MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A. INTRODUCTION:
The Objective of this Report is to present the Managements perception of the various
developments in the business environment, challenges and opportunities before the Company
as well as to provide an analysis of the Companys performance. This Report also
summarizes the Companys internal control measures and significant initiatives taken by
the Company to respond to such opportunities and challenges. It should be read in
conjunction with the Directors Report to the Shareholders, Financial Statements and Notes
forming part thereof.
B. MACRO-ECONOMIC SCENARIO:
INFRASTRUCTURE REVOLUTION IN INDIA
India is experiencing a blitzkrieg upgrade in its infrastructure, driven by increased
government investment and development initiatives. There are significant advancements in
Indias transportation networks, including roads, railways, aviation, and waterways, and
their impact on the countrys economic growth. These infrastructure developments aim to
enhance connectivity, reduce logistics costs, and position India as a global economic
powerhouse. Fuelled by the ambitious PM Gatishakti National Masterplan for multi-modal
infrastructure development, the new roads and railways will help India fulfil its ambition
to turn into a $5 trillion economy—up from $3.74 trillion currently (IMF, 2023).
Revitalizing Road Networks
India boasts of the worlds second-largest road network, with over 6.37 million
kilometres. In recent years, there has been a substantial increase in the pace of
construction of national highways. The governments budget support for road infrastructure
has rapidly increased, reaching approximately Rs. 1.4 lakh crore in FY22-23.
Revolutionizing Railways
Indias railways have undergone substantial modernization and expansion. Capital
expenditure on railway infrastructure has steadily increased over the past four years,
with a budget of Rs. 2.5 lakh crore allocated in FY22-23, representing a 29% rise compared
to the previous year.
Aviation Sectors UDAN
Indias aviation sector has experienced substantial growth, positioning the country as
the worlds third-largest market. To promote regional connectivity and revive unserved or
underserved airports, the government has allocated a budget of Rs. 4,500 crores under the
Ude Desh ka Aam Nagarik (UDAN) scheme.
Harnessing Waterways
India recognizes the immense potential of its waterways in establishing a sustainable
logistics sector. The governments focus on inland water transport has led to the
declaration of 111 National Waterways. The Inland Vessels Bill 2021 further facilitates
the growth of inland water transport, creating a robust multi-modal transport ecosystem
and fostering ease of doing business. Additionally, the Sagarmala Project aims to develop
ports, streamline compliances, and reduce vessel turnaround time.
Economic Implications and the Future
Transport infrastructure development reduces transport costs, increases gains from
trade, and drives up wages, thus boosting economic activity.
India will be integrated into a high-quality transport network, powered by greenfield
expressways, electrified railways, revamped airports, and an EV ecosystem. The
transformative power of new infrastructure is a precondition for the high growth that
India aspires to achieve. It is a rising tide that will lift all the sections of India.
INFRASTRUCTURE REVOLUTION IN TAMILNADU
Tamil Nadu is planning to come out with a new public-private partnership policy to woo
private investments worth Rs 1 lakh crore for 100 iconic projects. The policy is being
framed by Tamil Nadu Infrastructure Development Board (TNIDB). The state has identified
seven sectors - agriculture, transport, social, industries, energy, urban amenities, and
recreation - for taking up projects under PPP mode in the first phase. The projects could
be related to urban transportation systems, power generation, transmission, drinking water
supply, health infrastructure, solid waste management, and development of satellite towns.
Aiming to reach the trillion-dollar economy goal by 2030, the state government has
taken steps to reduce the revenue deficit and create fiscal space for more capital
expenditure. According to sources, the government is currently investing more than Rs
50,000 crore every year for capital asset creation and to reach the trillion-dollar goal
by 2030, capital investments must be ratcheted up. According to a Deloitte report, the
state must achieve an annual growth rate of 16.5%, from the current level of 10%, to
achieve the trillion-dollar goal.
The state, while creating more fiscal space for investment from its own budget, is also
keen on inviting private investments for infrastructure development. The focus of the new
policy will be to share risks fairly, accommodate the concerns of private investors, and
enhance the capacity of government agencies in a planned planner.
C. PERFORMANCE OF THE INDIAN TRANSMISSION AND DISTRIBUTION SECTOR:
The Ministry of Power has recently accepted the recommendations of a task force report
established to suggest ways to modernise and make the transmission sector smarter and
future-ready. The task force was set up in September 2021 by the Ministry of Power, and
POWERGRID chaired it. The goal of the task force was to identify and suggest ways to
address the challenges in the transmission sector and propose modernization measures for a
smart and future-ready transmission system.
India has significant potential in the transmission sector as it is the third-largest
producer and consumer of electricity globally, with an installed power capacity of 408.71
GW as of October 2022. India also plans to set up 21 new nuclear power reactors with a
total installed capacity of 15,700 MW by 2031. The Central Electricity Authority estimates
that Indias power requirement will reach 817 GW by 2030, and renewable energy generation
will increase from 18% to 44% by 2029-30, while thermal energys share is expected to
reduce from 78% to 52%.
The task force has suggested several technological and digital solutions to modernize
and upgrade the existing transmission system, including the use of advanced technology in
construction, supervision, operations, and management, creating a smart and future-ready
transmission system, and upskilling the workforce. The recommendations include centralized
remote monitoring, operation of substations with SCADA, flexible AC transmission devices,
cyber security, and the use of drones and robots for construction and inspection. The task
force also suggests establishing benchmarks for transmission network availability and
voltage control based on the performance of global transmission utilities.
Significance of future-ready transmission system
India is currently experiencing significant economic growth and population expansion,
which has led to increasing demand for energy. To meet this demand, the country needs a
future-ready transmission system that can efficiently transmit power from new power
generation sources to the distribution network.
India has set an ambitious goal of achieving 500 GW of renewable energy capacity by
2030. To integrate such large-scale renewable energy into the grid, a future-ready
transmission system is essential.
It can ensure efficient transmission and distribution of power and facilitate the
integration of advanced technologies such as smart grids, energy storage systems, and
demand response systems.
A future-ready transmission system can also improve grid stability by providing backup
power during emergencies, ensuring the availability of power during natural disasters, and
preventing blackouts.
This system can play a vital role in reducing transmission losses, which currently
account for around 22% of the total power generated in India. By reducing transmission
losses, the country can save a significant amount of energy and reduce greenhouse gas
emissions.
Moreover, modern transmission systems can help meet sustainable goals by enabling the
integration of renewable energy, reducing greenhouse gas emissions, and improving energy
efficiency.
D. COMPANYS PERFORMANCE:
Project Segment:
The Company has discontinued the insulators business and has expanded the
Infrastructure business including execution of Turnkey Projects in the verticals of
electrical, EPC and construction projects.
The change in management in June 2022 has lot of significance as the Company after
going through a turbulent period in the last decade, has turned around after resolving
most of the litigations, challenges and clearing all the pending dues to the secured
creditors. The new promoter group have the relevant experience and expertise in the
infrastructure business and the Company has already bagged orders in infra structure
project segments viz. integrated storm water drainage works, macro drain works, civil
constructions including integrated bus terminal and multi utility facility center, pipe
line projects valued at Rs.753.22 Cr. On the infrastructure vertical, the company is
progressing rapidly and is actively participating in both State and Central Government and
private sector projects. The focus on capex by the Government and the private sector will
enable the company to achieve significant growth in the forthcoming years.
Under the stewardship of the new management, after continuous losses year on year the
Company has achieved a profit before tax from continuing operations for the year ended
31.03.2023 for Rs. 32.01 millions with an EBITDA of Rs. 76.60 millions. Profit before tax
from discontinued operations for the year ended 31.03.2023 for Rs. 164.54 millions.
The Companys Revenue from operations for the year ended 31.03.2023 stands at Rs.
796.72 millions.
Marching towards diversified portfolios:
a) The Company has been the successful bidder for a property under auction by Central
Bank of India measuring an extent of 254 acres situated at Sunguvar Chathram,
Sriperumbudur Taluk, Kancheepuram District of Tamil Nadu. The Company envisages a modern
logistics park, and, in consultation with architects proposes to develop an integrated
township with attendant infrastructure. The Company will associate with relevant industry
leaders and financial institutions to develop this project and generate annuity and
significant revenues. The total project outlay for land is Rs. 107,35,00,000/- (Rupees One
Hundred Seven Crores and Thirty Five Lakhs only) and on completion of land acquisition,
detailed plans including optimal land use will enable the Company to leverage
significantly on this acquisition and consequent value maximization. The land is situated
in the prime industrial hub of Sriperumbudur, Sunguvar Chatram and Oragadam and is in
close proximity to major multinational companies.
b) The Company has entered into a joint venture with the Bangalore based Prestige Group
for the development of IT/IT enabled services/parks in 6.53 acres of immovable property at
No.108, Mount Poonamallee Road, Porur, Chennai - 600 116.
c) To harness the opportunities in defense segment, the Company propose/plans to add
defense verticals/ segment also in its portfolios.
E. ENTERPRISE RISK ANALYSIS & ITS MANAGEMENT:
The exposure of the Company to various types of risk is detailed in Note 39 forming
part of audited financial statements for the year ended 31st March 2023 along
with the strategy employed to manage/mitigate the same.
F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
The objective of the internal control systems is to ensure optimal use of resources,
safeguard the Companys assets, exercise control and minimize system deficiencies and
weaknesses. Internal Audit is carried out by an independent professional audit firm to
review all aspects of the internal control system and adherence to policies and
procedures. The Audit Committee of the Board of Directors reviews the internal audit
reports and the implementation of corrective actions and also addresses all aspects of the
Companys functioning from this perspective as required under SEBI and Company Law
guidelines.
G. OUTLOOK:
India has to enhance its infrastructure to reach its 2025 economic growth target of US$
5 trillion. Indias population growth and economic development require improved transport
infrastructure, including investments in roads, railways, and aviation, shipping and
inland waterways. Development of infrastructure has a multiplier effect on demand and
efficiency of transport and increases commercial and entrepreneurship opportunities.
Budget 202324 is complemented with the continuation of 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). Under Budget 2023-24, capital investment outlay for
infrastructure is being increased by 33% to Rs.10 lakh crore (US$ 122 billion), which
would be 3.3 per cent 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.
Your Management and the Company has made significant strides in the turn around and is
confident that the days ahead will be very exciting considering the huge infra push by the
government both Central and State.
H. CAUTIONARY STATEMENT:
Statements in the Managements Discussion and Analysis Report describing the Companys
projections, estimates, expectations or predictions may be ‘forward-looking
statements within the meaning of applicable securities laws and regulations. Actual
results could differ materially from those expressed or implied. Important factors that
could make a difference to the Companys operations include demand-supply conditions, raw
material and fuel and energy prices, changes in Government regulations, tax regimes and
economic developments within the Country and State and other markets where the Company
operates.
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