Rachana Infrastructure Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW AND OUTLOOK

Global growth is forecast to slow from the 2.7% 2023 pace to 2.5% in 2024 and rebound to 2.7% in 2025. Inflation is expected to continue to cool, although in many countries the price pressure will take longer to unwind than it took to emerge. slower expected glide path on rate cuts by the U.S. Federal Reserve, which plays an outsized role in global financial markets, will have a larger impact on rate decisions by developing economies. These markets are more sensitive to the exchange rate movements than we have seen in the past. Weakening currencies relative to the U.S. dollar are inflationary for those economies. To further complicate matters, foreign exchange markets have been reacting to unexpected election outcomes.

Between interest rate uncertainty and the elections, business leaders remain hesitant to engage in major investment projects. Consumers are cutting back on financed goods due to elevated rates, while governments face higher financing costs as debt rolls over at higher interest rates.

INDIAN ECONOMIC OVERVIEW

Strong economic growth in the first quarter of FY23 helped India overcome the UK to become the fifth-largest economy after it recovered from the COVID-19 pandemic shock. Nominal GDP or GDP at Current Prices in the year 2023-24 is estimated at Rs. 295.36 lakh crores (US$ 3.54 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.6% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Governments continued emphasis on capital expenditure are seen as among the key driver of the GDP in the second half of FY24. During the period April-June 2025, Indias exports stood at US$ 109.11 billion, with

Engineering Goods (25.35%), Petroleum Products (18.33%) and electronic goods (7.73%) being the top three exported commodity. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.

Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand. The sectors success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. Indias appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money raised by India-focused funds in 2022 are evidence of investor faith in the "Invest in India" narrative.

INDUSTRY OVERVIEW

Indias infrastructure sector

The infrastructure sector, being a key driver and backbone of the Indian economy, is prioritised by the Government through huge capex investments and other initiatives. The infrastructure industry acts as a catalyst and facilitates the development of related industries such as townships, housing, urban infrastructure and development projects as well.

The Government, recognising the potential of this sector, has provided an enhanced impetus to it by rolling out several initiatives, including the National Infrastructure Pipeline (NIP), the Public-Private Partnership (PPP) model, the Production-Linked (PLI) initiatives and the Make in India scheme.

In the past, over 80% of the funds allocated for infrastructure in India were typically directed towards transportation, electricity, water and irrigation. While these sectors are still significant and receive considerable government attention, other areas are now gaining prominence due to changes in Indias environment and demographics

ROADS AND HIGHWAYS

India has the worlds second-largest road network with a total length of 6.33 million kilometres. This comprises National Highways, Expressways, State Highways, Major District Roads, Other District Roads and Village Roads as under:

Road infrastructure

National Highways:	1,44,955 km
State Highways :	1,67,079 km
Other Roads :	60,19,757 km
Total :	63,31,791 km

Road transport plays a key role in promoting equal socioeconomic development across regions of the country, apart from facilitating the movement of goods and people. It has gradually increased over the years with improvements in connectivity between cities, towns and villages across the country.7 The market for roads and highways in India is expected to grow at a CAGR of 36.16% between 2016 and 2025, owing to favourable government programmes to upgrade the countrys transportation infrastructure.

GOVERNMENT POLICIES

The Government has been implementing several initiatives for the development of road infrastructure and transformed the landscape from commuting perspective. Some of the key initiatives are:

BharatMala Pari yojana, which was announced in 2017, intends to construct around 65,000 kilometres of national and economic corridors, border and coastal roads and motorways to enhance the efficiency of existing highway infrastructure.

The programme is expected to offer 4-lane connections to 550 districts, create 50 economic corridors totalling around 26,000 kilometres, boost vehicular speed by 20-25%, reduce supply chain costs by 5-6% and strengthen the NH network to transport 70-80% of total road traffic.

In addition to this, the NHAI intends to build 25,000 kilometres of national highways in 2022-23 averaging at a rate of 50 kilometres per day and has raised H 2850 crore through InvIT mode of which H 3900 crore is in the year 2022-23. In addition to this, to build world-class infrastructure, the Government has announced that the National Infrastructure Pipeline (NIP) will receive an investment of USD 275 billion in roads from 2019 to 2025.

Gati Shakti scheme launched on October 13, 2021, is a digital platform that will bring 16 ministries, including railways and roadways, together for integrated planning and coordinated implementation of infrastructure connectivity projects for industrial clusters and economic nodes. The Government of India plans to invest nearly USD 1.2 trillion (H 100 lakh crore) in building a holistic infrastructure through Gati Shakti.13

The National Highways Interconnectivity Improvement Project is aimed at enhancing the highway infrastructure in the North-Eastern region of India. The project involves the development of two critical corridors - the East-West Corridor, which spans approximately 3,442 kilometres from Porbandar in Gujarat to Silchar in Assam and the North-South Corridor, which stretches for around 4000 kilometres from Srinagar in Jammu and Kashmir to Kanyakumari in Tamil Nadu.

Key policy measures to encourage private participation: The Government decided to leverage private sector expertise and resources to deliver projects more efficiently, effectively and at a lower cost than traditional procurement methods.

The private sector brings its expertise in project management, financing and technology, while the Government provides regulatory oversight, public policy direction and often some form of financial support. This has gained popularity in recent years as the Government seeks to provide essential infrastructure and services to its citizens without relying solely on public funds.

Public-Private Partnership (PPP) model: This is a model of infrastructure development and service delivery that involves collaboration between the public and private sectors. Under the PPP model, the Government partners with private companies to finance, design, build, operate and maintain infrastructure projects such as highways, airports and power plants. The private sector brings in capital, technical expertise, and efficiency in operations, while the Government offers assistance through policies, regulatory frameworks and funding. The objective of PPP is to leverage the strengths of both sectors to deliver better-quality and more cost-effective public services.

Fast-tracking of project approvals: The Government has streamlined the project approval process for infrastructure projects to make it easier for private companies to invest in such projects. This includes setting up a single-window clearance system and reducing the number of approvals required.

Logistics infrastructure: In recent years, Indias logistics infrastructure has attracted considerable attention and investment as it remains inadequate to meet the countrys growth aspirations. If improvements are not made in a timely manner the waste produced by inadequate logistical infrastructure is expected to increase.

The waste produced by inadequate logistical infrastructure is expected to increase. However, if addressed in an integrated and coordinated manner, almost half of this waste can be eliminated. Also, this will help lo wer Indias transportation fuel requirements by 15 to 20%

To address these challenges, an integrated approach is required, focusing on the development of rail and waterway networks, alongside roads. The Government has undertaken several initiatives, such as the Dedicated Freight Corridors (DFCs) and the BharatMala project, aimed at improving connectivity and reducing transportation costs. These projects involve the construction of new highways, expressways and rail corridors, providing efficient transportation links between major industrial and consumption centres

OPPORTUNITIES:

Government Infrastructure Projects: The Indian government has announced several infrastructure projects, including the BharatMala Pari yojana, the Sagar mala project and the National Highways Development Project. These projects will require significant investments in infrastructure and these opportunities need to be capitalised on by winning contracts for construction, operation and maintenance.

Increased Private Sector Participation: The Indian Government has been actively encouraging private sector participation in the infrastructure industry through various policy measures. This has led to an increase in private investments in areas such as infra development of roads, ports, airports and increased focus on renewable energy.

Infrastructure Development in Tier-II and Tier-III Cities: The Indian Government is focusing on developing infrastructure in smaller cities and towns, which presents significant opportunities for investors and businesses.

This includes investments in areas such as affordable housing, access to clean water, sanitation and healthcare.

Increased Investment in Digital Infrastructure: The Indian government has launched several initiatives to promote the development of digital infrastructure, including the Digital India programme. This has led to a surge in investment in areas such as broadband connectivity, data centres and e-commerce.

Emerging Markets: With the growth of the Indian economy, there is a rising demand for infrastructure development in smaller towns and cities. This can be leveraged by expanding of operations to emerging markets and offering its services in these regions.

Focus on new models of operations: Hybrid Annuity Mode (HAM), Toll Operate and Transfer and Operate Maintain and Transfer, Engineering, Procurement and Construction (EPC) are some of the new models gaining prominence. The Engineering, Procurement and Construction (EPC) model is becoming increasingly popular in the construction industry due to its efficiency and cost-effectiveness. The Company has already secured several EPC contracts and this trend is expected to continue, providing significant opportunities for growth. The Company has also secured few HAMS and BOT model-based projects which gives future growth opportunities to the Company.

Embracing technology: With technological advancements, the construction industry is rapidly changing and companies that embrace technology can gain an early mover advantage. The Company implements advanced digital solutions and leverages cutting-edge tools to enhance project management, improve operational efficiency and drive innovation in infrastructure development. The Company also incorporates the latest technologies such as Artificial Intelligence (AI), Internet of things (IoT) and data analytics to optimise construction processes, enhance safety measures and deliver sustainable and futuristic infrastructure solutions.

Sustainability: There is a growing preference for sustainable infrastructure and companies that adopt environment-friendly practices can gain a competitive advantage. The Company can profit from this trend by incorporating sustainable practices into its operations, such as using renewable energy sources, reducing waste and improving energy efficiency.

CHALLENGES

Project complexity and risk Management:

Infrastructure projects are often extensive and complex, involving multiple stakeholders, intricate logistics and various risks. Effective project management, risk assessment and mitigation strategies are critical to ensuring successful and timely project execution. Urbanisation and population growth Rapid urbanisation and growing population place further strain existing infrastructure systems. Meeting the demand for transportation, housing, utilities, and other critical services necessitates careful planning and resource allocation.

Political and policy uncertainty:

Changes in government policies, regulations and political scenarios can impact infrastructure projects. Political stability and favourable long-term policies are crucial for attracting investments and ensuring project continuity.

Funding and investments:

It is challenging to secure adequate financing for infrastructure projects. Infrastructure development is often impeded by limited public funds, overlapping priorities and difficulties in attracting private investment. Regulatory and approval processes Infrastructure projects often face complex regulatory frameworks and lengthy approval processes. Navigating through various approvals and complying with environmental and land acquisition regulations can cause delays and raise project costs.

Sustainability and climate change:

Building infrastructure that is resilient to climate change and environment-friendly is a growing concern. The industry must address challenges pertaining to reducing carbon emissions, adapting to extreme weather events and implementing sustainable construction practices.

Stakeholder Engagement:

Infrastructure projects involve numerous stakeholders, including communities, local authorities, environmental groups and businesses. Balancing diverse interests, addressing concerns and maintaining effective communication throughout the project lifecycle is a major challenge.

Outlook

India has to focus on enhancing its infrastructure to reach its year 2025 economic growth target of USD 5 trillion. To this end, the Government has set a target to invest USD 1.8 trillion in infrastructure over the next five years. The Indian government also intends to modernise the countrys infrastructure network while creating numerous job opportunities. In the years ahead, the government is expected to focus more on transportation infrastructure. The Government plans include building new highways, railways and airports as well as modernising existing ones. The Government is investing heavily in the development of metro rail systems in major cities, with plans to have metro rail systems in 25 cities by 2025.37 This is expected to enhance transportation efficiency and reduce traffic congestion. Another focus area is energy infrastructure, with the Government striving to increase the generation of renewable energy. This includes investments in solar, wind, hydroelectric and nuclear power. The Government is also investing in the development of water and sanitation infrastructure, digital infrastructure and affordable housing.

COMPANY OVERVIEW:

Your Company is an Indian Infrastructure Company that has been contributing to the Development of the nations Infrastructure for over two decades. Your company is mid-size private sector company engaged in the business of Construction of Road projects on Bill of Quantities (BOQ) and on 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 This Year we are making more than 110 Lane Length Kilometer Roads. 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	2023- 24	2022-23	% Change
1. Debtors Turnover Ratio	3.66 Times	3.68 Times	(0.042)
Formula: Debtors Turnover Ratio= 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	7.21 Times	6.57 Times	(0.0974)
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.
Interest Coverage Ratio
3. Formula: Interest Coverage Ratio= Interest Expense/EBIT	0.0960 Times	0.0836 Times	0.15
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
Formula: Current Ratio=Current assets/ Current liability	3.70 Times	4.66 Times	(0.2048)
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
Formula: Debt Equity Ratio = non-current borrowings (+) current borrowings (-) cash and cash equivalent /Total Equity	0.24 Times	0.28 Times	0.6282
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:	0.048 Times	0.047 Times	0.001
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	0.040 Times	0.036 Times	(0.1138)
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	0.0960 Times	0.0836 Times	0.1482
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

Particulars for the year ended	March 31, 2024	March 31,2023
Net revenue from Operations (Sales)	9396.95	6522.90
Profit Before Depreciation, Exceptional Item and Tax	699.72	490.40
Less: Depreciation	245.58	186.46
Profit Before Extra-Ordinary Items and Tax	454.14	303.94
Extra Ordinary Items	0.00	0.00
Profit Before Tax	454.14	303.94
Tax Expense
-Current Tax	110	75.00
Less: MAT Credit Receivable	0.00	0.00
-Deferred Tax	(18.72)	2.73
Profit After Tax	362.85	226.21
EPS (Basic) (In Rs.)	1.95	1.22
EPS (Diluted) (In Rs.)	1.95	1.25

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

There were 148 employees on roll in the Company as on 31st March 2024 Company maintained Relations with the employees were cordial throughout the year. Your 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.

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: 03/09/2024	Girishkumar Ochchhavlal Raval
Place: Ahmedabad	Chairman & Managing Director
	DIN: 01646747