ITD Cementation India Ltd Management Discussions

COMPANY OVERVIEW

ITD Cementation India Limited (ITD Cem) is one of Indias leading Engineering and Construction Companies undertaking Heavy Civil and EPC projects sustainably for more than nine decades. The Company has an established experience and expertise in Maritime Structures, Mass Rapid Transit Systems, Airports, Hydro-Electric Power, Tunnels, Dams and Irrigation, Highways, Bridges and Flyovers, Industrial Building and Structures, Foundation and Specialist Engineering. Further, the Company leverages the expertise of parent Italian-

Thai Development Public Company Limited (ITD, Bangkok) in utilising technology, skilled manpower, processes and industrial know-how to deliver iconic projects. The CWompany is well positioned to capitalise on the opportunities arising from Indias mega infrastructure development push, which is reflected in the robust order book.

We prioritise sustainability, safety, innovation in construction and all aspects of our operations and are now gearing up to look for opportunities in Indias near neighbourhood.

PROJECT PORTFOLIO

Urban Infrastructure, MRTS and Airports Rs 6,219 Cr	Highways, Bridges and Flyovers Rs 4,606 Cr	Maritime Structures Rs 3,666 Cr	Industrial Structures and Buildings Rs 2,805 Cr
• Underground metro	• Expressway	• Jetty, Dolphins, Berths and Wharfs	Civil structures for
• Elevated Metro	• River Bridges	• Ship lift, Dry dock, Wet Basin	• Refineries
• Road and Railway Tunnels	• Flyovers		• Academic institution
• Integrated passenger terminal buildings and allied EPC services for airports		• Breakwater and Piled approach trestles	• Residential complexes
			• Petrochemicals
		• Dredging and land reclamation	• Power
		• Container Terminal	• Steel
		• Coastal erosion protection and Rock bund	• Fertiliser plants

 

Hydro, Dams, Tunnels and Irrigation Rs 1,692 Cr	Water and Wastewater Rs 642 Cr	Foundation and Specialist Works Rs 414 Cr
• Railway tunnels	• Water Transmission main by micro-tunneling	• Diaphragm Wall
• Concrete, earth fill, rock fill and masonry dams	• Water treatment plant	• Ground improvement
• Hydro tunnels, micro-tunneling	• Sewerage plant	• Cast-in situ/Precast pile
	• Pipeline for drainage project	• Rehabilitation work
• Irrigation projects		• Slope stabilisation/Rock anchors

 

Total Order

Book

Rs 20,044 Cr

as on 31 March 2023

GLOBAL ECONOMIC REVIEW

In 2022, the global economy faced a notable slowdown, with GDP growth of 3.2% compared to 6.0% in the previous year. This decline was marked by macro trends such as surging inflation, ongoing geopolitical conflicts, supply chain disruptions and the enduring impacts of the COVID-19 pandemic. Nonetheless, positive signs of recovery emerged as the impact of these global headwinds began to fade. Notably, the recent decline in energy and food prices and improvement in the global supply chain situation. Proactive monetary policies implemented by central banks further started yielding positive results, contributing to the easing of inflationary pressures with easing inflation. Looking ahead into 2023, the IMF projects a further slowdown, with significant disparities in economic growth and recovery across regions. Risks to the global economic outlook include geopolitical tensions, climate change and digital transformation. However, the potential for growth and resilience exists, particularly in Asia, where economic growth is expected to remain strong despite the ongoing challenges. Advanced economies are expected to experience a pronounced slowdown, with inflation not returning to the target until after 2025, while Emerging Markets and Developing Economies (EMDE) are recovering faster. EMDEs are expected to grow in 2023, supported by robust policy support, moderate commodity prices and improved external demand.

GDP GROWTH (%)

INDIAN ECONOMY REVIEW

The National Statistical Offices estimates of national income suggest that the Indian economy should grow at 6.9% in FY 2022-23, with robust growth in the agriculture sector, while the manufacturing and services sectors have faced challenges. The global economy was recovering from the pandemic until the Russia-Ukraine conflict disrupted global supply chains and led to inflationary pressures. Despite this, Indias economy continues to be one of the fastest-growing major economies. Four factors that have been responsible for the recovery post-pandemic include higher government spending on infrastructure creation and welfare schemes that boosted the construction sector, buoyant global demand post-pandemic which lifted exports from the manufacturing sector, IT/ITES and other professional services, an inflow of abundant global liquidity into Indian markets and policy intervention supporting financial sector and consecutive years of good rainfall benefiting agriculture sector. To address inflation, the Reserve Bank of India has raised the policy interest rate for the sixth time to 6.50% in 2022-23. Although headline inflation is high, it is projected to decrease to an average of 5.2%1 in FY 2023-24 due to easing global commodity prices and some moderation in domestic demand. Nevertheless, Indias financial sector remains strong, with improvements in asset quality and robust private-sector credit growth. Further support for economic growth will come from an expansion of public digital platforms and path-breaking measures such as PM Gati Shakti, National Logistics Policy and Production Linked Incentive (PLI) schemes to boost manufacturing output. Indias manufacturing sector activity continued to expand with Purchasing Manager Index (PMI) reported at 56.4 in March 2023.

INDIAN CONSTRUCTION INDUSTRY REVIEW

The Indian construction industry is experiencing tremendous growth. The Union budget 2023-24 lays down the blueprint for a prosperous and inclusive India, which recognises the infrastructure sector as a key contributor to achieving sustainable growth. The enhanced capital outlay of Rs 10 Lakhs Crores i.e. 3.3% of GDP provides the required boost for the development of infrastructure in India and opportunities for the construction sector players.

Between 2024 and 2027, the Indian construction industry is expected to achieve an average annual growth of 6%2. This growth will be supported by investments in transport, electricity and housing projects, as the Indian government plans to invest ~US$ 1.5 trillion in infrastructure through National Infrastructure Pipeline (NIP). Many structural changes such as identification of upcoming and under-construction infrastructure projects under NIP, setting-up dedicated infrastructure finance institutions such as the National Bank for Financing Infrastructure and Development (NaBFID), PM Gati Shakti for coordination between various infrastructure ministries, identification of projects under National Monetisation Programme, mandating monthly pay-outs by central and state governments for infrastructure projects and increase reliance on its own funds for capex spend to support the growth of the sector.

Urban Rail

In response to the escalating strain on public transit systems, the Indian government has undertaken an initiative to promote urban rail as an alternative mode of intra-city transportation in densely populated areas. The primary objective is to establish a sustainable mode of transit that can curtail harmful emissions and reduce reliance on fossil fuel-powered vehicles. The Union Budget 2023-24 acknowledged this pressing issue and allocated Rs 19,518 Crores towards the advancement of metro rail projects. As of now, there is approximately 832km³ of operational conventional metro tracks throughout the country, while more than 20 cities are currently undertaking the construction of metro and regional rapid transit systems. Under NIP, the Government has identified metro project opportunities worth US$ 73 Billion⁴.

ITD Cementation is proud to be associated with the development of prestigious metro rail projects in a number of cities in India consisting of elevated and underground metro including tunnels, station buildings and track works. The Company has successfully executed elevated metro rail projects in Delhi, Nagpur, Bengaluru, Mumbai, Kolkata and Jaipur and is currently executing projects in Surat. In addition, the Company is currently executing underground metro projects in Chennai, Bengaluru, Mumbai and Kolkata.

Ports and Marine

The Indian government has prioritised the expansion of port capacity through the implementation of well-conceived infrastructure development projects. The government has undertaken several initiatives aimed at enhancing port governance, augmenting capacity utilisation and improving port efficiency and connectivity. The Maritime India Vision 2030 initiative seeks to establish world-class mega ports, transhipment hubs and modernise port infrastructure. As part of the Sagarmala Project, the government has announced a long-term investment plan of US$ 82 Billion⁵ for the countrys seaports which include port modernisation, port connectivity, port-led industrialisation and costal community development. ITD Cem is one of the leading names in the development of maritime structures and has executed projects in most of the major and minor ports of the country. During the year, the Company has successfully completed its first international project in Yangon (Myanmar) and the iconic Pamban Rameswaram bridge in Tamil Nadu. Some of the prestigious projects which the Company is currently executing include a captive coal jetty, island breakwater, and a coal unloading/ conveyor system for the Udangudi Super Critical Thermal Power Project in Tamil Nadu, a marine infrastructure project in Karwar, Karnataka, a breakwater in Vizhinjam (Kerala), captive oil jetty at Kamarajar port in Tamil Nadu, wharf and approach trestle works at JNPT in Maharashtra and international project at West Container Terminal in the Port of Colombo, Sri Lanka.

Aviation

India is one of the fastest-growing aviation markets globally. The aviation infrastructure has been expanding, thanks to low-cost carriers, foreign direct investments in local airlines, modernisation programmes and the implementation of new emerging technology. The government has included airports in its PM Gati Shakti plan and allowed 100% FDI under the automatic route in scheduled air transport services, regional air transport services and domestic scheduled passenger airlines. Airports Authority of India (AAI) and other airport developers have targeted capital outlay of Rs 98,000 Crores⁶ in next five years for expansion and modernisation of existing terminals, new terminals and strengthening of runways amongst other activities. Out of this, Rs 60,000 crore has been allocated for development of existing airports and Rs 38,000 crore for establishment of new greenfield airports. The Government of India has accorded in-principle approval for setting up 21 new greenfield airports.

ITD Cem has been continuously contributing to the growth and development of the countrys airport modernisation programme. In the past, the Company has successfully executed integrated passenger terminal building at Netaji Subhash Chandra Bose International Airport in Kolkata in JV with our parent company. Currently, the Company is engaged in the modernisation and upgradation of integrated passenger terminal buildings at airports in Pune, Trichy and Ahmedabad.

Road Transport

India has the second-largest road network in the world of about 63.32 Lakh kms⁷. The PM Gati Shakti National Master Plan (NMP) plans to develop 22 greenfield expressways, highway projects, 35 multi-modal logistics parks and the ministry has allocated Rs 23,000 Crores for adding 25,000 km of national highways and expressways. The Bharatmala Pariyojana Scheme, which is the largest-ever highways development programme with total capital outlay of Rs 6 Lakh Crores under Phase 1 of the programme is currently under execution. Under NIP, the Government has identified opportunities worth ~US$ 400 Billion⁸ for the highways and road sector.

ITD Cementation has experience in constructing over 300 kms of roads and highways in the country, which includes projects under the Golden Quadrilateral, National Highway projects, major river bridges and _yovers in cities having traffic density. The Company is currently executing the prestigious six-laning Greenfield Ganga Expressway Road project in Uttar Pradesh and the construction of a steel bridge over the river Ganga in Uttar Pradesh.

Industrial Civil Works

Industrial civil works hold considerable significance in the Indian economy and are largely dependent on industrial growth which is measured by the Index of Industrial Production (IIP). Indias industrial output registered a growth of 5.1% as on March 20239. The Government has initiated several projects that are aimed at supporting the development of quality infrastructure to support the growth of the industrial sector. ITD Cementation has demonstrated its expertise in the construction of civil and industrial work for refineries, petrochemicals, academic institutions, complexes, museums etc. The Company is currently developing an aerospace museum in Delhi, a residential colony in Kasturba Nagar (Delhi), a circuit bench of Calcutta High Court in West Bengal, buildings for Sikkim University and Thal Sena Bhawan in Delhi.

Irrigation

Irrigation is one of the main focus areas of the Government and various project has been announced for the development of this sector namely the Ken-Betwa Linking Development Project, the Kaleshwaram Irrigation Development Project, the Polavaram Irrigation Project etc. Under National Infrastructure Pipeline, the Government has identified opportunities worth US$ 155 Billion10 for the irrigation sector.

ITD Cementation has contributed substantially in providing expertise in the construction of earth fill, rock fill, concrete dams, and tunnels, thus fulfilling Indias ever-increasing need for irrigation systems. The Company is currently developing water conveyor systems consisting of lined gravity and tunnels for the Telangana Government and laying of the main trunk sewer by micro-tunneling method at Churial Canal in West Bengal.

Water and Wastewater

Urbanisation, population growth along with socio-economic development have intensi_ed the water supply and demand imbalance leading to water shortage conditions, especially in developing countries like India. Various robust Government initiatives such as Jal Jeevan Mission, National Mission for Clean Ganga, Atal Mission for Rejuvenation and Urban Transformation and Community Drinking Water schemes are contributing to the growth of the Indian water and wastewater treatment market. Under NIP, the Government has identified opportunities worth US$ 118 Billion11 for water and wastewater treatment projects.

ITD Cem has augmented its expertise to execute various water supply systems, drainage systems and sewage treatment plants through micro-tunneling/pipe jacking/trenchless technology. In the past, the Company has constructed a water treatment plant for Agartala Municipal Corporation, sewage trunk-mains by micro-tunneling method for Ahmedabad Municipal Corporation and is currently executing water infrastructure and allied works in Karwar, Karnataka.

RISK MANAGEMENT & MITIGATION

By implementing strategic Risk Management, ITD Cementation thereby safeguards operations and empowers our future growth.

Identified Risks, Impacts & Mitigation

Type of Risk	Impact	Mitigation
Cyber Security	Data breaches, intellectual property theft, project delays, damage to reputation and financial performance	Implementing robust cybersecurity measures, providing cyber security training to employees, 3 layers of cyber security systems and conducting regular audits and risk assessments
Retention of Skilled_ Manpower	Quality of work, competitiveness, project delays and reduced efficiency	Providing training and development opportunities, creating a positive work culture and offering competitive compensation packages
Impact of Economic Slowdown	Reduced demand, increased competition, price pressure and reduced margins	Regularly review order book, upcoming opportunities and look for new market overseas
Cost of Inputs	Increased project cost and reduced profitability	Anticipate in advance and build provision while bidding for projects
Competition	Price pressure, reduced margins and increased competition for limited projects	Focusing on niche markets, continuous upgrade to go to markets with less competition
Capital Risk	Challenges to secure financing, increased cost of capital and reduced profitability	To showcase strong operational performance for securing required support from financial institutions
Cost Overruns and Delays	Reduced profitability and damage to reputation	Developing a robust project management framework, conducting regular risk assessments and implementing effective communication protocols
Contractual Risk	Financial losses and legal liabilities	Conducting thorough contract reviews, negotiating favourable contract terms and ensuring compliance with contract requirements
Environmental Risk	Fines, project delays and damage to reputation	Conducting environmental impact assessments, implementing environmental management plans and complying with relevant regulations and standards

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

ITD Cementation India Limited relies on Internal Control Systems (ICS) to ensure that operations are efficient and adhering to the policies, procedures and guidelines in compliance with laws and regulations that are aimed at facilitating risk management and protecting the Companys assets. The adequacy of the ICS is determined by its ability to prevent and detect fraud and correct errors and irregularities in a timely manner. Periodic evaluations of the ICS are carried out to ensure that they remain relevant and effective in the current business environment. This proactive approach ensures that the ICS is updated to reflect emerging risks and changes in the business environment.

BUSINESS REVIEW AND OUTLOOK

ITD Cementation India Limited has seen a remarkable year of delivering growth with excellence and has reported a strong financial and operational performance for the fiscal year 2022-23. During the year under review, the Company recorded the highest-ever revenue of Rs 5,091 Crores, which is a growth of 34% y-o-y thereby indicating growth in the Companys operations. The Company also reported a record Profit After Tax of Rs 125 Crores, a growth of 80% y-o-y showcasing better execution capabilities and improvement in profitability ratios with higher Net Profit margin, improved Return on Equity and Earnings Per Share for the shareholders. Our Companys balance sheet reflects a strong financial position and is conservatively financed Net Debt to Equity of 0.22x, thereby indicating the Companys ability to meet its financial obligations and invest in the upcoming opportunities in the sector.

The Company recorded the largest ever order inflow of

~Rs 8,000 Crores with an order book of Rs 20,044 Crores as on 31 March 2023, which is a testimony of our capabilities, quality and commitment to nation-building and contribution to the economic growth of the country. We are now gearing up for international expansion, building capabilities while leveraging our parent expertise to expand our footprint overseas. The Government enhanced push towards the infrastructure development as reflected in the Union Budget 2023-24, will enable us to participate in the upcoming opportunities in the sector. The Company will continue to focus on efficient capital allocation, quality of order book, diversified clientele, geographies, investment in the talent pool, advanced technologies and unlock efficiencies to deliver robust performance and generate long-term business value. Our expertise and experience in executing projects with excellence have helped us earn a reputation as one of the preferred contractors in the infrastructure sector.

FINANCIAL PERFORMANCE

	Standalone		Consolidated
Particulars	2022-23	2021-22	2022-23	2021-22
Revenue from Operations (H in Lakh)	467,492	324,953	509,091	380,902
EBITDA (before exceptional item) (H in Lakh)	44,583	30,935	46,278	33,791
PAT (H in Lakh)	12,425	6,881	12,473	6,934
EPS (in H)	7.2	4.0	7.2	4.0
Operating Profit (%)	7.2	6.6	6.9	6.2
Net Profit (%)	2.7	2.1	2.5	1.8
Interest Coverage Ratio	2.1	1.6	2.1	1.7
Return on Net Worth (%)	10.5	6.3	10.5	6.3
Debt Equity Ratio	0.6	0.5	0.6	0.5
Current Ratio	1.0	1.0	1.0	1.1
Debtors Turnover (days)	64	60	61	55

HUMAN RESOURCE DEVELOPMENT & INDUSTRIAL RELATIONS

ITD Cementation India Limiteds Human Resource Development and Industrial Relations functions are key drivers in achieving the Companys strategic objectives. The workforce serves as the cornerstone for every triumph achieved, comprising 2,398 permanent employees and 12,147 contractual personnel and workforce who exert their skills to accomplish each project. ITD Cementation prioritises the health and safety of employees and imparts a culture of excellence through rigorous training and skill development programmes aimed at enabling employees to tackle complex engineering and construction tasks. ITD Cementation constantly looks out for fresh talent and it caters to the needs and skills of existing employees and is geared towards empowering employees, encouraging workplace innovation and ensuring employee satisfaction. These functions support the organisations success by attracting and retaining top talent and maintaining high levels of productivity and efficiency.

DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements have been prepared in accordance with all applicable accounting standards.

DISCLAIMER

Certain statements in the MDA section, concerning future prospects, may be forward-looking statements, which involve a number of underlying identified/non-identified risks and uncertainties that could cause actual results to differ materially. In addition to the foregoing changes in the macro environment, global pandemics like COVID-19 may pose an unforeseen, unprecedented, unascertainable and constantly evolving risk(s), inter-alia, to the Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the Report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based, are also subject to change accordingly. These forward-looking statements represent only the Companys current intentions, beliefs or expectations, and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.