VSF Projects Ltd Management Discussions

GLOBAL ECONOMY

The global economy continues to show modest resilience despite ongoing trade tensions and fiscal vulnerabilities. According to the IMFs World Economic Outlook Update – July 2025, global growth is projected at 3.0% in 2025 and 3.1% in 2026. India remains the fastest-growing major economy, with growth pegged at 6.7% in 2025 and 6.4% in 2026. China, meanwhile, is expected to moderate to 4.0% in 2025. India is set to surpass Japan to become the worlds fourth-largest economy in 2025, with a nominal GDP of USD 4.18 trillion, and is slated to rise further to the third position in the coming years.

INDIAN ECONOMY

Indias nominal GDP for FY 2024–25 is estimated at ?330.68 lakh crores, approximately USD 3.96 trillion, up from ?301.23 lakh crores in FY 2023–24. The nominal GDP growth rate stands at 9.8%, moderating from the 13.9% growth recorded in the previous year. Exports have played a significant role in sustaining momentum, with total exports of goods and services reaching USD 210.31 billion in April–June 2025, a 5.94% increase over the prior year. Merchandise exports contributed USD 112.17 billion, while services exports rose strongly to USD 98.13 billion. Electronics exports surged by nearly 47% year-on-year, alongside steady gains in pharmaceuticals and engineering goods. Domestic demand and investment remain the primary drivers of growth, supported by government capital expenditure and infrastructure projects. With agriculture rebounding due to a favorable monsoon and services continuing their upward trend, Indias GDP growth is expected to remain in the 6.5–7% range for FY25.

INDUSTRY OVERVIEW

Industry contributes 30.8% to Indias GDP and employs over 12.3 crore people. In FY 2024–25, the sector is estimated to grow by 6.2%, aided by increased capital expenditure from the government and renewed private sector investment. Electronics manufacturing has emerged as a key growth area, with India targeting USD 300 billion in output and USD 120 billion in exports by 2026, supported by production-linked incentive schemes. Special Economic Zones have also gained prominence, with UNCTAD launching a global alliance in May 2025 to strengthen SEZ ecosystems worldwide. Ports have played a vital role, with APSEZ handling more than one-fourth of Indias cargo volumes in FY25, surpassing its guidance of 390–410 MMT.

INFRASTRUCTURE AND CONSTRUCTION – THE LONGTERM OPPORTUNITY

Infrastructure investment continues to provide a critical push to Indias growth potential. Capital expenditure for FY 2025–26 is targeted at ?11.11 lakh crore, an increase of 11.1% over the previous year. The National Infrastructure Pipeline has laid out a roadmap of investible projects worth ?225 lakh crore across 13,995 projects, with the transport sector accounting for more than half. This sustained investment drive is expected to create long-term opportunities for the construction and infrastructure industries.

FINANCIAL PERFORMANCE

VSF Projects (VSFPROJ.), with a legacy of 30 years, has built strong capabilities and credentials in project delivery across diverse sectors within the infrastructure industry. The companys core business lies in providing engineering and construction services for large projects in power, transportation, water, and industrial sectors. Its ability to reinvent itself in response to changing times has enabled it to deliver consistent value to stakeholders.

OPPORTUNITIES & THREATS

The infrastructure industry continues to offer significant opportunities, particularly in highways, expressways, and power projects. Indias economic growth in FY 2025 has been driven by private consumption and capital formation, which have contributed to employment generation and declining urban unemployment. Upside potential arises from stable inflation, easing global trade tensions, and capital flows returning to India. At the same time, threats remain in the form of global recessionary tendencies, equity market volatility, and liquidity risks.

RISKS & CONCERNS

The infrastructure sector is highly dependent on political stability, and contract payment delays remain a concern. Challenges also persist in the unorganized sector, shortage of skilled labor, and coal supply constraints, all of which could impact project execution.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The company has established a robust internal control system designed to safeguard assets and ensure compliance. A well-defined organizational structure with clear functional authority and transaction approval limits is in place. The reporting system evaluates and forewarns management on compliance-related issues, and periodic updates ensure alignment with regulatory requirements.

HUMAN RESOURCES

Employees remain the most valuable asset of the company, and their contribution is recognized as a key differentiator for sustained growth. Industrial relations have remained cordial and progressive, with no unrest reported during the year.

HEALTH AND SAFETY

The company places considerable emphasis on health and safety across its operations, ensuring compliance with applicable laws and regulations. High standards are maintained consistently, reflecting its commitment to employee welfare and operational safety.

Source: IMF World Economic Outlook July 2025 (cnbc tv18.com in Bing)

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

KEY RATIOS:

FORWARD LOOKING / CAUTIONARY STATEMENT:

Certain statements in the Management Discussion & Analysis Report detailing the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. These statements being based on certain assumptions and expectation of future event, actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting domestic demand supply conditions, finish goods prices, changes in Government Regulations and Tax regime etc. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of subsequent developments, information or events.