Rachana Infrastructure Ltd Management Discussions

ANNEXURE- “C”

INDUSTRY STRUCTURE & DEVELOPMENT

The information in this section includes extracts from publicly available information, data and statistics and has been derived from various government publications and industry sources. Neither we or any of our respective affiliates or advisors nor any other person connected to us have verified this information.

India has the second-largest road network in the world at about 62.16 lakh km. The National Highways/ Expressways measure 1,36,440 km and State Highways measure 1,76,818 km and Other Roads measure 59,02,539 km in FY 2020-21. Ministry of Roads and Highways constructed 34 Km of National Highways per day in 2020-21. India has a world record of making 38 KMs per day his target is going upto more than 100 KMs per day. The implementation agencies of the Ministry of Road Transport and Highways include:

? National Highways Authority of India

? State/Union Territories Public Works Departments

? National Highway and Infrastructure Development Corporation Limited

? Border Roads Organization

? Indian Academy of Highway Engineers (IAHE)

Historically, the government has been the primary stakeholder in investments in the transport sector. However, to boost private sector participation, the Ministry of Road Transport and Highways has laid down comprehensive policy guidelines for private companies to participate in the development of National Highways.

Highest ever construction of 34 km per day of National Highways in 2020-21. 12,205.25 km National Highways constructed in India during FY 2020-21. Ministry has constructed 1,470 km of National Highways in May 2021 as compared 847 km in May 2020.

OPPORTUNITY AND THREATS

The Government offers various incentives to attract Private Investment and Foreign Direct Investment in the roads and highways sector. The Government bears the following costs:

? Duty-free import of high capacity and modern road construction equipment

? 100% tax exemption in any consecutive 10 years out of 20 years after commissioning of the project

? Subsidy up to 40 % of the project cost to make project viable

? Environment clearance, cutting of trees, etc.

? Shifting of utilities

? Land for the right of way and wayside amenities

? Project Feasibility Study

About USD 1.4 Tn will be invested on infrastructure in India from 2020 to 2025. The National Infrastructure Pipeline (NIP) set up by the government unveils the infrastructure projects across various states which will receive this funding. To build domestic capacity and enhance execution by private sector participants, NIP promotes collaborations and joint ventures with strong global infrastructure developers. Roads and Highways will receive total funding of about USD 26.9 Bn under the NIP projects. About 39 of these projects are proposed to be implemented by the private sector.

Setu Bharatam: The Ministry of Road Transport and Highways has envisaged a plan for replacement of Level Crossings on National Highways by ROBs/ RUBs under a scheme, Setu Bharatam.

SEGMENTAL REVIEW AND ANALYSIS

Your Company was having more than two decades of experience in infrastructure and civil construction work. Your company is mid-size private sector company engaged in the business of Construction of Road projects on Bill of Quantities (BOQ) and EPC basis. Your Company continues to operate in three business segments only i.e., Road and Highway Construction projects, Trading and Quarry Mining.

Road and Highway Construction project plays a major role in the core business of our company. We are proud to say that since last few years we are making more than 100 Kilometer Lane every year. We are specialised in construction of all type of roads like Four Lane Highway, Two Lane Highway, State Highway, Major District Road. We are also involved in roads for Urban Development Town Planning Schemes and also Resurfacing & Reconstruction of roads in City as well. We have done mining works for various clients at our own Mines at Vadagam, Gujarat. In these mining project the mines are almost 100 ft below ground level and million tons of aggregate has been produced from this project so far.

OUTLOOK

Post pandemic, demand for Black trap, Roads and Bridge Construction and its related products has gone up.

Increased penetration of organized retail sector, growing population and rising income levels are likely to drive demand for construction projects.

The rapid deterioration of the global economic outlook following the pandemic and Russia-Ukraine war has severely impacted demand and margins. The major focus of the industry will be on cost cutting measures, improving productivity and quality and reduction in wastage.

RISK AND CONCERN

We own a large fleet of equipment and have a large number of employees, resulting in increased fixed costs to our Company. In the event we are not able to generate adequate cash flows it may have a material adverse impact on our operations.

We operate in a highly competitive environment and may not be able to maintain our market position, which may adversely impact our business, results of operations and financial condition.

Our operations could be adversely affected by strikes, work stoppages or increased wage demands by our employees or any other kind of disputes with our employees.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Companys internal control systems and procedures commensurate with the size and nature of its operations. The Company has adequate system of Internal Controls to ensure that the resources of the Company are used efficiently and effectively, all assets are safeguarded and protected against loss from unauthorized use or disposition and the transactions are authorized, recorded and reported correctly, financial and other data are reliable for preparing financial information and other data and for maintaining accountability of assets. The management periodically reviews the internal control systems and procedures for efficient conduct of the Companys business. Internal Audit is conducted by independent Chartered Accountants, on quarterly basis. To maintain its objectivity and independence, the Internal Auditors report directly to the Audit Committee of the Board. The Audit Committee reviews the Internal Audit Reports and effectiveness of the Internal Control Systems. If required, the corrective actions are taken and the controls strengthened.

KEY RATIOS

		Ratio For F.Y.
Sr. No.	Particular	2022-23	2021-22	% Change
1.	Debtors Turnover Ratio	3.68 Times	2.81 Times	31 %
	Formula: Debtors Turnover Ration= Net Credit Sales/Average Account Receivable
	Definition: The Debtors Turnover Ratio also called as Receivables Turnover Ratio shows how quickly the credit sales are converted into the cash. This ratio measures the efficiency of a firm in managing and collecting the credit issued to the customers.
2.	Inventory Turnover Ratio	6.57 Times	11.20 Times	41 %
	Formula: Inventory Turnover= Cost of Goods Sold / Average Inventory
	Definition: Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a given period. A company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand.
3.	Interest Coverage Ratio	0.46 Times	0.55 Times	16 %
	Formula: Interest Coverage Ratio= Interest Expense/EBIT
	Definition: The interest coverage ratio measures how many times a company can cover its current interest payment with its available earnings. The ratio is calculated by dividing a companys earnings before interest and taxes (EBIT) by the companys interest expenses for the same period.
4.	Current Ratio	4.66 Times	1.75 Times	165 %
	Formula: Current Ratio=Current assets/ Current liability
	Definition: The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations. It compares a firms current assets to its current liabilities, and is expressed as follows: The current ratio is an indication of a firms liquidity.
5.	Debt Equity Ratio	0.28 Times	0.68 Times	59 %
	Formula: Debt Equity Ratio = non-current borrowings (+) current borrowings (-) cash and cash equivalent /Total Equity
	Definition: The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders equity and debt used to finance a companys assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage.
6.	Operating Profit Margin Ratio Formula:	4.66 %	4.43%	5%
	Operating profit margin = *Operating income/ Total revenue
	*Operating Income excluding Exceptional Item Operating profit margin =
	**Operating income/ Total revenue
	**Operating Income including Exceptional Item
	Definition: In business, operating margin also known as operating income margin, operating profit margin, EBIT margin and return on sales is the ratio of operating income to net sales, usually presented in percent. Net profit measures the profitability of ventures after accounting for all costs.
7.	Net Profit Margin Ratio	2.51%	4.42%	43%
	Formula: Net Profit Margin= Net Profit/ Sales
	Definition: The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining profit after all costs of production, administration, and financing have been deducted from sales, and income taxes recognized.
8.	Return on Net Worth Ratio	8.36 %	19.78 %	58 %
	Formula: Net Income/Shareholders Equity
	Definition: The return on Net Worth is a measure of the profitability of a business in relation to the equity.

FINANCIAL AND OPERATIONAL PERFORMANCE

(Amount in Lakhs. Except EPS)

Particulars for the year ended	March 31,2023	March 31,2022
Net revenue from Operations (Sales)	6522.9	6606.15
Profit Before Depreciation and Tax	490.4	497.79
Less: Depreciation	186.46	204.91
Profit Before Extra-ordinary Items and Tax	303.94	292.88
Extra Ordinary Items	0.00	0.00
Profit Before Tax	303.94	292.88
Tax Expense
-Current Tax	75.00	62.50
Less: MAT Credit Receivable	0.00	0.00
-Deferred Tax	2.73	9.60
Profit After Tax	226.21	220.77
EPS (Basic) (In Rs.)	1.22	1.40
EPS (Diluted) (In Rs.)	1.25	1.40

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The employees on roll in the Company as on 31st March 2023 were 160. Relations with the employees were cordial throughout the year. The Company provides to its employees favourable work environment conducive to good performance with high degree of quality and integrity. The Company continuously nurtures this environment to keep its employees highly motivated and result oriented. Effective Human Resource Practices and customized training programmes enable building a stronger performance culture.

The Company took measures to protect its employees during Covid-19 pandemic. The Company introduced safety norms, created continuous awareness about the pandemic and introduced preventive and safety measures including workplace sanitization, thermal screening, demarcation of work areas, etc.

CAUTIONARY STATEMENT

Statements in this Management Discussions and Analysis Report describing the Company objectives, projections, estimates, expectations or predictions may be ‘forward looking statements within the meaning of applicable security laws or regulations. These statements are based on reasonable assumptions and expectations of future events. Actual results could however, differ materially from those expressed or implied. Factors that could make a difference to the Companys operations include market price both domestic and overseas availability and cost of raw materials, change in Government regulations and tax structure, economic conditions affecting demand / supplies and other factors over which the Company does not have any control. The Company takes no responsibility for any consequence of decisions made based on such statements and holds no obligation to update these in future.

By Order of the Board of Directors

For, RACHANA INFRASTRUCTURE LIMITED

	Sd/-
Date: 30/08/2023	Girishkumar Ochchhavlal Raval
Place: Ahmedabad	Chairman & Managing Director
	DIN: 01646747