Va Tech Wabag Ltd Management Discussions

Global economy

Overview: Global economic growth declined from 3.5% in 2022 to an estimated 3.1% in 2023. A disproportionate share of global growth in 2023-24 was expected to come from Asia, despite the weaker-than-expected recovery in China, sustained weakness in USA, higher energy costs in Europe, weak global consumer sentiment on account of the Ukraine-Russia war, Israel-Palestine war and the Red Sea crisis resulting in higher logistics costs. A tightening monetary policy translated into increased policy rates and interest rates for new loans.

Growth in advanced economies was expected to slow down from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024 as policy tightening takes effect. Emerging market and developing economies are projected to report a marginal growth decline from 4.1 percent in 2022 to 4.0 percent in 2023 and 2024. Global inflation is expected to decline steadily from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024, due to a tighter monetary policy aided by relatively lower international commodity prices. Core inflation decline is expected to be more gradual; inflation is not expected to return to target until 2025 in most cases. The US Federal Reserve approved a much-anticipated interest rate hike that took the benchmark borrowing costs to their highest in more than 22 years.

Global trade in goods was expected to have declined nearly US$2 trillion in 2023; trade in services was expected to have expanded US$500 billion. The cost of Brent crude oil averaged $83 per barrel in 2023, down from $101per barrel in 2022, with crude oil from Russia finding destinations outside the European Union and global crude oil demand falling short of expectations.

Global equity markets ended 2023 on a high note, with major global equity benchmarks delivering double-digit returns. This outperformance was led by a decline in global inflation, slide in the dollar index, declining crude and higher expectations of rate cuts by the US Fed and other Central banks.

Regional growth (%)	2023	2022
World output	3.1	3.5
Advanced economies	1.69	2.5
Emerging and developing economies	4.1	3.8

(Source: UNCTAD, IMF)

Performance of major economies, 2023

United States: Reported GDP growth of 2.5% in 2023 compared to 1.9% in 2022 China: GDP growth was 5.2% in 2023 compared to 3% in 2022

United Kingdom: GDP grew by 0.4% in 2023 compared to 4.3% in 2022 Japan: GDP grew 1.9% in 2023 unchanged from a preliminary 1.9% in 2022 Germany: GDP contracted by 0.3% in 2023 compared to 1.8% in 2022 (Source: PWC report, EY report, IMF data, OECD data, Livemint) Outlook: Asia is expected to continue to account for the bulk of global growth in 2024-25. Inflation is expected to ease gradually as cost pressures moderate; headline inflation in G20 countries is expected to decline. The global economy has demonstrated resilience amid high inflation and monetary tightening, growth around previous levels for the next two years (Source: World Bank).

Indian economy

Overview: The Indian economy was estimated to grow 7.8 per cent in the 2023-24 fiscal against 7.2 per cent in 2022-23 mainly on account of the improved performance in the mining and quarrying, manufacturing and certain segments of the services sector. India retained its position as the fifth largest economy. The Indian rupee displayed relative resilience compared to the previous year; the rupee opened at INR 82.66 against the US dollar on the first trading day of 2023 and on 27 December was INR 83.35 versus the greenback, a depreciation of 0.8%. In the 11 months of FY 2023-24, the CPI inflation averaged 5.4 percent with rural inflation exceeding urban inflation. Lower production and erratic weather led to a spike in food inflation. In contrast, core inflation averaged at 4.5 percent, a sharp decline from 6.2 percent in FY 23. The softening of global commodity prices led to a moderation in core inflation.

The nations foreign exchange reserves achieved a historic milestone, reaching $645.6 billion. The credit quality of Indian companies remained strong between October 2023 and March 2024 following deleveraged Balance Sheets, sustained domestic demand and government-led capital expenditure. Rating upgrades continued to surpass rating downgrades in H2 FY24. UPI transactions in India posted a record 56 per cent rise in volume and 43 per cent rise in value in FY24.

Growth of the Indian economy

	FY 21	FY 22	FY23	FY24
Real GDP growth (%)	-6.6	8.7	7.2	7.8

Growth of the Indian economy quarter by quarter, FY 2023-24

	Q1FY24	Q2FY24	Q3FY24	Q4FY24E
Real GDP growth (%)	8.2	8.1	8.4	8.2

E: Estimated

(Source: Budget FY24; Economy Projections, RBI projections, Deccan Herald) The FY 24 growth in the economy was the highest since FY17, excluding the 9.7% post- Covid rebound in gross domestic product (GDP) in FY22 from the 5.8% contraction in FY21. Indias monsoon 2023 hit a five-year low. August was the driest month in a century. From June to September, the country received only 94 per cent of its long-term average rainfall. Despite this reality, wheat production was expected to touch a record 114 million tonnes in the 2023-24 crop year on account of higher coverage. Rice production was expected to decline to reach 106 million metric tons (MMT) compared to 132 million metric tonnes in the previous year. Total kharif pulses production for 2023-24 was estimated at 71.18 lakh metric tonnes, lower than the previous year due to climatic conditions. As per the first advance estimates of national income released by the National Statistical Office (NSO), the manufacturing sector output was estimated to grow 6.5 per cent in 2023-24 compared to 1.3 per cent in 2022-23. The Indian mining sector growth was estimated at 8.1 per cent in 2023-24 compared to 4.1 per cent in 2022-23. Financial services, real estate and professional services were estimated to record a growth of 8.9 per cent in 2023-24 compared to 7.1 per cent in FY 2022-23. Real GDP or GDP at constant prices in 2023-24 was estimated at INR 171.79 lakh Crores as against the provisional GDP estimate of 2022-23 of INR 160.06 lakh Crores (released on 31^st May 2023). Growth in real GDP during 2023-24 was estimated at 7.3 per cent compared to 7.2 per cent in 2022-23. Nominal GDP or GDP at current prices in 2023-24 was estimated at INR 296.58 lakh Crores against the provisional 2022-23 GDP estimate of INR 272.41 lakh Crores. The gross non-performing asset ratio for scheduled commercial banks dropped to 3.2 per cent as of September 2023, following a decline from 3.9 per cent at the end of March 2023. Indias exports of goods and services were expected touch $900 billion in 2023-24 compared to $770 billion in the previous year despite global headwinds. Merchandise exports were expected to expand between $495 billion and $500 billion, while services exports were expected to touch $400 billion during the year. Indias net direct tax collection increased 19 per cent to INR 14.71 Lakh Crores by January 2024. The gross collection was 24.58 per cent higher than the gross collection for the corresponding period of the previous year. Gross GST collection of INR 20.2 lakh Crores represented an 11.7% increase; average monthly collection was INR 1,68,000 Crores, surpassing the previous years average of INR 1,50,000 Crores. The agriculture sector was expected to see a growth of 1.8 per cent in 2023-24, lower than the 4 per cent expansion recorded in 2022-23. Trade, hotel, transport, communication and services related to broadcasting segment are estimated to grow at 6.3 per cent in 2023-24, a contraction from 14 per cent in 2022-23. The Indian automobile segment was expected to close FY 2023-24 with a growth of 6-9 per cent, despite global supply chain disruptions and rising ownership costs. The construction sector was expected to grow 10.7 per cent year-on-year from 10 per cent in 2023-23. Public administration, defence and other services were estimated to grow by 7.7 per cent in 2023-24 compared to 7.2 per cent in FY2022-23. The growth in gross value added (GVA) at basic prices was pegged at 6.9 per cent, down from 7 per cent in 2022-23.

India reached a pivotal phase in its S-curve, characterized by acceleration in urbanization, industrialization, household incomes and energy consumption. India emerged as the fifth largest economy with a GDP of US$3.6 trillion and nominal per capita income of INR 123,945 in 2023-24. Indias Nifty 50 index grew 30 percent in FY 2023-24 and Indias stock market emerged as the worlds fourth largest with a market capitalization of US$4 trillion. Foreign investment in Indian government bonds jumped in the last three months of 2023. India was ranked 63 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. Indias unemployment declined to a low of 3.2% in 2023 from 6.1% in 2018. Outlook: India withstood global headwinds in 2023 and is likely to remain the worlds fastest-growing major economy on the back of growing demand, moderate inflation, stable interest rates and robust foreign exchange reserves. The Indian economy is anticipated to surpass USD 4 trillion in 2024-25. Union Budget FY 2024-25: The Interim Union Budget 2024-25 retained its focus on capital expenditure spending, comprising investments in infrastructure, solar energy, tourism, medical ecosystem and technology. In 2024-25, the top 13 ministries in terms of allocations accounted for 54% of the estimated total expenditure. Of these, the Ministry of Defence reported the highest allocation at INR 6,21,541 Crores, accounting for 13% of the total budgeted expenditure of the central government. Other ministries with high allocation included Road transport and highways (5.8%), Railways (5.4%) and Consumer Affairs, food and public distribution (4.5%). (Source: Times News Network, Economic Times, Business Standard, Times of India)

INDUSTRY STRUCUTRE, DEVELOPMENTS, OPPORTUNITIES, THREATS AND INDUSTRY OUTLOOK

Global water sector

Overview: Global water use has risen by approximately 1% annually in the last four decades, primarily in middle- and lower-income countries, driven by population growth, socio-economic development, and changing consumption patterns. Northern America and Central Asia exhibit the highest water withdrawals per capita. Groundwater accounts for half of global domestic water use and 25% for irrigation. Groundwater depletion hotspots, often linked to irrigation or urban supply, are widespread. The projected trajectory suggests a continued 1% annual increase, leading to a 20-30% rise by 2050, with a margin of error exceeding 50%. With 71% of the Earths surface covered by water, 96.5% of it resides in the oceans. However, factors such as a growing population, evolving lifestyles, rapid urbanization, industrialization, and climate changes are consistently straining this vital survival resource. The current global water sector investment needs surpass $1.37 trillion. Achieving SDG 6 by 2030 necessitates a sixfold increase in investments. Projected global water withdrawal is set to hit 4,350 billion cubic meters by 2040, with demand growth doubling population growth in recent decades. Key contributors to this surge are anticipated to be India, Africa, and developing nations in Asia. Agriculture, mainly for irrigation, remains a major global water consumer. Future water usage trends hinge on factors like urbanization, improving living standards, goods demand, and dietary shifts.

Despite the Asia-Pacific regions rapid economic growth, nearly 500 million people lack access to basic water and 1.14 billion for sanitation. Urbanization, with 55% of the population living in cities by 2030, will increase water demand by 55%. Agriculture consuming 70% of freshwater, competes for diminishing resources. Water quality has worsened, with a 50% increase in river pollution and rising salinity. Around 80% of wastewater is untreated. Frequent disasters, like floods, have claimed 31,000 lives and displaced 4.9 million in the past decade, threatening water security.

The Asian Development Bank (ADB), in collaboration with the World Bank and other multilateral institutions, initiated Strategy 2030 to foster a resilient and water-secure Asia-Pacific region. With a projected annual portfolio of around $4 billion, ADB aims to bolster the water sector through infrastructure investments, grants, and technical assistance. It also focuses on enhancing awareness and capacities within the sector through knowledge-sharing events like the Asia Water Forum 2022 (AWF 2022), trainings, publications, and the upcoming Asia Pacific Water Resilience Hub.

Global water treatment industry overview

The global water and wastewater treatment market is expected to experience robust growth, with a projected increase from $323.32 billion in 2023 to $536.41 billion by 2030, reflecting a Compound Annual Growth Rate (CAGR) of 7.5%. This growth is attributed to various factors such as heightened demand from industries, growing awareness of health issues, water scarcity concerns, the impact of climate change, and stringent environmental regulations. The objectives of water treatment processes are to enhance water quality for its intended purpose by eliminating pollutants and unwanted components or by reducing the concentration of hazardous substances. Furthermore, the global wastewater treatment plant market is anticipated to generate revenue of USD 222.3 billion by 2032, exhibiting a CAGR of 6.2% from 2023 to 2032. A key trend driving market demand is the increasing adoption of smart water management systems in wastewater treatment plants, underscoring the industrys commitment to innovation and sustainability. (Source: fortunebusinessinsights. com, acumenresearchandconsulting.com)

Global wastewater treatment market overview

The global wastewater treatment market experienced significant growth, reaching approximately USD 59.61 billion in value in 2023. Forecasts indicate continued expansion in the period from 2024 to 2032, with a projected CAGR of 6.30%. By 2032, the market is expected to reach a valuation of USD 103.30 billion. This growth is propelled by an anticipated increase in wastewater production, expected to rise by 24% by 2030 and 51% by 2050.

Key regions driving the growth of the global wastewater treatment market include the Asia-Pacific region, Europe, and North America, where the market is already fully developed. However, there is considerable potential for further expansion in the Middle East & Africa and Latin America regions, which are considered high-potential markets with ample room for growth. (Source: expertmarketresearch.com, reliefweb.int)

Global industrial wastewater market overview

The global industrial wastewater treatment market exhibited robust growth, reaching a valuation of USD 17.23 billion in 2023. Projections indicate continued expansion, with the market expected to reach around USD 30.36 billion by 2032, with a CAGR of 6.50%. The Asia Pacific region contributed significantly to this growth, with its industrial wastewater treatment market valued at USD 6.04 billion in 2023. By 2032, this market is expected to reach USD 10.83 billion, growing at a CAGR of 6.70% from 2023 to 2032. The increasing demand for effective industrial wastewater treatment is primarily driven by growing environmental concerns and stringent government regulations. Industrial wastewater treatment involves the conversion of wastewater from various industries into usable soft water for processing. The adoption of wastewater treatment systems in the industrial sector offers several benefits, including waste reduction, energy production, fertiliser production, and the provision of clean and processed water.

Global desalination market overview

The global water desalination market size is projected to grow by USD 11.2 billion from 2023 to 2029, registering a CAGR of 8.7 percent. Water desalination is a method aimed at purifying water by eliminating impurities and excess salts, rendering it suitable for various purposes. This technique is applicable to seawater or brackish water. The escalating water demand, urbanization, and expanding population are significant factors propelling the widespread implementation of desalination plants.

With water covering 71% of the Earths surface, only 3% is freshwater available for drinking and agriculture, making water conservation critical. Approximately 785 million lack access to clean drinking water, while 2 billion use contaminated sources. Water consumption has increased by 1% annually since the 1980s, expected to continue due to factors like population growth. By 2030, half the worlds population may face water scarcity. Only 1% of freshwater is directly available for human use, with the majority frozen. Depleting freshwater resources have boosted the demand for desalinated water.

The Middle East & Africa lead the global desalination industry, prioritizing large-scale facilities to reduce reliance on costly imported water. In the Asia-Pacific region, rapid urbanization drives heightened water demand, fostering growth in desalination to address escalating water scarcity. (Source: marketresearch. com, marketsandmarkets.com)

Demand drivers

Fresh water shortage: Some 3% of the Earths water is freshwater, with two-thirds stored in frozen glaciers or inaccessible. Consequently, 1.1 billion people lack water access and 2.7 billion face water scarcity for at least one month annually. (Source: worldwildlife.org) Water recycling: The global water recycling and reuse market is projected to hit $31.9 billion by 2028, growing at a CAGR of 11.0% from $19.0 billion in 2023. Increasing industrial demand, a push for water recycling, and environmental concerns are key drivers for this market expansion. (Source: bccresearch.com) Drinking water availability: Approximately 2.2 billion people lack access to safe water services: 1.5 billion with ‘basic services, 292 million with ‘limited water, 296 million using unimproved sources, and 115 million collecting drinking water directly from surface water sources. (Source: unicef.org) Rapid urbanization: Currently, more than 50% of the global population resides in urban areas. By 2045, the urban population is expected to grow 1.5 times to 6 billion, driving increased water demands for city expansion, infrastructure development, and meeting urban needs. (Source: worldbank.org) Industrial expansion: Growing industries require substantial water resources for manufacturing processes, cooling, steam generation and other operational needs, contributing to increased demand.

Climate change: Altered precipitation patterns and more extreme weather events can affect water availability, influencing demand and water management strategies.

Agricultural needs: The agriculture sectors gross production value is forecasted to reach US$3.90tn in 2024, with an expected annual growth rate of 5.66% (CAGR 2024-2028). By 2028, the gross production value is projected to be US$4.86tn. Rising food demand amplifies the need for water in agricultural irrigation. (Source: statista.com)

Indias water sector overview

India has 18 percent of the worlds population, but only 4 percent of its water resources, making it among the most water-stressed in the world. A large number of Indians face high to extreme water stress. Indias dependence on an increasingly erratic monsoon for its water requirements increases this challenge. Climate change is likely to exacerbate this pressure on water resources, even as the frequency and intensity on floods and droughts in the country increases. About 97 percent of the population experienced severe water scarcity for at least one month annually due to improper water management. Although not a ‘water scarce nation yet, it is in a ‘water- stressed situation with annual per capita water availability below 1,700 cubic metres. Melting of Himalayan glaciers and erratic monsoon rainfall due to climate change could further increase this stress.

India treats just a third of the 72,368 million litres of sewage generated in its urban areas every day. Untreated water not only goes waste but also pollutes groundwater, rivers and other water bodies. Therefore, judicious use of water in agriculture – which consumes nearly 89% of freshwater – and efforts to reuse wastewater are key to improving the situation.

The Union Ministry of Water Resources projects Indias water requirements to reach 1093 BCM by 2025 and 1447 BCM by 2050, barely matching the estimated available resources with a population of 1.5 billion by 2050. Per capita water availability has declined from 5177 m? in 1951 to 1342 m? in 2000. India is expected to become water stressed by 2025 and water scarce by 2050. The National Commission for Integrated Water Resource Development estimates that out of the total annual availability of 1953 BCM, only 55.6% (1123 BCM) can be utilized due to pollution and other constraints.

The total water demand in India is projected to increase 22% and 32% in 2025 and 2050 respectively and, by 2050, 85% of this demand is expected to come from industrial and domestic sectors alone. Among the regions, the south and the northwest are expected to face the worst in the next two years.

The per capita water availability in India has reduced over the last five decades. About 50 years ago, the per capita availability of water in India used to be 5,000 cubic metres. It has reduced to 1,500 cubic metres due to increased population and water usage. The average annual rainfall in our country is 1184mm. About 4,000 billion cubic meters of water comes from the annual precipitation and the harvestable component is around 2000 billion cubic metres; our total water-bearing capacity on the surface is less than 300 billion cubic metres.

Sector wise projected water demand in India

Sector			Water demand in bcm
	2010		2025		2050
	High	Low	High	Low	High	Low
Irrigation	543	557	561	611	628	807
Drinking Water	42	43	55	62	90	111
Industry	37	37	67	67	81	81
Energy	18	19	31	33	63	70
Other	54	54	70	70	111	111
Total	694	710	784	843	973	1180

(Source: worldbank.org, statista.com, indiaenvironmentportal.org.in, indiatimes.com, deccanherald.com, adriindia.org)

Government initiatives

AMRUT 2.0: AMRUT 2.0, launched in October 2021, spans five years (FY 2021-22 to 2025-26). The mission emphasizes financial sustainability, citizens quality of life and water sector reforms. Its features include:

It will build upon the progress of AMRUT to address water needs, rejuvenate water bodies, better manage aquifers, reuse treated wastewater, thereby promoting a circular economy of water.

It will provide 100% coverage of sewerage and septage in 500 AMRUT cities.

Recycling and reuse of treated wastewater is expected to cater to 20% of total water needs of the cities and 40% of industrial demand. Under the Mission, fresh water bodies will be protected from getting polluted to make natural resources sustainable.

It aims to make 500 cities self-reliant and water secure, with universal coverage of sewerage and septage management. (Source: pib.gov.in) Jal Shakti Abhiyan: Catch the rain (JSA:CTR): Focusing on saving and conserving rainwater with the theme "Source sustainability for drinking water" from 04 March 2023 to 30 November 2023 in the pre-monsoon and monsoon periods of 2023, covering both urban and rural areas of all the districts in the country. In this year key focus of JSA:CTR - 2023 is on ensuring source sustainability in 150 water stressed district of the country, identified by Jal Jeevan Mission. Its features include:

Water conservation, rainwater harvesting, geo-tagging of water bodies, establishment of Jal Shakti Kendras through, intensive afforestation and awareness creation.

Desilting and cleaning of water bodies.

Revitalising abandoned borewells, geo-tagging and mapping of water bodies.

Intensified afforestation in catchment areas, snow harvesting in hilly regions, and rejuvenation of small rivers.

Jal Jeevan Mission (JJM): Jal Jeevan Mission, launched by Prime Minister Shri Narendra Modi in August 2019, is a transformative initiative dedicated to providing safe and ample drinking water to all rural households. Its features include:

Providing functional household tap water connections. Upgrading rural water supply infrastructure. Improving water quality and reducing contaminants. Creating water conservation and harvesting systems. Implementing Water Technology and Management systems Empowering local communities and institutions for water management.

Over the past four years, this mission has achieved a significant milestone, reaching 13.91 Crores households with tap water connections and profoundly impacting rural communities. In 2023, the mission crossed several milestones and progressed from 11 Crores connection at the start of the year to nearly 14 Crores tap connections by the end of the year. In 2023-24, so far, the Government of India has released INR 45,841.39 Crores to 26 eligible States for the implementation of Jal Jeevan Mission in the financial year 2023-24. (Source: pib.gov.in) Swachh Bharat

Mission - Urban 2.0: Swachh Bharat Mission (SBM-U) 2.0 has been launched on October 1, 2021 for a period of five years with a vision of achieving Garbage Free Status for all cities through 100% source segregation, door to door collection and scientific management of all fractions of waste including safe disposal in scientific landfills. Its features include:

No untreated used water or faecal sludge is discharged into the environment and all used water (including sewerage and septage, grey water and black water) is safely contained, transported, and treated, along with maximum reuse of treated used water, in all cities with less than 1 lakh population.

To sustain open defecation free status in all statutory towns.

(Source: pib.gov.in)

Atal Bhujal Yojana: Atal Bhujal Yojana is a central sector scheme worth INR 6,000 Crores which aims for sustainable management of groundwater with community participation.

It is being implemented by the Ministry of Jal Shakti (earlier known as Ministry of Water Resources, River Development and Ganga Rejuvenation). The scheme is being funded by the Government of India and the World Bank on 50:50 basis. The identified over-exploited and water-stressed areas for the implementation of the scheme are Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, and Uttar Pradesh. Its features include:

Envisage peoples participation through the formation of water budgeting, preparation and implementation of Gram-panchayat-wise water security plans, etc.

Emphasise community participation and demand side interventions for sustainable ground water management in identified water stressed areas in seven States of the Country.

Envisage improved source sustainability for Jal Jeevan Mission, positive contribution to the Governments goal of ‘doubling farmers income and inculcating behavioral changes in the community to facilitate optimal water use.

(Source: ataljal.hid.gov.in)

Namami Gange Programme: Namami Gange Programme was launched in June 2014 for a period up to 31^st March, 2021 to rejuvenate River Ganga and its tributaries with a budgetary outlay of INR 20,000 Crores. Considering the need and spread of the Programme, Government of India has further approved Namami Gange Mission-II with a budgetary outlay of INR 22,500 Crores till 2026 interalia including projects for existing liabilities (INR 11,225 Crores) and new projects/interventions (INR 11,275 Crores). A total of INR 14,084.72 Crores has been released by the Government of India to the National Mission for Clean Ganga (NMCG), from Financial Year (FY) 2014-15 till 31^st January 2023, out of which INR 13,607.18 Crores have been released by NMCG to State Governments, State Missions for Clean Ganga and other agencies for implementation of projects related to Ganga rejuvenation. Its features include:

Sewage Treatment Infrastructure.

River-Front Development.

River-Surface Cleaning.

Bio-Diversity.

Afforestation.

Public Awareness.

Industrial Effluent Monitoring.

Ganga Gram.

National River Conservation Directorate (NRCD): The NRCD, initiated by the Indian Government, endeavors to mitigate river pollution through a range of pollution abatement projects, thereby enhancing water quality in rivers. Its features include:

Identification and protection of priority rivers: NRCD identifies and prioritizes rivers requiring conservation efforts, focusing on their habitat, biodiversity, and water quality.

River surveillance: The directorate conducts regular monitoring and surveillance of river systems to detect pollution, changes in water quality, and any other environmental concerns.

Public awareness and education: NRCD engages in awareness campaigns and educates local communities on the importance of river conservation and sustainable practices.

National Infrastructure Pipeline (NIP): NIP has a projected investment of around INR 111 trillion for FY20-25 for developing a comprehensive view of infrastructure development in the country. At the time of its launch, NIP consisted of 6,835 projects. It has now expanded to over 9,000 projects across 35 sub-sectors and covers economic and social infrastructure projects jointly funded by the Central Government, State Governments, and the private sector. Its features include:

Capturing key greenfield and brownfield projects for investments across all economic and social infrastructure sub-sectors on a best-effort basis.

Addressing lack of infrastructure issues so that it does not become a binding constraint on the growth of the Indian economy.

Improving the infrastructure and realising the growth potential.

(Source: moneycontrol.com)

Company overview

VA Tech Wabag Limited, a leading global pure-play water technology Company, prioritizes a circular future and focuses on water management. Established in 1924, we lead in designing, engineering, and providing innovative technological services and solutions for municipal and industrial water needs. With extensive R&D and advanced technology, weve executed 6,500+ projects across 25+ countries, benefiting over 88 million people globally. Ranked third largest water private water operator in the world by Global Water Intelligence, UK, we ensure access to clean, safe water and a healthy environment for millions of lives.

The Segment wise performance disaggregated based on geography into ‘India and ‘Rest of the World is provided in the Financial Statements.

Our financial overview

The order book during the FY 2023-24 stood at INR 114,484 Million.

On a Consolidated basis, the Companys total income stood at INR 28,998 Million in FY 2023-24, as compared to INR 30,141 Million in FY 2022-23. Consolidated Profit after tax for FY 2023-24 stood at INR 2,456 Million as compared to INR 130 Million (after exceptional items) in FY 2022-23. On a Standalone basis, the Companys total income for FY 2023-24 stood at INR 25,410 Million as compared to INR 23,859 Million in FY 2022-23 Standalone Profit After Tax for FY 2023-24 INR 2,358 Million as compared to INR 12 Million (after exceptional items) in FY 2022-23 The Company reported a Net Cash positive position of INR 2,356 Million and a Free Cash generation of INR 1,683 Million driven by our effective cash management efforts. The interest cost remained under control with the interest coverage ratio at 18.90 in the FY 2023-24 compared to 12.84 in the FY 2022-23 on a standalone basis.

The above financial performance was a result of shift in the strategy from a Engineering, Procurement & Construction (EPC) to Engineering & Procurement (EP) business and divestment of subsidiary companies in the Switzerland and Czech Republic. The Key metrics of the year under review as per SEBI Regulations were as follows: Debtors Turnover ratio : 1.17 times Inventory Turnover ratio: 20.27 times Interest Coverage ratio: 16.73 times Current ratio: 1.66 times Debt Equity ratio: 0.11 times

EBIDTA (Operating Profit Margin) and Net Profit margin stood at 14.3% and 9.4% respectively and return on Net Worth at 17.1% for the FY 2023-24.

The reasons for significant changes can be referred in the notes to the financial statements forming part of this Annual Report.

Risks and Concerns

Your Company faces a spectrum of business risks stemming from both internal operations and external factors. It maintains a robust risk management framework designed to suit the distinct needs of its diverse businesses, taking into account factors such as risk magnitude, nature, and regulatory landscape specific to each business segment or operating unit. This system facilitates early identification and analysis of risks, empowering proactive measures. Senior management conducts regular reviews of the Companys risk management processes to ensure their effectiveness in mitigating risks.

Your Company faces risks stemming from fluctuations in interest rates. Operating primarily in rupees, it is vulnerable to exchange rate fluctuations. The Corporate Assurance Team collaborates with business units to define and oversee specific risk profiles, encompassing strategic, financial, and operational risks.

The Chief Executive Officers (CEOs) of all Clusters closely monitor the overall Risk Management Process viz. Risks and concerns, which includes Project Pre-Bid, Execution, and Close-out Risk Reviews by constantly having dialogues with the Functional Heads. CEOs in turn discuss with the Chairman

& Managing Director, the Business Risks and its mitigation plan periodically. Further, the significant risks are presented to the Risk Management and Monitoring Committee of the Board at least two (2) times in a year, which in turn reviews, suggests and recommends to the Audit Committee for its review and further suggestions; Audit Committee finally puts up to the Board for its final consideration. Further, CEOs in their quarterly presentation to the Board, make a detailed presentation on key Projects with major risks, its mitigation plan and Bid & No-Bid analysis. Our operations across multiple locations enable us to capitalize on the competitive advantages unique to each location, thereby strengthening our competitiveness and mitigating geographic and political risks within our business ventures.

Threats:

We see intense competition in our sectoral services from various competitors across the Globe. We have invested in our R&D initiatives as a result of which more than 125+ IPRs are registered so far. We constantly upgrade the innovative technology solutions as per the changing market scenarios and we will continue to do so to tackle the threats from our business competitors. For details, refer to the Theme section of our Annual Report.

Internal control systems and their adequacy

The Companys internal control systems are effective and robust, ensuring that there is efficient use and protection of resources and compliance with policies, procedures, financial reporting and statutory requirements. Further, Corporate governance is the foundation stone for the Company to achieve probable growth and desired outcomes, and robust internal controls are one of the important pillars of the corporate governance system. The Company ensures integrity in conducting its business, safeguarding its assets, timely preparation of reliable financial information, accuracy & completeness in maintaining accounting records, and prevention & detection of frauds & errors through a set of detailed policies and procedures (the detailed policies are stated elsewhere in this Report). All the Companys major business processes are well integrated and currently run on IFS. The Internal control systems of the Company are effective and adequate, commensurate with the size and complexities of its operations. These are regularly tested for effectiveness by the statutory as well as the Corporate Assurance Team (Internal auditors). An independent firm carries out the internal audit across the organisation on specific assignments assigned by the Audit Committee of the Board. A well-established internal audit framework is in place which extensively covers all aspects of financial and operational controls, covering all business, locations and functions. The internal auditors review the adequacy, integrity and reliability of control systems and suggest improvements in its effectiveness. The effectiveness of the controls is mapped and scores are given based on control indices. The internal audit team conducts extensive reviews and process improvements identified during the reviews are communicated to the management on an on-going basis. Significant observations made by the internal auditors and the follow-up actions thereon are reported periodically to the Audit Committee of the Board. The Audit Committee monitors the implementation of the audit recommendations.

Human resources

The company considers its dedicated and motivated employees as its greatest asset. It provides competitive compensation, fosters a healthy work environment, and acknowledges employee performances through a structured reward and recognition program. The Company aims to cultivate a workplace where each employee can realize and achieve their full potential. Encouraging individuals to undertake voluntary projects beyond their regular scope of work promotes learning and nurtures creative thinking. As of March 31, 2024, the Companys employee strength stood at 914.

Extra Milers Programme (EMP): This programme intended to identify potential talent among trainees who come through graduate/executive training programme. The objective of this programme is to build junior management level leadership pipeline.

Selected extra milers get a sponsorship to a premier institute for a week long basic leadership skills training programme followed by an individual development plan that will facilitate their growth on fast track.

Young Entrepreneur Programme (YEP): A programme intended to identify potential talent among young engineers/ executives of the Company and develop functional/business managerial capabilities. The objective is to build middle-level leadership pipeline.

Leadership Excellence Programme (LEX): A programme intended to identify potential talent among managers and deputy general managers of the Company and develop functional/ business managerial capabilities. The objective is to build a senior-level leadership pipeline.

Emerging Leader Programme (ELP): Though we have YEP in the middle management level, only four or five members get selected through this programme. Hence, to broaden the base, we have initiated another programme called the Emerging Leader Programme or ELP in the age group of 29 to 40 years. The objective is to identify emerging talents in the middle management level and build leadership capability.

Hi-Pot Programme: This programme aims to strengthen the leadership pipeline of our organisation. We have developed a very strong programme in this regard under the Global Talent Architecture framework, wherein we are identifying the Hi-Potential (Hi-Pots) leaders who can take on higher responsibilities and larger roles. Through this, we are covering various aspects of leadership management such as individual development plans, succession planning and their periodic and continuous monitoring through focused mentorship from business leadership and the talent managers within HR.

Research & Development

Your Company possesses more than 125 Intellectual Project Rights (IPRs) and is actively growing its research efforts. WABAG consistently enhances its extensive experience through in-depth R&D activities. This is supported by internal R&D facilities in Europe and India. Collaborations with Universities and Development Partners play a crucial role in WABAGs drive to innovate and offer solutions tailored to the market. Some of our partnerships are with below prestigious institutions across the world:

Anna University, Chennai, India

Vienna University of Technology, Austria

IWW Water Centre, Germany

EAWAG – Swiss Federal Institute of Aquatic Science and Technology, Switzerland

Istanbul Technical University, Turkey

As a forward-thinking Company, we consistently strive to develop and implement innovative solutions for the benefit of our Customers. This commitment drives us to engage in extensive research and development (R&D) activities, with our current particular focus on:

Potable Reuse

Contaminants of emerging concern (micro pollutants)

Antibiotic-resistant bacteria and genes

Deammonification

Minimum/Zero-Liquid Discharge (MLD/ZLD)

Ceramic membranes

Some of the major IPRs of the Company are:

CERAMOPUR?, CERAMOZONE?, CARBOPUR?, PACOPUR?, ADOX?, BIOZONE?, BIODEN?, ENR?, iEDR^TM, MICROPUR?,

CYCLOPUR?, FLUOPUR?, BIOPUR?, MARAPUR?, DAMOPUR?,

OPURR, ENOPUR-ADR, etc.

Cautionary statement

This statement made in this section describes the Companys objectives, projections, expectations and estimations which may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. Your Company cannot guarantee that these assumptions and expectations are accurate or will be realized by the Company. The actual result could differ materially from those expressed in the statement or implied due to the influence of external factors which are beyond the control of the Company. Your Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements based on any subsequent development.