. NHAIs funding allocation more than doubled during this period as well. The Governments plan to expand the national highway network by 25,000 Km in the current fiscal year is supported by this massive increase in budget. Aside from investments in roads and highways, this years budget also put a focus on river connection projects, which will increase water availability across various regions, and comparable irrigation projects.

By 2024, the Government intends to add 40 Km of world- class National Highways per day. The Government and other organizations have undertaken several steps in recent years to speed up highway construction and improve the financial health of infrastructure firms.

Continued Support By The Government Through Various initiatives

NHAI announced a new system to speed up the payment of compensation for land acquisition to property owners, under which the funds will be transferred directly to the beneficiarys accounts via the public finance management system. This will also save thousands of crore from being blocked in banks for months, which could be used for construction.

Deleveraging of NHAi balance Sheet To Drive Highway construction Growth

NHAI set a monetization target of 21,700 km of highway stretches in three years starting from FY 2022-23. It could help the NHAI to raise about ? 2 lakh Cr. NHAI has identified stretches of 5,500 km for monetization in FY 2022-23, 7,300 km in 2023-24, and 8,900 km in 2024-25. The NHAI will utilize these funds to repay the debt which stood at around ? 3.2 lakh Cr in FY 2020-21. In early November 2021, the NHAI launched its maiden InvIT, another mode of asset monetization, to mop up ? 5,100 Cr by monetizing 390 km highway stretches. Such initiatives are expected to deleverage NHAIs balance sheet significantly, which certainly will benefit the whole industry.

Significant Rebound In Toll Collection

After witnessing a fall in FY 2020-21 due to Covid-19- induced lockdowns and sluggish economic activities, FASTag toll receipts grew by 67% y-o-y and reached ? 38,084 Cr in FY 2021-22. On the national highways, FASTag penetration now stands around 97% with 964 toll plazas being live on FASTag.

The recent hike by NHAI in toll rates, which is linked to WPI along with a rebound in passenger and commercial vehicle traffic, is expected to drive the toll revenues during FY 2022-23.

Union Budget Highlights For The infrastructure Sector

- PM Gati Shakti is a concept strategy for economic growth and development. Seven engines power this strategy: roads, railways, airports, ports, mass transportation, waterways, and logistics infrastructure.

- During FY 2022-23, national highway network will be extended by 25,000 Km.

- ? 20,000 Cr will be raised using innovative financing methods to supplement public funds.

- During FY 2022-23, contracts for the PPP implementation of Multimodal Logistics Parks at four locations will be finalized.

- During FY 2022-23, 2,000 km of the network would be brought under Kavach, an indigenous world-class technology for safety and capacity augmentation, as part of Atmanirbhar Bharat.

- 400 Vande Bharat trains with new generation technology will be introduced in the next three years. During the following three years, trains with improved energy efficiency and passenger comfort will be developed and operationalized.

- Multimodal connectivity between public transportation and railway stations will be prioritized. Metro systems, including civil constructions, will be redesigned and standardized to meet Indian conditions and requirements.

- National Ropeways Development Program will be implemented on a PPP basis as a preferred environmentally sustainable alternative to conventional highways in tough hilly areas. In FY 2022-23, contracts for 60 kilometer 8 ropeway projects will be awarded.

- Har Ghar, Nal Se Jal now has 8.7 Cr of beneficiaries. In the previous two years, 5.5 Cr households have received tap water. A budget of ? 60,000 Cr has been set aside with the goal of covering 3.8 Cr homes by FY 2022-23.

Water Sector

The Jal Shakti Ministry has been allocated ? 86,189 Cr in the Union Budget 2022-23, as against ? 69,052 Cr y-o-y, a growth of 24%. Under the Jal Shakti Ministry, the Drinking Water and Sanitation Department has been allocated ? 67,221 Cr, while ? 18,968 Cr have been allocated to the Department of Water Resources, River Development, and Ganga Rejuvenation.

? 60,000 Cr have been allocated to provide Functional Household Tap Connections (FHTC) to 3.8 Cr households in FY 2022-23 under the Jal Jeevan Mission (JJM), as against ? 50,000 Cr y-o-y. JJM is a program of the Union Government to provide drinking water connections to rural households in the country.

The mission is on track to meet its target, with groundwork well underway: Goa, Telangana, Andaman & Nicobar Islands, Puducherry, Haryana, Dadra and Nagar Haveli, and Daman & Diu have all reached 100% tap water penetration, while Jharkhand, Chhattisgarh, West Bengal, and Rajasthan have the lowest functional household tap connection coverage. Uttar Pradesh has the lowest tap coverage in rural regions, at 13.46%, and the highest functional tap demand. Thus, ample opportunity is available under the JJM, especially for the northern states, including Uttar Pradesh where the Company has a strong presence.

Airport Sector

Growth in air passenger traffic in India has remained on upward trajectory since the new millennium, driven by growth in real income and low-cost aviation. During the previous three years, Indias civil aviation industry has become one of the countrys fastest-expanding industries. India has surpassed the United Kingdom to become the worlds third-largest domestic aviation market. According to the International Air Transport Association, India is predicted to overtake China and the United States as the worlds largest air passenger market in the next ten years by 2030.

In India, there are currently 464 airports of which 125 are managed by the Airports Authority of India (AAI). 89% of the aircraft movement and 91% of the passenger traffic is handled by these AAI-managed airports (Source: Airports Authority of India).

The Government of India has now allowed foreign companies (except airlines) to own 100% of domestic airlines as against the previous limit of 49% to attract more foreign capital in the aviation sector (scheduled air transport service/domestic scheduled passenger airline and regional air transport service). However, investment by foreign airlines in domestic airlines will be limited to 49% of paid-up capital. With many regional airports coming up along with the Governments support, the aviation sector is expected to witness growth in investments in the coming years.


PNC Infratech Limited offers end-to-end infrastructure implementation solutions that include EPC services on a fixed-sum turnkey basis, as well as on an item rate basis. The Company also executes and implements projects on a Design-Build-Finance-Operate-Transfer (DBFOT) basis, Hybrid Annuity Mode basis and other public-private partnership formats. PNC is one of the few infrastructure companies in India that have proven investment, development, construction, and management capabilities.

Fully Integrated Infrastructure Player With In-House Capabilities

For the past two decades, the Company has created a strong track record of being an efficient player in the construction of roads, highways, expressways, bridges, and airport runways. The Company is well capable of taking an EPC project of large ticket size. The Company has a large fleet of construction equipment, plants and machinery with a gross block of ? 1,273 Cr.

The Company has also focused on creating a robust workforce over the years to reinforce the project execution capabilities. Since FY 2016-17, we have added about 3,415 employees to our workforce, taking the total strength to 10,187 employees. The diverse work force consists of in-house design, engineering, development, construction, operation, management, and a strong technical team. As a result of this, the Company can undertake and execute projects on a timely basis, without compromising on quality and profitability.

Diversified Presence Across Multiple Segments

The Company continues to focus on calibrated diversification to continue the growth momentum, without assuming the concentration risk. However, the focus area remains the road sector. The Company is looking forward to increasing the order book in the water sector, by participating in more projects under the Jal Jeevan Mission for which the Company expects sizeable inflow of orders over the near and medium-term.

The key segments where the Company operates include roads, highway and expressway projects under BOT, HAM and OMT models, airport runways & pavements, rural drinking water supply, irrigation, and industrial area development.

Cluster-based Approach With A MultiState Presence

Being headquartered in the North India and a strong track record of project execution over the years in the northern part of country, a large chunk of the order book is located in North India. The Company has a strong presence in Uttar Pradesh, Rajasthan, Haryana, Madhya Pradesh, Bihar, Uttarakhand, Maharashtra, Gujarat and Karnataka. We have successfully executed over 80 major infrastructure projects spread across 13 states.

>At present, the Company has a total of 25 projects in PPP format, comprising BOT-Toll, BOT Annuity, OMT and HAM assets. Out of these 25 projects, 18 HAM projects with a total Bid Projects cost of ? 24,590 Cr. From the HAM portfolio of 18 projects, the Company has achieved COD/PCOD of 5 projects, 6 are under construction, and 7 projects recently awarded.

We follow a cluster-based approach, with more than 75% of our total order book consisting of projects from Uttar Pradesh. The Company leverages the strategic location for optimum utilization of resources translating into superior operating leverage and profit margins. Given a long track record of operating in this cluster, the Company can bid at competitive rates and still maintain a margin and profitability profile. The Company has been one of the biggest beneficiaries of the recent awarding activity in North India, especially in Uttar Pradesh and we expect similar momentum in the coming years.

Established Relationship With Public Sector Clientele And Excellent PreQualification Credentials

Over the past two decades, the Company has worked on several projects with various State and Central Governments. We have built strong, long-term relationships with key infrastructural development authorities such as the NHAI, MoRTH, Airports Authority of India, Military Engineering Services, Delhi State Industrial and Infrastructure Development Corporation Limited, Haryana State Roads and Bridges Development Corporation Limited, Madhya Pradesh Road Development Corporation Limited, Uttar Pradesh State Highways Authority, Uttar Pradesh Expressways Industrial Development Authority, State Public Works Departments, Dedicated Freight Corridor Corporation of India Limited and others.

IN FY 2021-22, the Company executed multiple projects across the multiple states which helped us mitigate risks and efficiently manage the working capital cycle. With strong execution credentials, the Company has been able to qualify for bidding on large projects and can bid for a single project up to a ticket size of ? 4,000 Cr individually meeting financial and technical qualifications.

Optimal Leverage And Asset Monetization To Pave Way For Funding Future Projects

The Company has a standalone net debt to equity ratio of 0.06x as of FY 2021-22 (consolidated net debt/equity at 1.32x). We will continue to fund the HAM projects through internal accruals and monetization of our operational BOT and HAM projects.

We, along with our wholly owned subsidiary, PNC lnfra Holdings Limited and other partners/promoters, on April 01,2021, entered into Share Purchase Agreement and other related transaction documents inter alia for sale its entires take of 35% (which includes 19.88% stake held by PNC lnfra Holdings Limited, a wholly owned subsidiary of the Company) in Ghaziabad Aligarh Expressway Private Limited, an Associate of the Company to Cube Highways and Infrastructure Pte Limited (Cube Highways). This transaction was subject to receipt of applicable regulatory and complying with the condition precedent, more specifically laid down in the Share Purchase Agreement. The deal was finally concluded on May 26, 2022 and total consideration was received. The Company is also exploring various options, including direct sale of fund based assets, on the basis on the valuations received going forward.

PNC Infratech had a net cash flow from operations of ? 263 Cr in FY 2021-22. While the entire sector is witnessing problems with financial closure and fund-raising, our strong balance sheet, robust operating cash flows, and credit ratings have helped us raise debt capital at lower rates along with faster financial closures.

Strong Order Inflow & Robust Order Book Position To Continue To Drive Future Growth

In FY 2021-22, PNC Infratech received projects at a healthy rate of ? 11,146 Cr resulting in the expansion of the order book and providing provides strong revenue visibility.

The unexecuted order book on March 31,2022 was over ? 14,600 Cr. By including all the projects for which the Company has already received letters of award, the order book would be over ? 20,000 Cr, which gives strong revenue visibility for the Company over the 2-3 years. The Company is not expecting any delays in getting financial closure and appointed dates for the recently won projects, so these awarded projects are likely to contribute to the revenue starting FY 2022-23 significantly.

Financial Overview

We are one of the few companies in the infrastructure and construction space in India that has posted consistent operating cash flow/free cash flow (OCF/ FCF) post-interest expense over FY 2014-22. The Company has negligible net interest expense as a percentage of EBITDA, thus having significant distributable cash flow. This has helped us avoid initiating aggressive growth campaign as well as unrelated diversification.

The standalone revenue for FY 2021-22 stood at ? 6,305.50 Cr.

The EBITDA for FY 2021-22 was ? 787.25 Cr and the profit after tax for FY 2021-22 was ? 447.83 Cr.

The Companys net worth as on March 31,2022, on a standalone basis was ? 3,340.2 Cr, whereas the total debt was ? 216.0 Cr. The Company has net cash of ? 191 Cr.

The interest coverage ratio for FY 2021-22 stood at 8.88x, as compared to 8.25x in FY 2020-21.

The current ratio, which indicates the Companys ability to pay short-term obligations, has remained strong at 2.7x for FY 2021-22, as compared to 2.2x in FY 2020-21.

During the year, CARE Ratings Limited reaffirmed its rating to AA with a stable outlook for the long-term facilities and reaffirmed A1 + for the short-term bank facilities of the Company.

The Companys net working capital days stood at 77 days as on March 31, 2022, compared to 51 days as on March 31,2021.

On a consolidated basis, the revenue for 2021-22 stood at ? 7,208 Cr. In terms of segment contribution, the EPC segment contributed approximately 85%, whereas the toll/annuity income contributed 15% for FY 2021-22. The toll/annuity income for FY 2021-22 grew by 17% to ? 1,071 Cr, as compared to ? 919 Cr in FY 2020-21.

The consolidated EBITDA for FY 2021-22 stood at ? 1534.45 Cr and the consolidated profit after tax in FY 2021-22 was ? 580.43 Cr. Whereas the consolidated profit after tax, minority interest and share in profit/loss of associate for FY 2021-22 was ? 580.43 Cr.

The Companys net worth as on March 31,2022, on a consolidated basis, was ? 3,628.1 Cr, whereas the total debt stood at ? 4,779 Cr. The net debt to equity on a consolidated basis came at 1.32x.


Competition Risk

The various business segments in which the Company operates, competes with a large set of regional, national and international companies. The competitive intensity varies by geography, nature of project, size and business segment. In FY 2021-22, the competition intensity was further increased owing to multiple Government initiatives, such as relaxed bidding criteria, which are now extended till October 31, 2022. This could lead to some pressure on margins driven by more competitive bids and lower contract prices.


The Company has a strong track record of 20+ years in engineering and construction. With the strong domain knowledge, the Company is aiming to bid for larger projects with ticket sizes of up to ? 4,000 Cr, where competition is less intense. By offering end-to-end services in terms of design, engineering, planning, management, and project execution to finish complex projects in a safe, timely, and cost-effective manner, the Company remains well-equipped to stay ahead of the curve. We are is planning to continue to complete the awarded projects ahead of the schedule to earn an early completion bonus wherever possible.

Capital-intensive Business Risk

The infrastructure sector as a whole, is very capitalintensive, particularly fund based (BOT) projects with a stretched payback period. The requirement of capital is intense for investment in assets with a large chunk of these assets being funded by the debt. Timely, and cost- effective availability of financing is very crucial, especially for TOT, BOT, and HAM projects.


While many infrastructure companies have faced challenges in raising the funds in a timely manner, the Company continues to benefit from lower interest rates and better terms on various loans for financing construction equipment, term debt for projects, and working capital facilities. The Company also possesses a large amount of fleet of construction equipment and machines, resulting in efficient mobilization of resources for multiple projects nearby.

input Cost Risk

There has been continuous inflationary pressure on input costs, especially for steel and cement. Structural steel, cement, bitumen, concrete, metal plate, cable, and other electrical and mechanical components are among the Companys main products. The sustaining upwards momentum in these costs may hamper the Companys margins and profitability. Apart from this, demand, manufacturer capacity, market conditions, and specific material shortages, the availability, prices of these products may vary dramatically. The lack of raw materials may also cause the project to be delayed.


Input cost volatility is very critical for any infrastructure project. The Companys approach is to have complete control over diverse input costs through ownership or long-term contracts. We have a large fleet of own stone aggregate mines and crushers, which is one of the primary cost contributors. Other key raw materials such as cement and steel are purchased from prominent manufacturers with whom the Company has built good business relationship over the years. This ensures competitive rates, high quality, and timely delivery. To minimize input cost pressure, we contract with Government clients and include cost-escalation measures that enable us to safeguard our margins during the project execution phase.

Labor Risk

The infrastructure projects are highly dependent on the timely availability of the labor force. Availability and the Companys capability to hire, retain and use experienced individuals, such as engineers, designers, corporate management professionals, and labors, with the requisite experience and competence at a competitive cost is critical for the execution of the project. The Companys inability to do so in the future may limit the Companys ability to execute the projects.


A large chunk of the Companys projects is based out of Northern India, where the availability of the labor force is abundant. The Company is focussing on providing requisite training and creating an environment to thrive and contribute. We follow an open-door policy along with entrepreneurial working culture. The Companys compensation approach is based on a systematic evaluation and appraisal of each employees performance and potential. We also distribute the early completion bonuses collected for the projects to the project team in the same proportion of number of days.

Human Resource Management

The Companys overall employee strength was over 10,100 employees as of March 31,2022. our administration is continually focusing on the skill development and enhancement of professionals and managers, as we think that personnel are the Companys future building pillars. The Company has stayed ahead of the curve because of PNC Infratechs staff of home-grown employees with unique industry knowledge. We also ensure that our personnel are driven to carry out their jobs with maximum accountability by providing moral support and financial incentives.

internal Control Systems

The Company has adequate internal control systems that are commensurate with the size and nature of its business, ensuring that all assets are acquired cost-effectively and are safeguarded against loss from unauthorized use or disposition and that all transactions are properly authorized, recorded, and reported. The Companys internal audit department supplements the internal control system with well-documented policies, guidelines, and procedures, as well as reviews. Internal auditors conduct audits of various departments in accordance with the yearly audit plan and report to Management and the Audit Committee of the Board regularly. To determine the adequacy and efficacy of the internal control system and measures, the views of statutory auditors and ISO auditors are also taken into account. The Companys project locations are protected by sophisticated closed-circuit television camera surveillance and the SAP ERP system. The management monitors these metrics regularly to verify that they are improving.

Cautionary Statement

We have included forward-looking statements and information including the risk factors in this Annual Report to help investors understand our growth potential and make educated investment decisions. This report, as well as other written and oral comments we make regularly, contain forward-looking statements that outline expected outcomes based on managements plans and assumptions. Forward-looking statements are predictions of future events based on certain assumptions. Risks, uncertainties, and even assumptions play a role in achieving such findings. The quality, reliability, and completeness of market data and information acquired from numerous published and unpublished reports and sources cannot be guaranteed. We do not promise to make any announcements or amend any development or forward-looking statements made by or on behalf of the Company if any of the economic scenarios, industry developments, or forward-looking statements become materially inaccurate in the future.