Vruddhi Engineering Works Ltd Management Discussions

BUSINESS OVERVIEW

Our Company was incorporated in Mumbai, Maharashtra as "Vruddhi Steel Pr?vate Limited", a pr?vate limited company under the Companies Act, 2013, vide certif?cate of incorporation dated October 27, 2020 issued by the Assistant Registrar of Companies, Central Registration Centre. Subsequently, our Company was converted from a private limited company to a public limited company, pursuant to a resolution passed in the extraordinary general meeting of our Shareholders held on December 26, 2022, and consequently, the name of our Company was changed to "Vruddhi Steel Limited", and a fresh certificate of incorporation consequent upon conversion from private company to public company dated January 05, 2023, was issued by the RoC to our Company. Later on, January 31, 2023, the running business of the proprietorship concern of our Promoter namely "M/s. Kosmo Ventures" was taken-over by the Company, along with the assets and liabilities of the proprietorship concern as going concern. Further, the name of our Company was changed to "Vruddhi Engineering Works Limited" pursuant to a special resolution passed in the extraordinary general meeting of our Shareholders held on April 29, 2023 and a fresh certificate of incorporation dated June 20, 2023 was issued by the Registrar of Companies, Mumbai.

Our Company is mainly engaged in offering mechanical splicing solutions to the real estate, construction and infrastructure industry by designing, engineering and supplying of rebar couplers. Our Companys offering under this vertical includes (a) supply of rebar couplers as per our customer needs; (b) on-site threading services of the couplers; and (c) trading in threading machines and spares. Our Company believes that it offers an end-to-end mechanical splicing solutions ranging from design, manufacturing, testing, logistics and rebar threading. We believe that the rebar couplers offered by our Company is an alternative to the conventional splicing methods followed in the construction industry.

As our Company primarily caters to the construction industry, our Company with an objective to expand its product offerings acquired the running business of the proprietorship concern of our Promoter namely, "M/s. Kosmo Ventures", along with the assets and liabilities of the proprietorship concern as going concern. Kosmo Ventures was engaged in the business of trading of reinforcement bars (TMT bars) and machinery. The acquisition was completed on January 31, 2023 and since then, our Company has expanded into the business of trading of reinforcement bars (TMT bars) and machinery as a trader and service provider. Our Company design and engineer the rebar couplers as per the customers requirement and is manufactured by a third-party manufacturer.

Our Promoter is engaged with the construction industry for over 5 years. In a short span of time, we believe that our Promoter has established herself as a trusted and reliable source for supply of Steel Products amongst our suppliers. We believe that our approach of timely supply of materials, quality control, logistics, inventory management, credit and delivery at cost effective prices to the customers has helped our Company to build strong relationship with our customers.

Our Company offers on-site threading service to our customers of the couplers. Our skilled and experienced workforce shall take care of all the hassles associated with on-site machine installation and rebar threading.

INDUSTRY OVERVIEW

The real estate sector is one of the most globally recognized sectors. It comprises of four sub-sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the

growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term.

Indias high growth imperative in 2023 and beyond will significantly be driven by major strides in key sectors with infrastructure development being a critical force aiding the progress.

Infrastructure is a key enabler in helping India become a US$ 26 trillion economy. Investments in building and upgrading physical infrastructure, especially in synergy with the ease of doing business initiatives, remain pivotal to increase efficiency and costs. Prime Minister Narendra Modi also recently reiterated that infrastructure is a crucial pillar to ensure good governance across sectors.

The governments focus on building infrastructure of the future has been evident given the slew of initiatives launched recently. The US$ 1.3 trillion national master plan for infrastructure, Gati Shakti, has been a forerunner to bring about systemic and effective reforms in the sector, and has already shown a significant headway.

Infrastructure support to nations manufacturers also remains one of the top agendas as it will significantly transform goods and exports movement making freight delivery effective and economical.

In order to meet Indias aim of reaching a US$ 5 trillion economy by 2025, infrastructure development is the need of the hour. The government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India and the production-linked incentives (PLI) scheme to augment the growth of infrastructure sector. Historically, more than 80% of the countrys infrastructure spending has gone toward funding for transportation, electricity, and water& irrigation.

While these sectors still remain the key focus, the government has also started to focus on other sectors as Indias environment and demographics are evolving. There is a compelling need for enhanced and improved delivery across the whole infrastructure spectrum, from housing provision to water and sanitation services to digital and transportation demands, which will assure economic growth, increase quality of life, and boost sectoral competitiveness.

EXECUTIVE SUMMARY

• In India, the real estate sector is the second-highest employment generator, after the agriculture sector.

• Real estate sector in India is expected to reach US$ 1 trillion by 2030. By 2025, it will contribute 13% to the countrys GDP.

• Rapid urbanisation bodes well for the sector. The number of Indians living in urban areas is expected to reach 542.7 million by 2025 and 675.5 million by 2035.

• Construction is the third-largest sector in terms of FDI inflow. FDI in the sector (including construction development & activities) stood at US$ 55.50 billion from April 2000-December 2022.

• Government of Indias ‘Housing for All initiative is expected to bring US$ 1.3 trillion investment in the housing sector by 2025.

• Indias Global Real Estate Transparency Index ranking improved by three notches from 39 to 36

since the past eight years from 2014 until 2022 on the back of regulatory reforms, better market data and green initiatives, according to property consultant JLL.

• Home sales across top eight cities in India surged 68% YoY to reach ~308,940 units in 2022, signifying a healthy recovery in the sector.

• The residential sector is expected to grow significantly, with the central government aiming to build 20 million affordable houses in urban areas across the country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union Ministry of Housing and Urban Affairs. Expected growth in the number of housing units in urban areas will increase the demand for commercial and retail office space.

• High budgetary allocation for Infrastructure:

^ In Budget 2023-24, capital investment outlay for infrastructure is being increased by 33% to ?10 lakh crore (US$ 122 billion), which would be 3.3% of GDP.

^ Infrastructure Finance Secretariat is established to enhance opportunities for private investment in infrastructure that will assist all stakeholders for more private investment in infrastructure.

• Increasing Private Sector involvement:

^ The Indian government has introduced various formats in order to attract private investments, especially in roads and highways,

airports, industrial parks and higher education and skill development sectors.

^ Private Equity-Venture Capital firms invested US$ 46 billion (across 1,261 deals) in Indian companies in 2022.

• Rising Foreign Direct Investment (FDI) in the sector

• FDI in construction development (townships, housing, built-up infrastructure and construction development projects) and construction (infrastructure) activity sectors stood at US$ 26.23 billion and US$ 28.95 billion, respectively, between April 2000- September 2022.

POLICY SUPPORT

• The Government has allowed FDI of up to 100% for townships and settlements development projects.

• Under the ‘Housing for All scheme, 20 million houses are to be built by 2022, GST rate is brought down to 5%.

• In the Union Budget 2023-24, the Finance Ministry has announced a commitment of ? 79,000 crore (US$ 9.64 billion) for PM Awas Yojana, which represents a 66% increase compared to the last year.

• Under Budget 2023-24, capital investment outlay for infrastructure is being increased by 33% to ? 10 lakh crore (US$ 122 billion), which would be 3.3% of GDP and almost three times the outlay in 2019-20.

• Under Budget 2023-24, Infrastructure Finance Secretariat is being established to enhance opportunities for private investment in infrastructure that will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power.

GOVERNMENT INITIATIVES

Government of India along with the governments of respective States has taken several initiatives to encourage development in the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies. Below are some of the other major Government initiatives:

• In the Union Budget 2023-24, the Finance Ministry has announced a commitment of ? 79,000 crore (US$ 9.64 billion) for PM Awas Yojana, which represents a 66% increase compared to the last year.

• In October 2021, the RBI announced to keep benchmark interest rate unchanged at 4%, giving a major

boost to the real est?te sector in the country. The low home loan interest rates regime is expected to drive the housing demand and increase sales by 35-40% in the festive season in 2021.

• Under Union Budget 2021-22, tax deduction up to ? 1.5 lakh (US$ 2069.89) on interest on housing loan, and tax holiday for affordable housing projects have been extended until the end of fiscal 2021-22.

• The Atmanirbhar Bharat 3.0 package announced by Finance Minister Mrs. Nirmala Sitharaman in November 2020 included income tax relief measures for real estate developers and homebuyers for primary purchase/sale of residential units of value (up to ? 2 crore (US$ 271,450.60) from November 12, 2020 to June 30, 2021).

• In order to revive around 1,600 stalled housing projects across top cities in the country, the Union Cabinet has approved the setting up of ? 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).

• Government has created an Affordable Housing Fund (AHF) in the National Housing Bank (NHB) with an initial corpus of ? 10,000 crore (US$ 1.43 billion) using priority sector lending short fall of banks/financial institutions for micro financing of the HFCs.

• As of December 31, 2022, India formally approved 425 SEZs, and as of January, 2023, 270 SEZs are operational. Most special economic zones (SEZs) are in the IT/ BPM sector.

• Under Budget 2023-24:

^ Capital investment outlay for infrastructure is being increased by 33% to ?10 lakh crore (US$ 122 billion), which would be 3.3% of GDP and almost three times the outlay in 2019-20.

^ Infrastructure Finance Secretariat is being established to enhance opportunities for private investment in infrastructure that will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power.

^ The Government has decided to continue the 50-year interest free loan to state governments for one more year to spur investment in infrastructure and to incentivize them for complementary policy actions, with a significantly enhanced outlay of Rs 1.3 lakh crore (US$ 16 billion).

^ A capital outlay of Rs 2.40 lakh crore (US$ 29 billion) has been provided for the Railways, which is the highest ever outlay and about 9 times the outlay made in 2013- 14.

^ 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified and will be taken up on priority with investment of ? 75,000 crore (US$ 9 billion), including ?15,000 crore (US$ 1.8 billion) from private sources.

^ 50 additional airports, heliports, water aerodromes and advance landing grounds will be revived for improving regional air connectivity.

^ An Urban Infrastructure Development Fund (UIDF) will be established through use of priority sector lending shortfall, which will be managed by the National Housing Bank, and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.

^ States will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF.

^ For realizing the vision of "Make A-I in India and Make A-I work for India", three centers of excellence for Artificial Intelligence will be set-up in top educational institutions.

^ The Digital Public infrastructure for agriculture will be built as an open source, open standard and inter operable public good that will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups.

^ 157 new nursing colleges will be established in co-location with the existing 157 medical colleges established since 2014.

^ National Digital Library for Children and Adolescents will be set-up for facilitating availability of quality books across geographies, languages, genres and levels, and device agnostic accessibility. States will be encouraged to set up physical libraries for them at panchayat and ward levels and provide

infrastructure for accessing the National Digital Library resources.

^ Skill India International Centres to be set up across different States to skill youth for international opportunities.

OPPORTUNITIES, THREATS, CONCERN AND OUTLOOK

OUR COMPETITIVE STRENGTHS Diversified customer base

We have a well-diversified domestic customer base, wherein we supply standard as well as custom based products. This reduces the intensity of any significant single customers contribution in our revenues. Our top ten customers contribute 95.28%, 75.75%, 85.22% and 100% of our revenue from operations for the period ended September 30, 2023, Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. We have relationships with some of our customer since inception.

Our continuous focus on providing quality products and services consistently to our customers has helped us nurture long-term relationships with them. Our track record of delivering timely services and demonstrated industry expertise has helped in forging strong relationships with them. We have a history of high customer retention and derive a significant proportion of our revenue from repeated business.

Diversified and Established Product

Our Company design, engineer and supply rebar couplers that finds its application in real estate, construction and infrastructure industry and is used in the construction of residential and commercial buildings, steel structures, roads, etc. With a wide variety of product categories, our product finds in application across real estate, construction and infrastructure industry as one of the key products.

Quality Assurance

We believe that we manufacture our product using the best raw material, i.e. carbon steel meeting the strict technical specification and governing standards of an ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certified Company issued by Quality Control Certification accredited by "UASL, England, UK". We conduct quality tests at every stage of manufacturing process of our third party manufacturer and the desired chemical compositions are maintained right through the process. After manufacturing, the products are also carefully inspected and evaluated on various parameters. For every batch of raw materials (unique Heat number), testing is conducted in third party NABL accredited Lab and one sample is tested for physical properties (UTS and Elongation) and one sample is tested for chemical composition in each batch. In case of finished products, once the Unique Identification number (UIN) has been marked on the coupler, one sample from each UIN lot is tested for chemical composition.

OUR BUSINESS STRATEGIES Increase our market share

In the domestic market we presently have presence in Pune, Dhule, Surat, Mangalore, Hyderabad, Kolkata, Bangalore market with majority of our business coming from Mumbai. We intend to increase our market share in domestic by focusing on cross selling of products and by introducing new products and introduce our products in the international markets. We believe that focus on export sales will enable us to improve our margins. We further believe that there exist significant opportunities to cross-sell our products and offer the same product to additional locations of our existing customers with the help of our established capabilities and manufacturing, sales and distribution infrastructure. We have multiple such customers wherein we service their different projects, across locations.

We have identified overseas markets where we would like sell our produc?s and we would be starting our marketing activities in such select market. Considering that our products, rebar couplers are critical inputs in construction process we would be subject to stringent quality requirements and our products will be tested on various parameters.

Focus on Advanced Products

We intend to leverage our design and engineering capabilities to increase our focus on advanced products. We believe that high value added and technology driven components will provide us with early- mover advantages and higher profit margins, thus giving us the opportunity to consolidate our position with our customers. We believe that the construction industry is evolving rapidly both in terms of products and also in terms of quality. We would keep upgrading our product portfolio to meet this every changing dynamic, to further improve the quality of our products and our introducing technology-oriented products and to add new products to our portfolio. For instance, we are testing Grouting couplers a product used in precast concrete structure for mechanical splicing of joints Saves cost and time in construction. Further, these grouting couplers can be customised to meet our customer specifications. We believe that an expanded product portfolio will assist us in developing long-term relationships with our customers. Focus on consistently meeting quality standards Our Company intends to focus on adhering to the quality standards of the products and services. This is necessary so as to make sure that we get repeat orders from our customers. Quality of the product and services is very important for the company from both customer and regulatory point of view. Providing the desired and quality products help us in enhancing our reputation and maintaining long term relationships with customers. We conduct quality testing from IIT, Kanpur as well as we have started with international testing of our products.

COMPETITION

We face competition from domestic manufacturers. Competition emerges from small as well as big players in the mechanical splicing industry and from traders and dealers in the Steel Products industry. Further, we also face competition from manufacturers of steel products who have direct access to our customers. We believe that our experience in this business and quality assurance will be key to overcome competition posed by organized and unorganized players. We believe that we are able to compete effectively in the market with our quality of services and our reputation. We believe that the principal factors affecting competition in our business include client relationships, reputation, the relative quality, credit terms and price of the products Our continued success depends on our ability to compete effectively against our existing and future competitors.

INTERNAL CONTROL FRAMEWORK

Your Company conducts its business with integrity and high standards of ethical behaviour, and in compliance with the laws and regulations that govern its business. Your Company has a established framework of internal controls in operation, supported by standard operating procedures, policies and guidelines, including self-assessment exercises. The Company time to time seek evaluating the adequacy of all internal controls and ensuring that operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements.

PEOPLE AND PRACTICES:

The Board of Directors contin?es to challenge the management and push for higher targets. The Boards well-rounded experience in industry. The Board continues to provide long term direction to the Company and engages actively towards initiatives inputs on the Companys lo ng-term vision.

The Company recognizes the importance and contribution of its human resources for its growth and development and values their talent, integrity and dedication. With the focus to develop leadership talent from within, the Company conduct various programmes. Employee motivation is key to organization success. On these lines, the Company conducts its various social programs and motivate them.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Your Company has achieved a total income of Rs. 2217.41/- Lakhs during the year under review as against Rs. 1309.62/- Lakhs in the previous financial year. The net profit after tax of the Company for the year under review is Rs. 57.29/- Lakhs as compared to profit of Rs. 75.34/- Lakhs for the previous year. The net profit before tax for the year under review is Rs. 79.59/- lakhs as compared to profit of Rs. 101.45/- Lakhs for the previous year.

FINANCIAL RATIOS

Particulars	As at 31-32024	As at 31-32023	% Variance	Reason for variance of more than 25%
Current ratio (in times)	1.15	1.26	(8.57)	-
Debt equity ratio (in times)	1.08	9.12	(88.19)	Due to Increase in share capital
Debt service coverage ratio (in times)	3.24	5.61	(42.33)	Due to decrease in profit after tax
Return on equity ratio (%) (ROE)	0.24	0.68	(64.96)	Due to Increase in average equity
Trade receivables turnover ratio (in number of days)	3.87	4.53	(14.56)	-
Net capital turnover ratio (in times)	17.14	17.29	(0.87)	-
Net profit ratio	0.03	0.06	(54.43)	Due to Increase in revenue from operation
Return on capital employed (%) (ROCE)	0.14	0.45	(68.34)	Due to Increase in Net worth

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report containing the objectives, expectations or predictions of the company may be forward-looking within the meaning of securities laws and regulations. Actual results may differ materially from those expressed in the statement. The operations of the Company could be influenced by various factors such as domestic and global demand and supply conditions affecting sales volumes a selling prices of finished goods, input availability and cost, tax laws, economic developments within the country and other factors such as litigation and industrial relations.