Tara Chand Management Discussions

INDIAN ECONOMY OVERVIEW

The Asian Development Bank (ADB) projects growth in Indias gross domestic product (GDP) to moderate to 6.4% in fiscal year (FY) 2023 ending on 31 March 2024 and rise to 6.7% in FY2024, driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem.

The projection is part of the latest edition of ADBs flagship economic publication, Asian Development Outlook (ADO) April 2023, released today. The growth moderation for India in FY2023 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices. However, FY2024 is expected to see faster growth in investment, thanks to supportive government policies and sound macroeconomic fundamentals, lower nonperforming loans in banks, and significant corporate deleveraging that will enhance bank lending, according to ADO April 2023.

"Despite the global slowdown, Indias economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand," said ADB Country Director for India Takeo Konishi. "The Government of Indias strong infrastructure push under the Prime Ministers Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth."

Improving labor market conditions and consumer confidence will drive growth in private consumption. The central governments commitment to significantly increase capital expenditure in FY2023, despite targeting a lower fiscal deficit of 5.9% of GDP, will also spur demand. Helped by recovery in tourism and other contact services, the services sector will grow strongly in FY2023 and FY2024 as the impact of COVID-19 wanes. However, manufacturing growth in FY2023 is expected to be tamped down by a weak global demand, but it will likely improve in FY2024. Recent announcements to boost agricultural productivity, such as setting up digital services for crop planning and support for agriculture startups will be important in sustaining agriculture growth in the medium term.

Inflation will likely moderate to 5% in FY2023, assuming moderation in oil and food prices, and slow further to 4.5% in FY2024 as inflationary pressures subside. In tandem, monetary policy in FY2023 is expected to be tighter as core inflation persists, while becoming more accommodative in FY2024. The current account deficit is projected to decline to 2.2% of GDP in FY2023 and 1.9% in FY2024. Growth in goods exports is forecast to moderate in FY2023 before improving in 2024, as production-linked incentive schemes and efforts to improve the business environment, such as streamlined labor regulations, improve performance in electronics and other areas of manufacturing growth. Services exports growth has been robust and is expected to continue to strengthen Indias overall balance of payments position.

(Source: Asian Development Bank. https://www.adb.org/ news/india-economy-grow-6-4-fy2023-rise-6-7-fy2024)

INFRASTRUCTURE SECTOR

The infrastructure sector in India is experiencing significant growth, fueled by government initiatives, foreign investments, and technological advancements. According to a report by Times of India, the fiscal year 2023 is crucial for Indias infrastructure, with a 33% rise in capital spending amounting to Rs. 10 lakh crores or 3.3% of GDP. The Indian Brand Equity Foundation (IBEF) also highlights the governments focus on infrastructure in the Budget 2023-24.

Foreign Direct Investment (FDI) has been a key driver, with policies being relaxed to encourage overseas investments. A report by PR Newswire states that the construction market in India is expected to reach INR 117.02 trillion by 2027, expanding at a CAGR of 17.26%.

Technological advancements like smart city solutions, IoT, and AI are further propelling the sector. Business Today reports that about 13,800 km of highways construction is planned with an outlay of Rs 2.81 lakh crore in 2023-24 alone.

However, the sector faces challenges such as regulatory hurdles and the need for skilled labor. Despite these obstacles, the outlook remains positive, with infrastructure expected to play a pivotal role in Indias economic growth.

(Sources: Times of India Article, IBEF Report, PR Newswire Report, Business Today Article)

STEEL SECTOR OUTLOOK AND GROWTH IN INDIA

The steel sector in India is poised for significant growth, with various reports and industry bodies projecting optimistic figures. According to Reuters, Indias steel consumption is expected to grow by 7.5% during the current fiscal year ending in March 2024. This growth is supported by domestic demand, which is estimated to reach 128.85 million tonnes in the current financial year, as reported by Economic Times.

The World Steel Association predicts a growth rate of around 6.7% for the steel industry in India in 2023. Furthermore, a CareEdge Research report released in January indicates that Indias steel production grew by 5.7%, while consumption grew by 11%4. These figures suggest that both production and consumption are on an upward trajectory, promising a robust future for the steel sector in the country.

The Indian Brand Equity Foundation (IBEF) also provides a comprehensive overview of the steel industry, highlighting its production capabilities and market size5. Overall, the Indian steel industry is set to ride on growth trajectories for the next 5 to 7 years, as noted by Financial Express.

Given these promising figures and projections, the steel sector in India appears to be on a solid path towards expansion and increased profitability.

(Sources: Reuters, Economic Times, Tata Nexarc Blog, Financial Express, IBEF)

OIL & GAS SECTOR

The Petrochemical, Oil & Gas sector in India is experiencing significant growth and transformation. According to a report by the India Brand Equity Foundation (IBEF), the oil demand in India is on the rise, indicating a robust market for the sector. Fitch Ratings also expects Indias petroleum product demand to grow in the financial year ending March 2024.

A market analysis by Mordor Intelligence predicts that the India Oil and Gas Market will reach 36.24 billion cubic meters in 2023 and grow at a CAGR of 5.20% to reach 46.69 billion cubic meters by 2028. This growth is supported by the Indian governments focus on increasing the countrys oil demand share in the global market from 5% to 11% in the coming years, as stated by Prime Minister Narendra Modi.

The sector is not only crucial for meeting domestic energy needs but also has the potential to be a significant contributor to Indias economic development. Investments in technology, infrastructure, and sustainable practices are expected to further boost the sector.

Overall, the outlook for the Petrochemical, Oil & Gas sector in India is positive, with promising growth rates and government support.

(Sources: Oil & Gas Industry in India - IBEF, India Oil & Gas Monitor: FY23 - Fitch Ratings, Oil and Gas Industry in India - Modor Intelligence, SP Global)

CEMENT SECTOR

The cement sector in India is showing promising signs of growth and stability. According to a report by ICRA, the domestic cement industry is expected to experience a volume growth of 7-8% in FY24. This growth is primarily driven by increased demand from the housing sector. IMARC Groups analysis further supports this optimistic outlook, projecting the market to reach 4,832.6 Million Tons by 2028 with a Compound Annual Growth Rate (CAGR) of 4.94% during 2023-2028.

Companies in the cement sector are also planning significant expansions. A report suggests that cement companies are likely to invest around Rs 1.2 Lakh Crore to add 145-155 MT capacity between FY 2023 and 2027. The Indian Cement Industry Analysis by IBEF also provides a comprehensive overview of the sector, highlighting its potential for growth.

Overall, the cement sector in India is on a growth trajectory, fuelled by investments and increasing demand from various sectors, particularly housing.

(Sources: Economic Times, Times of India, IMARC Group, Outlook India, IBEF)

RAILWAYS SECTOR OUTLOOK AND GROWTH IN INDIA

The Indian Railways sector is undergoing a transformative phase with a focus on modernization and expansion. According to Invest India, the sector aims to contribute about 1.5% to the countrys GDP by enhancing infrastructure to support 45% of the modal freight share. The government has increased the capital outlay for the railways to Rs 2.46 trillion for 2022-23, up from Rs 2.15 trillion in 2021-22.

Revenue growth has been a key focus, with various initiatives being rolled out to boost earnings. The demand for freight rail transportation in India is expected to grow at a Compound Annual Growth Rate (CAGR) of up to 8% from 2022 to 2027. This is in line with the governments plans to make the railways a more competitive and efficient mode of transportation.

Investments are pouring in, both from the government and private sectors, to upgrade tracks, introduce high- speed trains, and improve passenger amenities. These developments are expected to make the Indian Railways more sustainable and profitable in the long run.

Overall, the outlook for the Indian Railways sector is positive, with significant growth and modernization expected in the coming years.

(Sources: Invest India, IndianInfrastructure.com, IBEF, LinkedIn)

LOGISTICS SECTOR OUTLOOK AND GROWTH IN INDIA Overview

The logistics sector in India is experiencing significant growth and transformation. According to a report by Research And Markets, the Indian logistics industry is expected to grow at a CAGR of 10.5% from 2021 to 2026. Another report by EY projects that Indias economy will grow to US$26 trillion by FY48, with the logistics sector playing a crucial role. The market is projected to reach $380 billion by FY25.

STEEL LOGISTICS SECTOR

The steel logistics sector is a critical component of Indias transportation and logistics industry. Although specific reports focusing solely on steel logistics are limited, it is noteworthy that customs duty on steel products has been reduced by 7.5%. This move is likely to have a positive impact on the steel logistics sector, making it more competitive and efficient.

Technological Advancements

Technological change is essential for the growth of the logistics sector. McKinsey Global Institute predicts that technology will be a significant driver for the expansion of Indias logistics sector.

Despite the promising outlook, challenges such as infrastructural bottlenecks and regulatory hurdles persist. However, the sectors growth is expected to enhance Indias competitiveness globally.

The logistics sector, including the steel logistics sub-sector, is poised for substantial growth in India. Technological advancements and policy changes are likely to propel the industry forward, despite existing challenges.

(Sources: Ernst & Young, McKinsey, Research and Market Reports, Economic Times, ICICI Lombard Sector Report)

CONSTRUCTION EQUIPMENT SECTOR OUTLOOK AND GROWTH IN INDIA

Overview

The Construction Equipment Sector in India has been experiencing significant growth in recent years. The market size was valued at USD 141.9 Billion in 2021 and is expected to grow from USD 150.27 Billion in 2022 to USD 252.23 Billion. Another report estimates the market value to reach USD 12.4 Billion by 2029.

Growth Rate

The sector is anticipated to grow at a Compound Annual Growth Rate (CAGR) of over 8% from 2022 to 2028. This growth is fuelled by the increasing number of infrastructure projects and the governments focus on development.

Key Drivers

Infrastructure Development: The Indian government has been investing heavily in infrastructure projects, which is a significant driver for the construction equipment sector.

Technological Advancements: The adoption of new technologies is making construction processes more efficient, thereby driving demand for advanced equipment.

Urbanization: Rapid urbanization in India is leading to increased construction activities, further boosting the market.

The market is expected to reach over $7.5 billion by 2028. Technological innovations and government initiatives are likely to propel the sector further. The Construction Equipment Sector in India is on a growth trajectory, driven by infrastructure development, technological advancements, and urbanization. However, overcoming challenges like regulatory issues and labor shortages is crucial for sustained growth.

(Sources: SkyQuest, Maximize Market Research, Arizton)

CONSTRUCTION SECTOR OUTLOOK AND GROWTH IN INDIA

Overview

The construction sector in India is a significant contributor to the countrys economy and has been showing promising growth trends. The market size was valued at approximately $701.7 billion in 20221. The industry is expected to grow at an Average Annual Growth Rate (AAGR) of more than 6% from 2024 to 20271.

Growth Projections

Different reports offer varying growth projections for the sector. One report suggests that the industry is expected to expand by 5% in real terms in 20232. Another report is more optimistic, stating that the construction industry in India is expected to grow by 12.0% to reach INR 45,907 billion in 20233.

Key Drivers

The growth in the construction sector is primarily supported by government investments in major infrastructure projects. These projects are expected to be expedited ahead of the 2024 elections2. Despite near-term challenges, the industry is poised for significant growth.

Market Segmentation

The construction market in India is diverse, covering various sectors like residential, commercial, and infrastructure. The market is expected to grow at a Compound Annual Growth Rate (CAGR) of over 6% during the forecast period4.

The construction sector in India is on a growth trajectory, backed by government investments and a focus on infrastructure development. While there are varying estimates regarding the rate of growth, the sector is undeniably a critical component of Indias economic future.

(Sources: Global Data - India Construction Market Analysis, GlobeNewswire - India Construction Industry Report 2023, Yahoo Finance - India Construction Industry Databook Report 2023, Mordor Intelligence - Construction Industry in India)

COMPANY OVERVIEW

Tara Chand InfraLogistic Solutions Limited is engaged in serving the infrastructural development and industrial capacity expansion needs of India through its three key verticals: Warehousing & Multi-modal Transportation, Construction Equipment Rental and Steel Processing & Distribution. With almost four decades of experience, our company is among the leading Steel Warehousing & Transportation organizations in India with an execution capacity of more than 10 Million Tonnes of Steel per annum. The company is actively engaged in the infrastructure development of the country through its extensive fleet of 300 Machines comprising Heavy Duty Cranes upto 800MT Capacity, Hydraulic Piling Rigs, Steel Processing machines and Concrete Equipment. Our dedicated team of subject- experts and our young well-maintained fleet of equipment serves across various sectors like Power, Windmill, Oil & Gas, Steel, Cement, Renewable Energy and Urban & Rural Infrastructure (Roads, Bridges, Highways, Airports, Metros, Irrigation Projects and Water Pipelines). With a large diversified base of more than 50 customers ranging from Public Sector Undertakings to Multi-National Indian corporates, the companys clientele is well-balanced.

OPPORTUNITY

The Indian economy is well poised to continue its rapid growth across sectors as per various domestic and international reports. The positivity has fuelled a spree of commitments of new investments across sectors like Oil & Gas, Cement, Steel and Infrastructure development that will lead to an increase in demand for logistic and equipment rental services. Moreover, the Government of Indias 33% increased allocation of Rs 10.68 Lakhs in capital expenditure in the Union Budget augurs well for the demand in cranes and piling rigs, creating a very rewarding scenario for your company.

Our logistic services dedicated to the steel sector amounts for about 45% of the companys revenues. Your company has introduced innovative solutions to enhance operational efficiency in its steel warehousing and handling operations. The Companys 45% of the revenue stream is from its infrastructure development solutions that are executed through the companys large fleet of equipment. The Company has concentrated its assets to focus on solutions aligned to our customers growing needs. In the Financial Year 2022-23, the company has invested in large capacity cranes ranging from 200MT to 500MT lifting capacities, which are ideally suited to the needs of industrial capacity expansion projects in India.

THREATS

Economic volatility leading to reduction in capacity expansion plans of the large industries could impact the demand for cranes and ground work equipment. The Companys operations could also be affected owing to development of newer policies by the different State Governments of the country. The changing needs of customers makes it difficult to ensure availability of the right equipment as per the market demand. The Companys activities may get affected by increase in competition and by a stretched receivables cycle.

In this years landscape, its crucial to acknowledge the ever-changing governmental focus on infrastructure investments and the potential for political volatility. Such factors introduce a level of uncertainty that could lead to operational hiccups and financial setbacks. However, these challenges underscore the imperative for our industry to maintain its agility and proactive stance. By doing so, we position ourselves not merely to navigate these complexities but to thrive amidst them, ensuring ongoing prosperity and advancement.

RISKS AND CONCERNS

It is crucial to acknowledge that Tara Chand InfraLogistic Solutions Ltd is not immune to a variety of uncertainties and challenges that could adversely affect its operations. To mitigate such risks, the organization has instituted a robust, multi-tiered risk management infrastructure. The governance of this framework begins with our Board of Directors, who are responsible for formulating the overarching risk management strategy and endorsing the requisite policies. This alignment with the companys broader goals and ethical standards ensures a cohesive approach to risk mitigation.

Our Risk Management Committee is tasked with the vigilant execution of these strategies, as well as the regular assessment of risk exposure. This ongoing scrutiny allows for the timely identification of new risks, ensuring that our risk management protocols are not only effective but also up-to-date.

Through the diligent application of this risk management framework, Tara Chand Infra Logistic Solutions Ltd aims to stabilize its revenue streams and augment shareholder returns. This forward-thinking strategy equips the company with the resilience to navigate unforeseen challenges and the agility to capitalize on emerging opportunities.

Your company recognizes that every business has its inherent risks and the company has been taking proactive approach to identify and mitigate them on a continuous basis.

• continued economic growth: demand of our warehousing, transportation and equipment hiring services is dependent on economic growth and / or infrastructure development. Any slowdown in the economic growth affects our growth.

• our client base: the company depends on its limited marquee clients for a majority of its revenues. This exposes the company to a risk of client concentration. The company continues to take steps to create a larger client base, while continuing to benefit from the already strong long term association it shares with its current customers.

• risks from competition: aggressive focus on infrastructural development has created opportunities and also increased competition in the logistics and equipment hiring businesses.

• ability to pass on increasing cost: ability to pass on increasing cost in a timely manner depends upon the demand supply situation and competitive activities and there has been a general reluctance as seen in the past, to make significant price hikes.

• liquidity crunch: the infrastructure development is directly dependent on the availability of capital. With the recent escalating NPAs of the public and private sectors banks, there exists the risk of liquidity crunch for our clients thereby putting a risk to our liquidity.

• monsoon: infrastructure development, to some extent, runs the risk in case of above normal monsoon. With normal monsoon and infra spending from the government, we expect both the logistics and equipment hiring industries to grow in double digit percentage terms in near future.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The robust architecture of our business model provides a diversified revenue stream, eliminating reliance on any single customer or sector. This ensures financial stability and resilience for the Company.

Our Internal Control System is meticulously designed to align with the scale and complexity of our operations. Originating from the Board of Directors, the scope and authority of the Internal Audit function are clearly delineated. To preserve impartiality and independence, the Internal Audit team reports directly to both the Chairman of the Audit Committee and the Executive Chairman and Managing Director. This department continually assesses the effectiveness of our internal controls, ensuring compliance with established operating systems, accounting protocols, and company-wide policies. Any areas for improvement identified by the internal audit are promptly addressed by the respective process owners, thereby fortifying our control mechanisms. Key audit findings, along with recommended corrective actions, are regularly presented to the Audit Committee for review.

In terms of operational controls, the majority are seamlessly integrated into our internal procedures, which are comprehensively documented. These procedures outline the methodologies for various business activities, such as order bookings and consignment deliveries, and establish best practices for the seamless functioning of the organization.

We have instituted a comprehensive framework of guidelines, policies, and procedures to facilitate the effective implementation of internal financial controls across the organization. These controls are designed to promote the orderly and efficient conduct of business, safeguard assets, and prevent fraudulent activities. They also ensure the accuracy and completeness of our accounting records, contributing to the timely preparation and disclosure of financial statements. Our control environment extends to both manual processes and IT systems, including Enterprise Resource Planning (ERP) applications. Built-in review and control mechanisms guarantee the adequacy and effectiveness of these systems.

FINANCIAL PERFORMANCE REVIEW

• during the year under review, total revenue from operations including the other income was Rs. 14456.08 Lakhs against Rs. 13034.71 Lakhs in the previous year. The company has earned net profit of Rs 935.70 Lakhs in FY2022-23 against Rs. 237.32 Lakhs in the preceding FY.

FINANCIAL RATIOS ARE AS FOLLOWS :

	TARA CHAND INFRALOGISTIC SOLUTIONS LIMITED
Particulars	31st March, 2023 Ratio	31st March 2022 Ratio	Details of significant changes(i.e. change of 25% or more compared to previous year, 2022) and reason thereof
Debtors Turnover Ratio	2.49	2.08	-
Inventory Turnover Ratio	3.89	2.24	73.66% change owing to reduced inventory days to 93 days from 162 days.
Interest Coverage Ratio	0.92	0.97	-
Current Ratio	1.48	1.42	-
Debt Equity Ratio	1.21	1.64	26.2% decrease due to debt reduction & increase in equity
Operating Profit Margin	30.40%	27.98%	-
Net Profit Margin	6.47%	1.82%	255.50% change owing to increase in net profit due to increase in total revenue by Rs 14.21 Crs.
Return on Net Worth	12.97%	4.14%	213.28% change owing to increase in net profit due to increase in total revenue by Rs 14.21 Crs.

MATERIAL DEVELOPMENTS IN HUMAN RELATIONS / INDUSTRIAL RELATION

At Tara Chand InfraLogistic Solutions Ltd, we recognize that our human capital is an invaluable asset and a cornerstone of our enduring success. Guided by the visionary leadership of our management team, we have meticulously crafted a robust Human Resource strategy over the past year. Building upon the momentum of previous HR initiatives that have consistently invigorated our workforce, we have introduced a series of innovative programs aimed at enhancing operational efficiency.

Safety remains a paramount concern for us. We have instituted a comprehensive "Safety in Toto" policy, mandating compliance from all stakeholders. This policy encompasses critical safety practices designed to significantly reduce workplace injuries and illnesses. We empower our employees to proactively identify, address, and mitigate any potential hazards, thereby fostering a culture of safety and vigilance.

Despite the logistical complexities arising from our extensive geographical footprint and a large employee base, we take immense pride in reporting that employer- employee relations have remained exceptionally harmonious throughout the fiscal year. Notably, there have been zero instances of strikes, lockouts, or any other disruptions that could have adversely impacted the companys operations. It is also worth mentioning that our organization operates without the presence of any Employee Union, Trade Union, or similar bodies. As of March 31, 2023, Tara Chand InfraLogistic Solutions Ltd is proud to have a dedicated team of 627 permanent employees

RISK MANAGEMENT AND GOVERNANCE

In the interest of upholding the highest standards of fairness and transparency in the governance of the Company, we have meticulously implemented a robust set of governance practices. These include well-defined policies on whistleblower protections, nomination and remuneration procedures, and related-party transactions, among others. Our diversified portfolio spans multiple sectors, positioning us as a comprehensive solution provider for our clients. We offer end-to-end capabilities in designing, executing, enhancing, and optimizing logistics- related activities across the entire value chain.

Our Risk Management Policy is designed to serve as a proactive framework for risk identification, assessment, and mitigation. The policy underscores the Companys commitment to judiciously manage risks-avoiding excessive exposure while embracing calculated risks when they align with our strategic objectives. We employ a multi-faceted approach to risk management, which may include insurance coverage, internal control measures, and risk avoidance strategies, all aimed at safeguarding the Companys assets and stakeholder interests.

CAUTIONARY STATEMENT

The statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand, supply and price conditions in the domestic & overseas markets in which the Company operates, changes in the government regulations, tax laws & other statutes & other incidental factors. The Company assumes no obligation to revise or update any forward- looking statements whether as a result of new information, future events or otherwise.