Vascon Engineers Ltd Management Discussions

Company Overview

Established in 1986, Vascon Engineers Limited is one of Indias leading construction engineering and real estate development companies. With nearly four decades of expertise, the Company has built a strong reputation for delivering complex and large-scale projects with quality, precision, and timeliness.

Over the years, Vascon has executed more than 220 projects, covering over 45 million sq. ft. across residential, commercial, institutional, industrial, and infrastructure segments. Its asset-light approach in real estate development ensures capital efficiency, while its specialised clean room partition business provides additional diversification.

The Company has been entrusted with several landmark developments, including Ruby Mills (Mumbai), Suzlon One Earth (Pune), Symbiosis College (Pune), and the IGI Airport multi-level car parking (New Delhi). Building on this legacy, Vascon continues to secure prestigious EPC projects and scale its presence in high-potential markets. With a strong order book, proven execution capabilities, and a disciplined business model, the Company is well positioned to capture opportunities arising from Indias expanding infrastructure and real estate sectors.

Global Economy:

The global economy moderated in FY 2024-25, with growth estimated at 3.2% compared to 3.5% in the previous year (IMF). Advanced economies faced headwinds from tighter financial conditions, weaker external demand, and geopolitical tensions. The United States displayed resilience supported by strong labor markets and consumption, while the Eurozone and Japan struggled with subdued exports and weak industrial activity.

Emerging markets experienced mixed outcomes. China remained constrained by stress in its real estate sector and muted consumer sentiment, while India and parts of ASEAN continued to stand out as growth outliers, supported by robust domestic demand. Inflationary pressures eased across many regions as supply chain disruptions normalized and monetary tightening took effect. However, volatility in food and energy prices persisted, and global trade growth slowed under the impact of weaker manufacturing activity and rising protectionist policies.

Capital flows reflected heightened investor caution, with higher interest rates in advanced economies leading to selective risk appetite for emerging markets.

Outlook

In FY 2025-26, global GDP is projected to expand by around 3.2%. Easing inflation and potential monetary policy loosening may support activity, but risks remain elevated due to geopolitical conflicts, fiscal imbalances in advanced markets, and persistent supply chain vulnerabilities. Structural shifts around the global energy transition, accelerated digital adoption, and diversification of trade partnerships are expected to shape the next phase of growth, with emerging markets playing a key role. (Link)

Indian Economy:

India remained the fastest-growing major economy in FY 2024-25, with Real GDP estimated to expand by 6.4%. Growth was broad-based: agriculture recorded 3.8% growth on the back of record foodgrain output, industry expanded 6.2% supported by construction and utilities, and services continued to be the main driver at 7.2%, led by financial services, real estate, and public administration.

Inflationary pressures eased significantly during the year. Headline retail inflation averaged 4.9% during April— December 2024, moving closer to the RBIs medium-term target of 4%. Softer core inflation, improved food supplies, and stable global commodity prices contributed to the moderation, although food and energy costs remained prone to volatility.

Indias external sector remained resilient. Exports grew by 6%, supported by a 12.8% rise in services exports, highlighting Indias competitiveness in IT, financial, and professional services. Foreign exchange reserves stood at USD 640 billion by December 2024, covering nearly 11 months of imports and providing a strong buffer against global shocks.

GDP growth

On the policy front, fiscal consolidation efforts continued even as infrastructure investment was scaled up. Government capital expenditure remained a key growth driver, with allocations towards roads, railways, and urban development. The private investment cycle also gained momentum, supported by rising corporate profitability and easing supply bottlenecks. Credit growth remained healthy, aided by strong banking system balance sheets, thereby supporting financing for both infrastructure and housing.

Outlook

For FY 2025-26, Indias GDP is projected to grow in the range of 6.3%-6.8%. Growth will be supported by rural demand recovery, higher infrastructure spending, and buoyant services activity. Rising urbanisation, growing middle-class incomes, and improved credit conditions are expected to further sustain demand in housing and real estate. Risks from global trade uncertainties, commodity price swings, and geopolitical challenges remain, but India is expected to retain its position as the fastest-growing major economy, underpinned by stable inflation, prudent policy management, and strong macroeconomic fundamentals.

Industry Overview

Construction Sector

The construction sector continues to be one of the key drivers of Indias economy, contributing nearly 8% of national GDP (Economic Survey 2024-25). During FY 202425, the sector maintained healthy growth momentum, with revenues rising by 12-15% year-on-year, following a higher base of 18-20% in FY 2023-24. While growth moderated slightly due to election-related delays and base effects, the overall trajectory remained strong and resilient.

Within the sector, the Engineering, Procurement and Construction (EPC) segment delivered steady performance, supported by government spending on infrastructure such as roads, airports, metros, bridges, and urban projects. EPC revenues expanded by 12-15% during FY 2024-25, underpinned by strong order inflows. Indias order book- to-sales ratio in the EPC space remains robust at ~3.5x, providing healthy revenue visibility for the coming years.

Emerging Technological Trends Impacting the Construction Industry

The industry is undergoing a significant transformation, driven by technology, sustainability and the need for operational efficiency

Digital Transformation and Smart Planning-

Advanced digital solutions such as Building Information Modelling (BIM), digital twin technologies, and AI-driven project management tools are reshaping planning and execution. These technologies enable accurate designs, reduce errors, improve coordination across teams, and enhance transparency in project monitoring, ensuring timely and cost-effective delivery.

Automation and Advanced Machinery

Mechanization and automation are redefining project execution. GPS-enabled machinery, telematics, and IoT- powered monitoring systems are improving efficiency, reducing downtime, and enhancing safety standards at sites. Modern formwork systems and modular construction techniques are enabling faster construction, reduced labour dependency, and improved structural precision

Sustainability and Green Solutions

Sustainability has become central to sectoral growth. Developers are increasingly adopting eco-friendly materials, energy-efficient practices, and water and waste management systems. Green buildings, certified under global benchmarks such as IGBC and LEED, are gaining traction across residential and commercial projects, underscoring the shift toward environmentally responsible development

Data-Driven and Collaborative Ecosystems

Cloud-based collaboration platforms, digital project dashboards, and mobile-enabled reporting are enabling real-time project tracking and faster decision-making. These integrated ecosystems are helping companies proactively manage risks, ensure compliance, and strengthen safety and quality outcomes.

These trends are expected to accelerate the sectors transition toward sustainable, efficient, and technology- driven operations, creating opportunities for companies like Vascon to further strengthen execution capabilities and differentiate through innovation.

Outlook

Indias construction sector is projected to grow at 6-8% in FY 2025-26 (CRISIL Research). Growth will be driven by continued government investment in infrastructure, particularly in urban mobility, irrigation, and housing projects. Operating margins are expected to remain range-bound at 10.25-10.75% given the competitive bidding environment. While expiry of certain pandemic-related relief measures may put pressure on working capital, overall liquidity and leverage across the sector remain comfortable.

Government Initiatives Driving Growth

Several flagship government programmes continue to support the expansion of Indias infrastructure and housing markets:

PM Gati Shakti & National Logistics Policy - Integrated planning across ministries is improving multimodal

connectivity and logistics efficiency, enhancing competitiveness for EPC players.

Bharatmala Pariyojana & Highways Development - Over 18,900 km of economic corridors have been completed, strengthening freight movement and connectivity, and creating steady demand for contractors.

Pradhan Mantri Awas Yojana - Urban (PMAY-U) - With over 118 lakh houses sanctioned and ~88 lakh completed, the scheme is a major driver of affordable housing demand.

AMRUT & Smart Cities Mission - Investments in water supply, sewerage, mobility, and digital infrastructure are enhancing urban livability, boosting opportunities for real estate and EPC companies.

Pradhan Mantri Gram Sadak Yojana (PMGSY) - Rural road connectivity has crossed 7.7 lakh km, supporting inclusive growth and driving demand for regional infrastructure.

Together, these initiatives have created a long-term pipeline of opportunities for construction and real estate companies, while improving urban and rural ecosystems across India.

Real Estate Sector

Indias real estate sector delivered a strong performance in FY 2024-25, with housing sales across major cities crossing ~230,000 units (CBRE India). Demand was led by mid- and high-end housing, alongside a growing appetite for premium homes. Rising disposable incomes, preference for larger spaces, and a shift toward integrated townships with community living continued to drive momentum. The premium and luxury housing segments gained significant traction, supported by affluent buyers and non-resident Indians (NRIs), with sales in the INR 1-2 crore category registering notable growth.

The commercial real estate segment also reported robust activity. Office leasing touched a record 53.4 million sq. ft., supported by demand from IT, banking, and the rapid expansion of Global Capability Centres (GCCs). Grade-A spaces with advanced smart features remained the most preferred choice, while flexible workspaces continued to gain share. The retail and hospitality markets recorded strong growth, aided by rising consumer spending and tourism recovery, with hotel occupancy climbing to 67.5% — the highest in a decade.

Infrastructure expansion provided further impetus to real estate. Government capital expenditure stood at C 11.1 lakh crore in FY 2024-25, focused on roads, railways, and airports. Improved connectivity enhanced demand in emerging cities and growth corridors. Logistics and industrial real estate grew by 25%, while new-age asset classes such as data

centres, co-living, and senior housing continued to attract institutional and private investor interest. Indias data centre capacity is projected to expand by 66% over the next two years, underlining long-term growth potential

Outlook

The real estate sector is expected to remain a central pillar of Indias growth story. Currently contributing 7-8% of GDP, it is projected to grow into a USD 4.8 trillion sector by 2047, accounting for nearly 18% of GDP (CREDAI-Knight Frank Report). Over the medium term, the sector is likely to expand at a CAGR of 13-15%, supported by urbanisation, rising household incomes, infrastructure push, and evolving asset classes. The recent cut in policy rates by the Reserve Bank of India is expected to further support housing affordability, keeping demand momentum intact.

Emerging Trends Real Estate

Shift Toward Premium and Larger Homes

Consumer preference is moving toward spacious and premium homes, driven by lifestyle aspirations, hybrid work models, and rising affordability. Developers are increasingly focusing on the INR 1-2 crore segment, which accounted for a growing share of overall sales.

Smart and Sustainable Living

Buyers are placing greater emphasis on technology- enabled features such as AI-based security, energy-efficient systems, and smart home automation. At the same time, sustainability certifications, use of eco-friendly materials, and green building practices are becoming mainstream

Rise of Alternative Asset Classes

Institutional investors are showing rising interest in emerging real estate segments such as data centres, warehousing, co-living, and senior housing. These asset classes offer high-growth potential and align with Indias urbanization and digitalization megatrends.

Integration of Work, Living, and Community Spaces

Integrated townships and mixed-use developments are gaining traction, offering residential, commercial, and retail spaces within one ecosystem. This reflects evolving consumer preferences for convenience, holistic living, and community engagement

Outlook

The Indian real estate sector is expected to remain a cornerstone of the countrys growth journey. Currently contributing 7-8% to GDP, the sector is projected to

expand into a USD 4.8 trillion industry by 2047, accounting for nearly 18% of GDP (CREDAI-Knight Frank Report). Over the next five to six years, real estate is expected to grow at a CAGR of 13-15%, supported by urbanisation, rising household incomes, favourable credit conditions, and infrastructure development.

The recent policy rate cuts by the Reserve Bank of India are expected to enhance affordability, narrowing the gap between rental costs and home loan EMIs, and further supporting homeownership. With robust demand in the mid- to premium housing segments, strong investor interest in commercial and alternative assets, and government focus on urban infrastructure, the real estate sector is well- positioned for sustained growth

Relevance to Market

The macroeconomic and industry environment offers a strong foundation for Vascon Engineers to expand its core businesses of Engineering, Procurement & Construction (EPC) and Real Estate Development.

Indias continued emphasis on infrastructure creation — through sustained capital expenditure in roads, railways, airports, metros, healthcare, and smart cities — provides significant opportunities for EPC players. With a proven track record of executing complex and large-scale projects across geographies, Vascon is well positioned to capitalize on this demand. The Companys robust order book, supported by a diversified client base, provides healthy revenue visibility and strengthens its presence in high-potential segments such as hospitals, institutional buildings, and residential complexes.

In real estate, sectoral momentum remains firmly intact. Rising urbanisation, increasing household incomes, and evolving consumer preferences are driving demand in the mid-to-premium housing categories, while commercial and mixed-use developments continue to witness investor and end-user interest. Vascons asset-light, selective, and brand-driven real estate approach enables the Company to participate in this growth cycle while maintaining financial discipline. The Companys strong sales performance in ongoing projects, along with its pipeline of new launches, reinforces its ability to capture demand in key urban markets.

Technology adoption and sustainability, which are reshaping both construction and real estate, also align with Vascons strategic focus. The Company continues to enhance execution efficiency through digital tools, automation, and advanced project monitoring, while embedding environmentally responsible practices into its operations.

Overall, the prevailing economic momentum, combined with favourable sectoral trends, offers Vascon significant opportunities to accelerate growth, strengthen execution, and deliver long-term value to stakeholders.

Financial Performance with respect to operational performance

Company Performance

Vascon Engineers delivered a year of strong execution in FY 2024-25, supported by a healthy order book, operational discipline, and a sharper focus on core businesses. Both the EPC and Real Estate segments contributed meaningfully to growth, while the successful exit from non-core businesses enhanced strategic clarity.

EPC Segment

The EPC segment remained the primary growth driver, with revenues of Rs1,007.2 crore in FY 2024-25. Execution

momentum was sustained across major projects including the Mumbai Police Staff Quarters, Medical Colleges with District Hospitals at Kaushambi and Bijnor, Vedanta - Barmer facilities, and Pune MRDA works.

At year-end, the EPC order book stood at Rs2,825 crore, equivalent to 2.8 times annual revenues, providing robust visibility for the coming years. A diversified client base across government, institutional, and private sectors further strengthens resilience. Going forward, the Company will focus on expanding into high-potential verticals such as healthcare, institutional infrastructure, and residential complexes while leveraging digital tools and automation to enhance efficiency.

Real Estate Segment

The Real Estate segment recorded revenues of Rs71 crore in FY 2024-25, supported by healthy sales momentum and disciplined collections. New sales bookings stood at ~35,000 sq. ft. worth Rs23 crore, with collections of Rs58 crore during the year.

Ongoing projects continued to demonstrate strong traction, reflecting Vascons brand strength and focus on the mid-to- premium housing category

sProject	Location	Status (as of Mar-25)
Good Life	Talegaon (Pune)	83% sold
Tulip Phase III	Coimbatore	74% sold
Windermere	Pune	95% sold
Tower of Ascend	Pune	73% sold

With a strong pipeline of new launches, Vascon is well- positioned to capture demand in growth corridors such as Pune, Mumbai, and Coimbatore.

Strategic Realignment

During the year, the Company successfully exited all noncore businesses, enabling sharper focus on EPC and Real Estate. This has improved operational efficiency, streamlined resource allocation, and strengthened financial discipline. Reflecting these improvements, CRISIL upgraded Vascons long-term credit rating from BBB+ to A- with Stable Outlook, reinforcing the Companys strong fundamentals and ability to raise capital at competitive terms.

Consolidated Financial Performance

• Total Consolidated Income stood at C 1,089.91 Crores in FY 2024 - 25 as against C 775.36 Crores in FY 202324

• EBITDA stood at C 99.90 Crores in FY 2024-25 as against C 87.43 crore in FY 2023-24. (excluding exceptional gain)

• Profit after tax stood at C 130.25 Crores in FY 2024-25 as against C 61.48 crores in FY 2023-24

• As on March 31, 2025, Total consolidated debt stood at C 205.00 crores as against C 174.68 crores on March 31, 2024

• Net worth stood at C 1,092.82 Crores as on March 31, 2025 as compared to C 981.03 crores as on March 31, 2024

Working Capital Management

• Current assets as on March 31,2025 stood at C 1,739.03 Crores as compared to C 1520.57 crores as on March 31, 2024.

• Current ratio as on March 31, 2025 stood at 1.89 times as compared to at 1.99 times as on March 31, 2024.

• I nventories stood at C 591.21 Crores as on March 31, 2025 as against C 512.16 crores as on March 31, 2024.

• Loan & Other Financial Assets stood at C 612.86 Crores in FY 2024-25 compared to C 439.22 crores in FY 2023- 24.

• Current liabilities stood at C 920.64 crores on March 31, 2025 compared to C 792.76 crores as on March 31, 2024.

• Cash and bank balances was at C 227.74 Crores as on March 31, 2025 compared to at C 66.83 crores as on March 31, 2023.

KEY RATIOS

• Debtors turnover ratio: The Companys debtors turnover stood at 5.52 in FY 2024-25 as compared to 4.66 in FY 2023-24;

• Inventory turnover ratio: Inventory turnover stood at 1.65 FY 2024-25 as against 1.31 in FY 2023-24; major inventory is related to Real Estate Division and it also includes inventory for project which are not yet launched

• Interest coverage ratio: The Companys interest coverage ratio stood at 0.74 times in FY 2024-25 against 0.53 times in FY 2023-24;

• Debt to Equity ratio: Debt to Equity Ratio stood at 0.19

• Return on Capital Employed: The return on net worth stood at 13.91% in FY 2024-25

Real Estate

Ongoing Projects:

Tulip Phase 3 - The company has already delivered two phases of Tulips project in Coimbatore and launched its last phase i.e. Phase III in financial year 23 with 98 apartments and within a months time 50 % inventory has been sold . presently the project is 74 % sold.

Tower of Ascend - Commercial project in Kharadi, Pune with showroom and boutique office spaces nearby EON it park. It has various locational advantages and we have sold 61% of the Project. The total developable area of this project is 189790 Sq Ft.

Vascon Orchids - A luxury redevelopment project strategically located on Linking Road, Santacruz West. The project comprises three wings with 2 & 3 BHK residences, offering 62 premium units, complemented by curated rooftop and ground-level amenities including a fully equipped gymnasium, Bocce Ball, and Cornhole. Designed around the theme of "high-street living," the project brings a new benchmark of upscale residential lifestyle to one of Mumbais most vibrant neighborhoods, offering seamless connectivity to SV Road, the upcoming metro station, the Coastal Road Connector, and key business and lifestyle hubs across the city.

Strength, Opportunities, Strategy

Strengths

• Robust Order Book: A diversified order book across public and private sector clients, providing long-term revenue visibility.

• Specialisation in Building Segment: Strong inhouse design capabilities and focus on advanced technologies have enabled Vascon to consistently deliver complex projects with precision.

• Experienced Management: A proven leadership team with decades of experience in construction, real estate, and project execution.

• Brand Trust: Reputation for quality, transparency, and timely delivery, which continues to strengthen customer and client confidence.

• Government Infrastructure Push: Multiple national programmes in airports, healthcare, railways, smart

cities, and affordable housing create sustained demand opportunities in Vascons core segments.

• Real Estate Market Positioning: Participation in the organised and branded real estate market, which has seen strong revival in customer sentiment and demand.

Opportunities

• Rising government expenditure on infrastructure, including healthcare, transport, and urban development.

• Growing demand for affordable and mid-premium housing across Indias urban centres.

• Emerging trends in technology adoption, digital project management, and sustainable building practices.

• Expanding investor interest in commercial real estate, redevelopment, and alternative asset classes such as data centres and co-living.

Strategy

Vascons strategy remains anchored on strengthening its core businesses of EPC and Real Estate Development:

• EPC Focus: Expand presence in high-potential sectors such as healthcare, institutional buildings, and smart urban infrastructure, while improving execution efficiency through digitalisation and automation.

• Real Estate Focus: Pursue an asset-light, selective development model with emphasis on mid-to-premium housing and redevelopment opportunities in metro and tier-I cities.

• Operational Discipline: Continue improving balance sheet health through prudent cash flow management, monetisation of non-core assets, and maintaining a strong liquidity buffer.

• I nnovation & Sustainability: Leverage technology and green practices to differentiate offerings, improve cost efficiency, and align with evolving customer and regulatory expectations.

Through these strengths and strategic priorities, Vascon is well positioned to capture Indias growing demand for infrastructure and housing while delivering sustainable value creation for stakeholders.

Risk Factors & Mitigation

Vascon operates in dynamic markets where multiple external and internal risks can impact performance. The Company has developed a robust risk management framework to proactively identify, assess, and mitigate these risks.

EPC Business Risks

• Project Execution Delays: Delays due to unforeseen site conditions, natural calamities, or disruptions can impact timelines and margins.

Mitigation: Vascon follows rigorous project planning, on-site monitoring, and contingency planning to minimise delays and cost overruns.

• Cost Escalations: Fluctuations in input prices (cement, steel, fuel) may affect profitability.

Mitigation: The Company incorporates price

escalation clauses in contracts where feasible, diversifies sourcing, and leverages scale for cost efficiency.

• Client Payment Delays: Delayed payments from developers or government agencies may strain liquidity.

Mitigation: Vascon maintains a diversified client portfolio, strong credit monitoring, and disciplined working capital management.

Real Estate Risks

• Regulatory & Approval Delays: Real estate projects are subject to extensive approvals, environment clearances, and changing regulations.

Mitigation: The Company works with experienced consultants, maintains compliance frameworks, and engages closely with regulatory authorities.

• Financing & Policy Risks: Changes in fiscal or monetary policy may affect demand, financing costs, and affordability.

Mitigation: Asset-light strategy ensures lower capital intensity; projects are launched only after achieving adequate financial tie-ups and demand visibility.

• Market Volatility: Demand cycles can be impacted by economic slowdown, interest rate movements, or changing buyer sentiment.

Mitigation: Vascon focuses on mid-to-premium housing and redevelopment projects, which have relatively resilient demand, and adapts its launch pipeline to market conditions.

Enterprise-Wide Risks

• Macroeconomic Uncertainty: Global trade volatility, commodity prices, or geopolitical risks can indirectly affect growth.

• Talent & Manpower Risk: Shortages of skilled labour may impact project execution.

• Compliance & Legal Risks: As a listed entity, noncompliance with regulations could harm reputation.

Mitigation: Vascon continues to strengthen its enterprise risk framework, invest in training, and adopt global best practices in governance, sustainability, and compliance.

Human Resources

Employees form the foundation of the business and are vital to its continued success. Through strong HR policies and practices, the Company strives to crssseate an environment that attracts and retains top talent while ensuring employee well-being. Various programs for skill development and learning are conducted to enhance staff capabilities. Vascon draws on a wide pool of knowledge, qualifications, skills, professional experience, culture, geography, and industry expertise.

The Company places high importance on health and safety management, regularly conducting drills and mock training sessions. It adheres to the highest international standards, ensures compliance with all safety instructions, and implements additional measures in line with statutory requirements. As of March 31, 2025, Vascon Engineers had a workforce of 772 employees.

Internal Control System

The Company has deployed a vigorous Internal Controls and Audit mechanism to facilitate an accurate and fair presentation of its financial results. The internal audit system has been continuously monitored and updated to ensure that assets are safeguarded, established regulations are complied with and pending issues are addressed promptly. The Audit Committee reviews reports presented by the internal auditors on a routine basis. The Committee makes note of the audit observations and takes corrective actions, if necessary. It maintains a constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively.

Risk Management

The Company has developed a robust risk management framework. It has been identified as one of key enablers to achieve the companys objectives. Increased competition, pressures on cost and deliveries, forex & commodity price variations, impact of recessionary trends on the award of jobs and manpower attrition are some of the major risks faced by the industry. Measures such as advanced quantitative tools, global sourcing, standard operating procedures, and operational excellence initiatives have been implemented so as to protect the profitability of the business