Unity Infraprojects Ltd Management Discussions.

It is widely accepted that for India to sustain real economic growth of over 7% per annum, considerable efforts are needed in developing the requisite physical infrastructure backbone. While the need for widespread infrastructure development in India is firmly established, the progress on the ground, especially over the last five to six years, has been regrettably unsatisfactory. Project execution continues to be hampered by several issues such as land acquisition, environment protection and socio-political considerations.

Thus, while several projects came on-stream in the recent past, a large number remain stalled or considerably delayed, which has contributed to construction companies making unproductive capital outlays and facing a severe liquidity crunch. From developers to construction majors and sub-contractors, most players across the value chain are grappling with the malaise of timing mismatch in cashflows. In this environment, efforts to sustain operations have resulted in most companies having to deal with large debt burdens and over-leveraged balance sheets. Unity being a part of the same industry was no exception. Unity could not balance between growing and executing projects while overcoming the burden of legacy issues.

Macro-economic Review

In a backdrop of global uncertainty and slowing economic growth, India was a bright spot in 2016-2017 with robust macro economic fundamentals. The year was marked by two major domestic policy developments: passage of the Constitutional amendment which paved way for implementing the transformational Goods and Services Tax (GST), and the action to demonetise the Rs.500 and Rs.1,000 bank notes in the country.

The GST will create a common Indian market, improve tax compliance and governance, and boost investment and growth. It is also a bold new experiment in the governance of Indias cooperative federalism. The bill to implement GST has been passed in the Parliament and the country is poised to move to a GST regime from the second quarter of 2017-2018.

Demonetisation had short-term costs. Contemporary evidence tended to suggest significant disruption for the first six to eight weeks due to unprecedented cash constraints throughout the economy. However, the national income data published by the Central Statistics Office (CSO) does not suggest any significant reduction in growth in the third quarter of 2016-2017, which coincided with demonetisation. The third quarter tends to be muted. In 2015-2016, the growth rate of real gross value added (GVA)in Q2 was 8.4%; while in Q3 it was 7%, or a sequential drop of 1.4 percentage points. In 2016-2017, GVA growth in Q2 was 6.7%, and in Q3

it was 6.6%. Thus, despite the effects of demonetisation for much of Q3 financial year 2017, the negative effect — as reported by the CSO — has been only 10 basis points. What the data so far suggests is that the demonetisation effect was more moderate than what the critics claimed it would be. And it looks as if its effects have been transitory.

Although growth in 2016-2017 is expected to be less than what it was a year earlier it needs to be stated that 6.7% GVA will be the highest among developed and large emerging markets of the world.

Unless there are some serious unforeseen crises, India may achieve 7.5% growth in 2017-2018. Moreover, reforms such as overhauling the bankruptcy laws and giving banks more teeth to deal with their non-performing assets (NPAs), sustained increase in public infrastructure spending and continuing tight supervision of monetary policy suggests that India is again well placed for a period of sustained growth in excess of 7% per annum.Other major macroeconomic parameters like inflation, fiscal deficit and current account balance have also exhibited distinct signs of improvement in 20162017.

Inflation measured by the Consumer Price Index (CPI), which averaged 4.9% during April-December 2016 has displayed a downward trend since July, 2016 when it became apparent that the kharif agricultural production would be bountiful and reached 3.65% by February 2017. Core inflation has also been quite stable, hovering around 4.5% to 5% for most of 2016-2017. There was also some improvement in Governments fiscal condition. Revised estimates suggest that with gross tax revenues increasing from 10.6% in 2015-2016 to 11.3% in 20162017, the fiscal deficit has reduced from 3.9% of GDP in 2015-2016 to 3.5% in 2016-2017.

In 2016-2017, therefore, not only has India established itself as the worlds fastest growing major economy, under pinned by a stable macro-economy with declining inflation and improving fiscal and external balances, but it has also emerged as one of the few economies enacting major structural reforms that have strong longer term implications.

Indias Construction Sector

The infrastructure sector is at the heart of growth of India. Estimates suggest that the country needs close to Rs. 31,000 billion (US$ 455 billion) to be spent on infrastructure development over the next five years, with 70% of funds needed for power, roads and urban infrastructure segments. Despite this need, Indias rank on infrastructure development in the Global Competitive Index was at 68 in 2016-2017 — an improvement of only 19 places compared to 2014-2015. Notwithstanding an enormous demand for physical infrastructure, the sector is facing significant challenges, as the developers, the financial community and the government grapple with stalled projects, non-performing loans and widening gap between performance and targets.

Consequently, Indias construction growth in GDP terms has tapered off substantially since 2011-12. It appears that after an impressive 10.8% growth in 2011-12, the sector has seen much lower activity since and grew by only 3.1% in 2016-2017. The worrying factor is that growth in overall Gross Fixed Capital Formation (GFCF) has also reduced significantly from 6.1% in 2015-2016 to 0.6% in 2016-17

The slowdown in construction activities has adversely affected Engineering, Procurement and Construction (EPC) companies across India. Several unforeseen issues impacted projects at various stages of their life cycle from planning to operations, which have made several of them unviable. The sector is plagued with significant cost overruns, regulatory bottle necks and aggressive bidding positions taken by a few market players resulting in financial losses. Another important element is the massive build-up of claims that are receivable from various government entities. These are on account of several factors, such as change of scope of work (quantity variation or extra items), idling of resources like manpower and overheads, compensation beyond the original stipulated contract period, change in statute and loss of opportunity. The entire claims resolution mechanism has been substantially delayed and, consequently, blocked up large amounts of cash severely affecting liquidity across the value chain.

The Government of India has two very different challenges. First, it has to deal with and resolve several of these legacy issues that plague the infrastructure and construction sector. Second, it has to provide a new round of growth impetus to the sector. On both these fronts, the government has made some headway in 2016-2017. However, these are initial steps and much of the developments on the ground are expected in the next few year.

In an important development, the central government has finally managed to break the choke-hold of stalled projects, by giving faster clearances and closely monitoring the seat the highest levels. According to data released by the Centre for Monitoring of the Indian Economy, only 24 projects that were under some stage of implementation were stalled during the quarter ended March, 2017. This is the lowest number of stalled projects under implementation in any quarter since December 2008. Investment in such stalled projects has reduced from Rs.92,000 crore in the quarter ended March, 2016 to Rs. 25,700 crore in the quarter ended March, 2017. According to this data, projects worth only Rs. 4,400 crore were abandoned during the March,

2017 quarter. This was the lowest number of abandoned projects in a given quarter over the past eight years. Their total value is just a tenth of the average value of abandoned witnessed over the past eight years.

In the present business environment, owing to the existing high levels of debt, the construction companies are left with limited opportunity to raise further capital to fuel growth. To review the construction sector, the Cabinet Committee on Economic Affairs has approved a series of initiatives, which are expected to help in improving liquidity in the short run and reform the contracting regime in the long run The RBI, too, has stepped in to regulate the unsustainable levels of debt. The new Bankruptcy Code and the SDR/S4A guidelines from the RBI are expected to revitalize several key projects. New financial options and sources are now available for infrastructure projects, and the RBI has also taken various steps to facilitate more investment in the sector, through new investment structures as well as through changes in the existing project lending and external commercial borrowing (ECB) guidelines. While dealing with legacy issues, the central government has also laid emphasis on pushing a new round of infrastructure development. This includes a slew of measures related to award of contracts, regulatory approvals, funding and exit mechanism for developers.

As a result, the infrastructure sector has been showing incipient signs of recovery, which is likely to further acquire momentum in the medium term with the positive proposals in the Union Budget 2017-2018. Total outlay for the sector is up by 10% to Rs.3,96,135 crore in 2017-2018 over 2016-2017, with roads, bridges and railways seeing higher allocations of 7%-8% each.

In 2014, the banks had sanctioned Unity a complete restructuring package under the aegis of the Corporate Debt Restructuring (CDR) scheme. However, the financial state of the Company remained under stress due to a further slowdown in the industry and the slow pace of dues recovery from customers.

During the year under review the Company did not raise any capital from the Capital markets either by way of issue of equity shares /ADR/GDR / or any debt by way of Debentures. The Company continued to get financial assistance from its CDR lenders within the overall facilities sanctioned under the CDR package to meet the working capital requirements.


Infrastructure development is critical for India to achieve strong and inclusive growth. Indian Government has made Infrastructure Development its top priority. Government has charted out 12th Five Year Plan (201217), which estimates an investment of around $1 trillion in the infrastructure sector. This step-up in investment will be feasible primarily because of enlarged private sector participation and their contribution is expected to be about 48% during the 12th Plan.

With the large magnitude of investment required in the sector and a transparent growth and reform oriented business and investment climate, the sector outlook looks strong.


Unity Infraprojects Limited ("Unity") is one of the largest infrastructure construction company in India. We are a civil engineering and an EPC contractor associated with various landmark projects. With specific expertise in roads, flyovers & bridges, tunnel and dams, we are the leaders in construction and turnkey engineering projects. We have made concrete contribution to Indias infrastructure sector by executing multifarious civil engineering works, bridges, roads, rail stations, dams, high-rise structures in India and abroad. We undertake challenging projects which we proficiently deliver to our customers satisfaction. We continue to select projects where we can add value in executing and delivering complex structures.

The debt obligations of the Company were restructured under Corporate Debt Restructuring ("CDR") mechanism on the terms and conditions set out in the Master Restructuring Agreement dated 26th December, 2014 executed amongst SBI (as the Monitoring Institution), the Lenders and the Company ("CDR MRA"). The Principal Moratorium was for 27th months from the cutoff date i.e. 1st January, 2014.

Moratorium period of CDR Package has expired on 31st March, 2016 and during the said period there was no progress seen for revival of the Company. Lenders opposed for Strategic Debt Restructuring (SDR). The management of the Company has been trying its level best to save Bank Guarantees by giving balance work of on- going project on B2B basis.


Unity Infraprojects Limited (UNITY or the Company) is one of Indias leading construction companies with a history of almost 31 years. Over this long span, the Company has built strong capabilities and established widespread credentials for successful project delivery across a wide spectrum of sectors within the infrastructure industry.

The Company is professionally managed with very well- qualified and experienced personnel in all following areas including but not limited to engineering, procurement, legal, secretarial, finance and administration combined with a full-fledged MIS system. As on 31st March, 2017, the Company has on its roll over 350 employees.


A function in organizations designed to maximize performance in service of an employers strategic objectives; our employees have been our core strength to deepen the roots of our company. As a realization of our responsibility towards our pal-bearers for our existence as well as our goodwill, we look after their social amenities like Medical, PF, Gratuity, LTA etc. The Human Resource team at Unity Infraprojects Limited has and continues to allure the competitive talent and brace them in cohesion with the vision and mission of the Company. The potential of each employee is advanced due to the provision of right opportunity to grow which includes regular in-house and external training along with knowledge and skill development. A value-driven work environment with satisfaction and appreciation as well as professionalism has led us build an excellent team.


The infrastructure sector continues to face challenges from both internal as well as external environment like shortage of skilled labour availability, access and adaptability to technologies, availability of competent subcontractors, frequent changes in the political, economic and social scenarios. To add to these challenges, the current economic slowdown has put a further strain on the sector operators due to change in funding environment resulting in a very demanding setup with increased scrutiny from various stakeholders. Risk management is one of the key focus areas and your Company endeavours to protect its earnings and reduce / eliminate losses arising out of the various risks it faces. Over the years, your Company has steadily incorporated efficient practices in risk management to mitigate various types of risks.

Some of the key risks that the Company manages proactively and the various steps taken to mitigate these are listed here below:

1. Most of the contracts have an escalation clause and in case of those contracts which do not have an escalation clause, increases are extrapolated in the estimates at the tender stage to cater for the same should they arise. In both the situations, nevertheless, the key to manage the risk is in timely execution, which would not only ensure that costs are contained but also that penalties are obviated. To this end, the Company continuously reviews its business processes to strengthen its project management capabilities, tighten contract management, improve information flow and manpower retentions and enhance client relationship.

2. Defaults in payment of running bills and retention money by some of the clients put pressure on the working capital requirements of the Company and pushes up the financial costs. The Company

evaluates client risks and would generally seek payment comfort through instruments like letter of Credit, Bank Guarantee etc., where risk perception is high.

3. The Company has in place adequate and comprehensive insurance covers for all its assets and projects to deal with calamities.

4. The internal audit cell of the Company has in place a comprehensive program across the Company. The internal controls of the Company are reviewed to detect and minimize the risks of fraud and misreporting. The reports of the internal controls are regularly reviewed by Audit Committee of the Board and their recommendation for better effectiveness implemented.


The infrastructure segment continued to be sluggish due to policy inaction and liquidity constraints. Project execution continued to be slow due to delays in funding. Interest and Finance costs continued to be high. The backlog at stalled project sites created due to severe liquidity crisis continued to adversely affect project execution. The Company was affected due to resource crunch delays beyond the control of the Company such as delays in land acquisition municipal permission approval of designs by client and over and above scarcity in availability of labour and materials thereby widening the gap between the planned outlay and actual spending. Order intake remained sluggish since many of the stalled projects are yet to be kick-started. Projects already awarded are generally progressing slowly due to various continuing problems on ground which remain unresolved over the years leading to cost escalations which remain unpaid.

The Company is exploring several options for overcoming the liquidity crisis. The Group is in the process of monetizing its investments in real estate as well as assets divesting its non-core businesses and disposal of idle equipment. During the period under review the Company focused on realizing long pending receivables, arbitration awards and retention moneys. The Order book as on 31st March, 2017 stood at Rs. 608.89 Crore.

The Turnover of the Company on a standalone basis stood at Rs. 247.08 Crore, as compared to Rs. 381.40 Crore during the previous year. The Company posted a Net Loss after Tax of Rs. 1113.20 Crore during the year ended 31st March, 2017, as against a Net Loss after Tax of Rs. 540.37 Crore during the previous year ended 31st March, 2016.


Controls for business processes across departments internally, is required to ensure efficient operations, compliance with internal policies and applicable laws and regulations, protection of resources and assets and accurate reporting of the financial transactions. This system of internal control is supplemented by extensive internal audits, regular reviews by the management team and standard policies and guidelines to ensure the reliability of financial and all other records.


This communication contains statements that constitute forward looking statements including, without limitation, statements relating to the implementation of strategic initiatives and other statements relating to our future business developments and economic performance. While these forward looking statements represent the managements judgements and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments and other key factors that could adversely affect our business and financial performance .Unity Infra undertakes no obligation to publicly revise any forward looking statements to reflect future events or circumstances.


Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the infrastructure sector, significant changes in political and economic environment in India, exchange rate fluctuations, tax laws, litigation, labour relations and interest costs.

Annual Report on CSR Activities to be included in the Boards Report:

1. A brief outline of the CSR Policy Companys CSR Policy is to:

• contribute towards social and economic development of the Communities where it operate;

• in addition, Company wants to build a sustainable way of life for all sections of society;

• with emphasis and focus on Education, Health Care, Senior Citizens, Environment Sustainable Livelihood and Empowerment of Women.

2. Objective

Unity CSR Foundation underscores the fact that helping is not simply a matter of dispersing money but of making a deep, long-term commitment and casting a hard eye on results. The entire management and operation of Foundation is in compliance with the principles of "Good Governance "and thus sets itself apart with its set norms of sustainability, scalability, accountability, transparency, credibility and effective leadership.

3. An over view of activities undertaken Broad areas of CSR policy activities covers-

A. Health Sector:

1. Project Sangopan is running successfully since 2011 in association with Shabri Seva Samiti.The sole objective of the project is "Eradication of Malnourishment from Jawhar Taluka".

2. In 2016-17 Unity has provided nutritional food on daily basis to 87 severely malnourished children ageing between 0-5 years from Ukshipada and Faralepada hamlets of JawharTaluka.

3. 6 medical camps were arranged in Faralepada, Madha, Alyach Meth and Mokhyachapada hamlets of JawharTaluka and around 650 children and 46 pregnant women got treated through these medical camps.

B. Child Education:

1. Project Utkarsh: We are running this project smoothly in 7 MCGM Schools since 2010. The Objective behind the project is to impart computer education among the students of MCGM Schools. To achieve the set object UCF has appointed full time computer instructors on its payroll. In the year 2016-17 nearly 5000 students got benefitted through the said project. The special syllabus have been designed in English. Hindi and Marathi for 1st to 10th standard.

2. Project Dnyandeep: We are running this project successfully since 2010, the sole object of which is to establish and maintain libraries in MCGM Schools. Till now total 3 libraries have been established by us and three full time librarians have been deployed for the same. Along with book reading other activities like stage courage building or confidence building, wooden work, craft work, wax work, drawing, thread work etc. are being conducted in the said libraries.

4. Web-link to the CSR policy:The web-link is http://www.unitycsrfoundation.com.

5. The composition of CSR Committee :

Name of the Member Designation
Girish Gokhale Chairman of the Committee (Independent Director)
Kishore Avarsekar Chairman and Managing Director
Abhijit Avarsekar Vice Chairman and Managing Director

6. Average Profit of the Company for last 3 financial year :

Financial Net profit As per Section 198 of
Year the Companies Act, 2013
( Rs. In lakhs)
2015-16 (55,457.75)
2014-15 (34006.16)
2013-14 634.57

Average Net Profit of the Company for the last three financial years: Rs. ( 29609.78)lacs.

7. Prescribed CSR Expenditure (two percent of the amount as in item 6 above):

Not Applicable

8. Details of CSR activities undertaken during the year 2016-17

a. Total amount to be spent for the financial year - Rs.1.83lacs

b. Amount unspent -Not Applicable

c. Manner in which the amount spent during the year

Sector Description Amount (Rs.)
Child Education Dnyandeep 74,745
Health Sangopan 1,08,000
Total 1,82,745

9. In case the Company has failed to spend the two percent of the average net profit of the last three financial years or any part hereof, the Company shall provide the reasons for not spending the amount in its Board Report:

Due to liquidity issue, Corporate Debt Restructuring Package has been approved to the Company w.e.f. 26th December, 2014. The said scheme is under implementation. The Company has suffered losses in the financial year 201415 and 2015-16. As such prescribed limit of CSR Expenditure under Section 135 of the Companies Act, 2013 is not applicable. However,the Company will continue the existing project and spent the required amount on such project during the financial year 2016-17 till 30th September, 2016 and CSR Committee dissolved by the Board in its meeting held on 14th December, 2016.

10. A responsibility statement of CSR Committee that implementation and monitoring of CSR Policy is in compliance with CSR objectives and policy of the Company:

The CSR Committee hereby confirms that the implementation and monitoring of CSR policy has been carried out with all reasonable care and diligence and the same is in compliance with CSR Objectives and the Policy of the Company. However, as explained in item No.9 above, the CSR spend was not the amount equivalent to threshold limit during the financial year 2016-17 in view of the Company is under CDR.

Sd/- Sd/-
Kishore K. Avarsekar Abhijit K. Avarsekar
Chairman and Vice Chairman and
Managing Director Managing Director
(Member of CSR (Member of CSR
Committee) Committee)


Girish Gokhale

Chairman of CSR Committee