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MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Global Economy 2017
In 2017, global economic growth reached 3 percent the highest growth rate since 2011. The growth is expected to remain steady for the coming year. The improved global economic situation provides an opportunity for countries to focus policy towards longer-term issues such as low carbon economic growth, reducing inequalities, economic diversification and eliminating deep-rooted barriers that hinder development.
Development and Opportunities in the Domestic Market
The infrastructure sector is a key driver of the Indian Economy. During the year 2017 and 2018, there has been a significant push from the Government.
Meeting the expectations of the infrastructure sector, the government has proposed several schemes and allocated plenty of funds and support for the improvement of the nation in terms of infrastructure such as:
Railways, roadways, airways along rail and road linkages and Defense and Connectivity infrastructure received major emphasis.
Upgradation and renovation work to be conducted for the improvement of 600 railway stations in India.
New tunnel in Sera Pass will be built in order to promote tourism in India, especially in the north-eastern part of the country.
Under road infrastructure, plans for completion of 9,000 km of National Highway and 3.7 lakh km rural road construction plan.
The AHF has been established to give a boost to affordable housing projects. Safe harbor of up to 5% has been proposed where the value of stamp duty exceeds the transaction value for transfer of real estate assets.
Owing to the nature of the industry the Company operates in, it is exposed to a variety of risk factors which are broadly categorized into financial, technical, construction, policy and political, market and legal. A tight risk process is carried out from pre-bid to project completion stage to manage, mitigate and monitor these risks by adopting specific risk mitigation measures. During the year, the Board has reviewed the process and the Risks that have already been identified for the business and necessary action for mitigation has been initiated.
Regulatory & Political Risk: The Company functions in a dynamic and ever changing business environment, wherein any sudden withdrawal or cancellation of policy can have an adverse impact on the businesss overall operations.
Increasing Competition Heightened: Competition results in increased bidding for projects which in turn forces Companies to bid for projects at unviable margins. In addition, increased competition can have profitability owing to lower revenue generation and greater operating cost. negative impacton
The Company has been going through a challenging time over the past few years. Debt commitments in terms of interest expenses kept on mounting leading to tightening of liquidity position and profitability erosion of the business. However, in a bid to revive the business and restore its financials the Company has undertaken a series of measures directed towards improving its operational efficiencies, cutting down on expenses and negotiating with the bankers for securing better terms on existing debt.. The Companys strategic initiatives are also ably supported by improving macro environment on the back of supportive policies of the government. The Company is optimistic that the above factors will help it emerge as a stronger and more focused EPC player. The future looks even more bullish for various reasons. The increasing demands on infrastructure will see the implementation of mega and complex projects. The Company is tying up with JV partners to bid for new projects. The company has bagged projects worth Rs. 1633.02 crores as on the date of this report
Internal Control System
As per the provisions of the Companies Act, 2013, internal controls and documentation are in place for all the operations and activities of the Company.
The Company has an adequate system of internal control to ensure that the resources of the Company are used efficiently and effectively, all assets are safeguarded and protected against loss from unauthorized use or disposition and the transactions are authorized, recorded and reported correctly, and other data and for maintaining accountability of assets. The internal control financial is supplemented by extensive programme of internal audits, review by management, documented policies, guidelines and procedures.
Financial and Operational Performance
The Company has achieved a turnover of Rs 207.80 crores against Rs 410.93 crores resulting into a decrease by 49.43%.
Human Capital is a key driver to the growth and success of Valecha Engineering Limited. HR functions at VEL, have been playing a significant role in planning, recruiting, deploying, training, managing and retaining the Human Resources.
The key HR strategies at VEL focus on optimizing individual and organizational efficiency by bringing culture in the Company, where innovation is encouraged, performance is recognized and employees are motivated to realize their potential and provide a competitive advantage to the organization.
HR function co-creates all HR Strategies along with Senior Management Team and Board of Directors to facilitate and influenceChange, attract talent and build capabilities.
Human Resource is recognized as the most valuable asset of the Company that plays a vital role in attaining success for the organization today and in the years to come.
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.